Net profit returned to mother turned loss into profit, and the company entered a profit cycle
JD Logistics announced its 2023 results: 1) Revenue increased 21.3% year over year to 166.6 billion yuan; 2) Net profit to mother was 6.2 billion yuan, which turned a loss into profit for the first time since listing (2022: -1.4 billion yuan); 3) Non-IFRS net profit of 2.76 billion yuan (2022:870 million yuan). Among them, 4Q23 non-IFRS net profit was 1.80 billion yuan, up 79.6%/113.9% year-on-year. As an asset-heavy industry, logistics has high upfront capital investment and fixed costs; along with the expansion of the business scale and the gradual dilution of costs, the company reversed losses in '23 and ushered in an inflection point in performance. We are optimistic about the continued expansion of JD Logistics's integrated domestic supply chain business, and at the same time accelerate the development of cross-border logistics and overseas warehousing business. We raised our 24/25 non-IFRS profit forecast by 2%/10% to $3.32 billion/$4.65 billion; added a 26-year forecast of $5.84 billion. Based on 0.4x 2024E PS (average 2024E PS of Hong Kong stock comparable companies), the target price was lowered by 12% to HK$12.0 to maintain “buying”.
The share of external business continued to increase, showing that Debon brought significant growth and synergy effects to the express business. In terms of external business, the company achieved revenue of 116.6 billion yuan, an increase of 30.8% year on year, accounting for an increase of 5.1 pct to 70.0% year on year (4Q23 revenue of 32.83 billion yuan, +9.1%/+10.0% year over year). Among them, the revenue from the integrated supply chain business in '23 was 31.41 billion yuan, up 7.7% year on year, maintaining a steady growth trend; average revenue per customer (ARPC) increased 15.2% year on year. Revenue from other businesses (standardized services such as express delivery, express delivery, etc.) was 85.15 billion yuan, an increase of 42.0% over the previous year. The increase in express business volume and synergy effects were mainly due to the improvement in the growth rate of JD's express delivery business and the combined acquisition of Debon Logistics.
The growth rate of business revenue from the JD Group is improving
Revenue from JD Group in '23 was 50.60 billion yuan, an increase of 3.7% over the previous year. Among them, 4Q23 revenue was 14.37 billion yuan, up 11.3% year-on-year. In the second half of '23, benefiting from the moderate recovery of China's economy and the recovery in consumer demand, the company's business revenue from the JD Mall rebounded markedly. In '23, the JD Group's business accounted for 30.0% of the company's revenue, down 5.1 pct from the previous year. The share showed a downward trend, highlighting the positive expansion of the company's foreign business and the decline in dependence on the JD Group.
With overseas warehouses as the core, JD Logistics helps Chinese companies go overseas and the cross-border e-commerce logistics market. With its rich experience in integrated warehousing and distribution supply chain solutions, JD Logistics uses overseas warehouses as the core to serve the logistics needs of Chinese enterprises going overseas, cross-border e-commerce customers, and overseas local customers.
By the end of '23, JD Logistics operated a total of 90 bonded warehouses and overseas warehouses, and had a layout and business development in the US, Europe, the Middle East, etc. As Chinese enterprises go out and the rapid development of the cross-border e-commerce market, we are optimistic about the development of JD Logistics in overseas markets, which will bring new performance increases to the company.
Risk warning: 1) Revenue growth is below our expectations; 2) Costs are higher than our expectations; 3) Competition is intense; 4) Policy risk.