Revenue side: 2023H1. The company achieved revenue of 27.1 billion yuan, an increase of 34% over the previous year. The growth rate declined compared to the same period last year. Looking at the split, 1) Merchandise revenue for the first half of 2023 was 23.2 billion yuan, up 33% year on year. The growth rate declined significantly from last year, mainly due to a decrease in sales volume of epidemic protection materials; 2) Service revenue increased 44% from 2.7 billion yuan in 2021 H2 to 3.9 billion yuan. Under the main website's ecologically prosperous strategy, traffic is skewed towards merchants from all three parties, and commissions and advertising revenue are growing rapidly.
Profit side: Affected by the company's supply chain capacity optimization and cost control, 2023H1's gross margin increased from 22% in the same period last year to 23%. Expense investment efficiency increased as business scale expanded. Furthermore, interest income grew rapidly from 220 million to 940 million, and the company's non-IFRS net interest rate rose to 9.0% from 6.0% in the same period last year. 1) Performance expenses rose from 1.9 billion dollars in the first half of 2022 to 2.6 billion dollars. The use of distribution services increased as product sales increased, and the performance fee rate fell slightly from 9.6% to 9.5%, which remained stable; 2) Sales expenses rose from 900 million in the first half of 2022 to 1.2 billion, and the rate fell from 4.6% to 4.4%, mainly benefiting from the scale effect brought about by business expansion; 3) R&D expenses/management rates fell from 2.4%/4.9% to 2.3%/3.2%, respectively, mainly benefiting from the company's strong cost control capacity.
Operating data: The company's GMV growth was mainly driven by the number of active buyers. As of 2023H1, the number of active users of JD Health was 169 million per year, an increase of 29% over the previous year. We estimate that the main site user penetration rate is nearly 30%, and there is still plenty of room for growth in the future; ARPPU is basically flat. Affected by the decline in macro-consumption, we estimate that the average price per order fell year-on-year. After the pandemic, users' mentality to buy drugs online increased, and users' shopping frequency increased slightly.
Investment advice: Downgraded from “buy” to “increase holdings” rating. The post-epidemic era is affected by a high base and demand for epidemic prevention materials has declined sharply. We expect the company's revenue growth rate to slow further. We predict that the company's revenue for 2023-2025 will be 537/672/82.9 billion yuan, down 13%/13%/12% from the previous forecast. Affected by the decline in the company's growth rate, we gave the company a 2023 PS 2.8x-3.0x, lowered the target price to 51-55 HKD, with a reduction of 32%/40%, respectively. Relative to the current stock price increase, 17%-26%, downgraded to the “increase in holdings” rating.
Risk Alerts: Policy risks, business uncertainty brought about by company organizational restructuring, macroeconomic systemic risks, etc.