1Q22 performance is slightly lower than we expected.
JD Logistics, Inc. announced 1Q22 results: operating revenue of 27.4 billion yuan, an increase of 22% over the same period last year, which is slower than that of 28% of 4Q21. We think it is mainly affected by COVID-19 's epidemic. The net loss of 1Q22 was 1.39 billion yuan (corresponding to earnings per share-0.13 yuan), compared with a net loss of 11.07 billion yuan in the same period last year (mainly due to changes in the fair value of redeemed preferred shares). The net loss of non-IFRS criteria narrowed to 798 million yuan, compared with 1.37 billion yuan in the same period last year, which was lower than we expected, mainly due to gross profit margin and expense pressure. Revenue from the integrated supply chain services business increased by 16 per cent year-on-year, of which revenue from JD.com Group and external customers increased by 12 per cent and 25 per cent respectively (mainly due to a 20 per cent increase in the number of customers and a 4 per cent increase in average revenue per customer). The gross profit margin of 1Q22 reached 5.3%, up from 1.0% in the same period last year, mainly due to economies of scale and cost control measures (the total cost of 1Q22 increased by 16.7% year-on-year, lower than the revenue growth rate), lower than the 9.0% of 4Q21, mainly due to seasonal factors.
Trend of development
The short-term operation of the company is affected by the epidemic and is under pressure and is expected to be repaired step by step. COVID-19 's epidemic situation has been repeated in many places in China, resulting in pressure on the company's operation. This situation is likely to continue to affect revenue growth in April and May, increasing pressure on the company's cost side. Therefore, we believe that second-quarter results may be under pressure, but in view of the improvement in Shanghai and other seriously affected cities, it is still necessary to observe the pace of demand recovery in the logistics industry. We recommend that we focus on the release of potentially suppressing demand.
JD Logistics, Inc. 's integrated supply chain model provides customers with more flexible inventory management, and can provide support to customers through its warehousing network when truck drivers are quarantined and traffic control is encountered during long-distance transportation. This creates a comparative advantage for JD Logistics, Inc. to help customers maintain business continuity, thereby achieving better revenue growth than the industry as a whole and further enhancing customer stickiness.
Profit forecast and valuation
Due to weak demand, we lowered our 2022 non-IFRS profit forecast from-450 million RMB to-1.31 billion RMB, and our 2023 non-IFRS profit forecast by 11.2% to 990 million RMB.
The current share price corresponds to 0.6 times 2022 price-to-sales ratio and 0.5 times 2023 price-to-sales ratio. We maintain our outperforming industry rating, but lower our target price by 16.8% to HK $23.30 (1.0 times 2022 and 0.8 times 2023), with 56% room to rise.
Risk
Demand weakens due to an epidemic or economic weakness; costs soar.