4Q23 Profit Exceeded Our and Market Expectations
The company announced 4Q23 results: operating income of 47.201 billion yuan, +9.7% year-on-year, slightly exceeding our expectations; non-IFRS net profit of 1,804 billion yuan, +79.6% year-on-year, corresponding to a profit margin of 3.8%, the highest profit level in a single quarter since the company went public. Non-IFRS net profit in 2023 was 2,761 billion yuan, +218.8% year-on-year, corresponding to a profit margin of 1.7%, which exceeded our and market expectations, mainly due to cost reduction and efficiency gains better than expected.
4Q23 revenue side: Integrated supply chain customer revenue +8.8% to 23.012 billion yuan, with revenue from JD Group +11.3% to 14.373 billion yuan, mainly benefiting from JD retail platform customer experience upgrades (free shipping for PLUS users, free shipping policy adjustments such as 59 yuan free shipping for regular users) brought about a significant increase in retail business order volume; among them, external customer revenue was +5.0% to 8.640 billion yuan, and the average revenue per customer was +15.4% to 15.59 million yuan, reflecting the company's focus on providing high-quality integration Supply chain services, customer stickiness continues to increase
Strong. Revenue from other customers such as Express Express (including Debon) was +10.6% year-on-year to 24.188 billion yuan, mainly benefiting from business volume growth driven by improved network efficiency and enhanced customer experience; the share of external revenue was -0.4ppt to 69.5% year-on-year, and +5.1ppt to 70.0% year-on-year. Cost side: Operating costs were +20.5% year-on-year, and gross margin was +0.3ppt to 9.2% year over year. In addition to the impact of Debon's merger, it was mainly due to 1) the economies of scale effect brought about by scale growth; 2) the increase in gross profit improvement in the proportion of light and small items under 59 yuan free shipping; 3) efficiency improvement under refined business management, business restructuring, and cost reduction and efficiency.
Development trends
Looking ahead to 2024, we believe that the company may continue to improve the service capabilities of express delivery and express core products, and profit margins will remain high. We expect that the increase in company orders this year will continue to benefit from the adjustment of free shipping policies on retail platforms, so revenue from JD Group and 3P merchants may continue to maintain the current growth trend. Furthermore, we believe that the number of customers in the external integrated supply chain and average customer revenue are expected to return to a normal growth trend this year. The share of external customer revenue will remain high, benefiting from 1) organizational restructuring, 2) cost reduction and efficiency, 3) improved profit margins in the express shipping business under the Debon Express network, and 4) the synergy effects of JD Airlines. It is expected that profit margins will continue to rise as the company's revenue grows. We expect the company's non-IFRS profit margin to remain high at over 1.5% in 2024.
Profit forecasting and valuation
Considering that there is still uncertainty about the recovery in foreign order demand this year, the 2024 revenue forecast was lowered by 3.1% to 179.639 billion yuan, basically keeping the 2024 profit forecast unchanged. For the first time, a 2025 non-IFRS net profit of 4.568 billion yuan was introduced. The current stock price corresponds to 16.9/10.1 times the 2024/2025 non-IFRS price-earnings ratio, respectively. Considering the downward trend in the sector's valuation center, the target price was lowered by 29% to HK$11.0, corresponding to the 2024/2025 non-IFRS price-earnings ratio of 22.8/13.6 times, leaving room for an upward trend of 34.1%, maintaining the outperforming industry rating.
risks
Logistics demand fell short of expectations; costs soared.