JD Logistics, Inc. may benefit from the improvement of management capacity and the release of economies of scale in the second half of the year, with an adjusted net profit of 280 million yuan, a year-on-year turnround. Among them, the expansion revenue of external customers accounts for more than 50% for the first time, and the customer revenue of external integrated supply chain has increased significantly by 54.7% compared with the same period last year, and is expected to continue to lead the company as a whole in the future. The company has made obvious breakthroughs in the integrated supply chain such as Volvo, a well-known automobile brand, the high-quality service continues to be favored by XIAOMI, Volvo and other brands, and the integrated supply chain service network continues to tamp. to promote the automation and intelligent transformation and upgrading of warehousing and sorting centers, continuous capital investment is expected to significantly improve the operational efficiency and competitiveness of the warehouse network. JD.com Zhuofeng, a wholly-owned subsidiary, was transferred to Debon Holdings for 99.99 per cent of the shares, indirectly controlling the 66.5 per cent shares held by Debon Holdings. After that, JD.com Zhuofeng will trigger an offer to acquire 277 million shares of other circulating shareholders at an offer price of 13.15 yuan per share. The purpose of the offer is to terminate the listing status of Debang shares, and it is expected that Debang's direct express network is expected to achieve collaborative integration with JD.com 's warehouse network, Crossing Express and so on. In the long run, the company's profits are expected to increase significantly, the core net interest rate is expected to reach 1.5% in 2024, and integrated supply chain integrated logistics giants are emerging.

Benefiting from customer expansion, the company's revenue in 2021 increased by 42.7% compared with the same period last year, with an adjusted net profit loss of 1.23 billion yuan, of which 2021H2 made an adjusted net profit to reverse losses. The company achieved 104.7 billion yuan in main business income in 2021, benefiting from the rapid expansion of external integrated supply chain customers and other customers, a year-on-year increase of 42.7%, of which 2021H2 revenue increased by 34.4% to 56.22 billion yuan, while the revenue side maintained a high growth rate. Operating costs rose 47.4 per cent year-on-year due to business expansion and reduced government-supported incentives related to the epidemic, which was higher than revenue growth by 4.7pcts, causing gross profit margins to fall by 3.1pcts to 5.5 per cent. In 2021, the company's sales / R & D / management expenses increased by 57.8%, driving the expense rate (excluding financial income and expenses) to 8.4% year-on-year. The company's net loss / adjusted net loss in 2021 was 15.66 billion yuan. The gap is mainly due to the fact that the company recognized a variable loss of 12.8 billion yuan in the fair value of convertible redeemable preferred shares in the first half of the year, of which the adjusted net profit in the second half was 280 million yuan, reversing losses compared with the same period last year. or benefit from the improvement of management capacity and the release of economies of scale.

The proportion of external customer expansion revenue exceeded 50% for the first time, and customer revenue in the external integrated supply chain increased significantly by 54.7% compared with the same period last year. In 2021, the company's integrated supply chain business revenue increased by 27.8% year-on-year to 71.1 billion yuan, of which revenue from internal / external customers increased by 16.5% to 456 billion yuan, benefiting from the steady growth of JD.com Mall GMV and the active development of new customers. In 2021, the proportion of customer revenue in the externally integrated supply chain increased to 31.9% year-on-year, due to a year-on-year increase in the number of external customers by 41.7% and an increase in ARPC by 9.2%. In the same period, other customer revenue increased by 89.5% to 33.6 billion yuan compared with the same period last year, mainly due to the consolidation effect after the acquisition, with a contribution income of 11.3 billion yuan across 2021, accounting for 33.6% of other customer income. Overall, the company's annual revenue from external customers increased by 72.7% to 59.1 billion yuan compared with the same period last year, accounting for 56.5% of total revenue year-on-year, exceeding 50% for the first time, fully demonstrating the competitiveness of the company's supply chain service capabilities. The company has made obvious breakthroughs in the integrated supply chain such as Volvo, a well-known automobile brand. Based on the insight into the characteristics of accessories and products, the company has established SKU-dimensional portraits and models to achieve nationwide warehouse network planning, sales forecast and intelligent replenishment, and effectively improve order satisfaction and inventory turnover. The company's know-how accumulated in six major industries is expected to continue to increase in the proportion of external customer revenue contribution.

The rapid expansion of business and continued investment in infrastructure have led to higher costs and expenses, with gross profit margins falling 3.1pcts to 5.5 per cent year-on-year and improving to 7.1 per cent in the second half of the year. In 2021, the company's operating cost increased by 47.4% compared with the same period last year, which is higher than the revenue growth rate (7.1pcts). This is mainly due to the increase in expenditure brought about by business expansion and the reduction of government concessions related to COVID-19. Labor costs / outsourcing costs / leasing costs / depreciation amortization / other costs increased by 37%, 55%, 44%, 33%, 65% to 35840%, 9519114 billion yuan. Among them, the substantial increase in outsourcing costs is mainly due to the rapid expansion of external business, the substantial increase in express delivery volume and the use of more external suppliers, as well as the increase in outsourcing services brought about by acquisitions. The company continues to increase infrastructure construction and consolidate the chassis, and is still in the investment period. In 2021, the gross profit margin decreased by 3.1pcts to 5.5%, of which 2021H2 improved to 7.1% month-on-month due to an increase in income. It is expected that with the expansion of resource investment and scale effect, the profit level will gradually improve. In the same period, sales / R & D / management expenses increased by 69.5%, 36.9% and 70.8% compared with the same period last year. The substantial increase in sales costs is due to the expansion of external customers, and the increase in management costs is related to salary increases and acquisition leapfrogging. Financial costs increased by 58.1% to 720 million yuan compared with the same period last year, mainly due to the increase in lease interest caused by a 20% increase in lease liabilities.

The integrated supply chain service network will continue to be consolidated, and the automated and intelligent transformation and upgrading of warehousing and sorting centers will be promoted. Continuous capital investment is expected to significantly improve the operational efficiency and competitiveness of the warehouse network. By the end of 2021, the company operates 1300 + warehouses and 7200 + distribution stations. in addition to its own facilities, the company also expands network resources through strategic partners, currently covering 1000 + air cargo routes (including 12 all-cargo routes) in China. High-quality service and constantly tamped chassis make the company's business continue to be favored by customers, including XIAOMI Youpin, Volvo, Zhihuashi and so on. In 2021, the company's capital expenditure was 4.09 billion yuan, accounting for nearly 4% of total revenue. Mainly used for new warehouse layout, automatic and intelligent transformation and upgrading of existing warehousing and sorting centers, sorting network layout optimization and transportation equipment procurement, continuous capital investment is expected to significantly improve the operational efficiency and competitiveness of the warehouse network.

JD.com Zhuofeng transferred 99.99% shares of Debang Holdings to 8.976 billion yuan, indirectly controlling the 66.5% shares held by Debang Holdings. After that, JD.com Zhuofeng will trigger an offer to acquire 277 million shares of other circulating shareholders at an offer price of 13.15 yuan per share. The purpose of the offer is to terminate the listing status of Debang shares, and it is expected that Debang's direct express network is expected to achieve collaborative integration with JD.com 's warehouse network, Crossing Express and so on. On March 11, Debang issued a series of announcements such as the announcement on the change of the ownership structure of the controlling shareholder and the change of the actual controller, and JD.com Zhuofeng, a wholly-owned subsidiary of JD Logistics, Inc., was transferred to Debang Holdings for 99.99% of its shareholds. indirect control of the 66.5% shares held by Debon Holdings. The overall transaction will be carried out in three phases, totaling 8.976 billion yuan, of which the first phase includes the conversion of founding shareholders, Dong Jiangao and minority shareholders. From the settlement date of the first phase of the founding shareholder conversion, Mr. Cui Weixing completed the transfer of the voting rights of all the remaining shares of Debon Holdings, while Mr. Cui Weixing pledged his direct holding of 4.19% of the shares in the listed company to JD.com Zhuofeng. After the completion of the first phase, Mr. Cui Weixing will no longer be the actual controller of Debang Holdings, and JD.com Zhuofeng will trigger the obligation of a comprehensive offer and shall make a full offer to other circulating shareholders. Based on the premise that the offer price is 13.15 yuan per share and the number of Debang shares and other circulating shareholders are 277 million shares, the maximum amount of funds required for this tender offer is 3.644 billion yuan. In order to improve the integration efficiency of JD.com Group's subordinate logistics business sectors, the purpose of the offer is to terminate the listing status of Debang shares, we expect that Debang's direct express network is expected to achieve collaborative integration with JD.com 's warehouse network and leapfrog express, which will help the logistics networks and product categories of both sides to complement each other, improve network operation efficiency, reduce comprehensive operating costs, and continue to create greater value for customers.

Risk factors: labor, fuel and other costs are rising rapidly; competition in the supply chain logistics industry has intensified; the growth rate of logistics revenue from JD.com Mall has slowed down significantly; the company's long-term profit margin is not as expected and Debang integration is not as expected.

Investment suggestion: the company's net loss / adjusted net loss in 2021 is 15.7 billion yuan. The gap is mainly due to the fact that the company recognized a fair value change loss of 12.8 billion yuan in the first half of the year, of which the second half may benefit from the improvement of management capacity and the release of scale effects. adjusted net profit of 280 million yuan, year-on-year reversal of losses. Among them, the expansion revenue of external customers accounts for more than 50% for the first time, and the customer revenue of external integrated supply chain has increased significantly by 54.7% compared with the same period last year, and is expected to continue to lead the company as a whole in the future. The company has made obvious breakthroughs in the integrated supply chain such as Volvo, a well-known automobile brand, the high-quality service continues to be favored by XIAOMI, Volvo and other brands, and the integrated supply chain service network continues to tamp. to promote the automation and intelligent transformation and upgrading of warehousing and sorting centers, continuous capital investment is expected to significantly improve the operational efficiency and competitiveness of the warehouse network. JD.com Zhuofeng transferred a 99.99 per cent stake in Debon Holdings, indirectly controlling 66.5 per cent of the shares held by Debon Holdings. After that, JD.com Zhuofeng will trigger an offer to acquire 277 million shares of other circulating shareholders at an offer price of 13.15 yuan per share. The purpose of the offer is to terminate the listing status of Debang shares, and it is expected that Debang's direct express network is expected to achieve collaborative integration with JD.com 's warehouse network, Crossing Express and so on. According to the announcement, we predict that the annual EPS of the company in 2022-23-24 will be-0.39 yuan 0.17 PE (the original forecast is 2022 shock 23-0.31 shock 0.16 yuan, and 2024 will be a new increase). In the long run, the company's profit is expected to increase significantly, and the core net interest rate is expected to reach 1.5% in 2024. Compared with the comparable company's potential net interest rate of about 4% and 30 times PE, we estimate the target market capitalization of JD Logistics, Inc. for the next 12 months. Maintain a "buy" rating corresponding to the target price of HK $33.