Core views
In 2024Q1, we expect JD Group revenue to increase 6.2% year over year to 257.9 billion yuan, JD retail revenue to increase 6% year over year to 25.1 billion yuan, JD Group's non-GAAP net profit of 7.284 billion yuan, corresponding net interest rate of 2.82%, compared to 3.12% for the same period of the previous year.
The domestic macroeconomy and consumption recovered steadily this quarter. At the same time, compounded by the low base of last year's New Year's Festival and the return of JD to the Spring Festival Gala, the company's GMV and revenue growth continued to pick up.
On the profit side, considering the 10 billion subsidy, base issues after the free shipping threshold was lowered, and the impact of JD's sponsorship of the Spring Festival Gala, profit margins for this quarter may be under pressure. It is estimated that JD's retail profit margin in the first quarter was about 3.7%, down year on year, but this year, due to the low price strategy, the user acquisition and retention effects brought about by the Spring Festival Gala event may be more positive.
Brief review
2024Q1 outlook: JD's 2024Q1 revenue is expected to increase 6.2% year-on-year to 257.9 billion yuan, non-GAAP net profit of 7.284 billion yuan, corresponding net interest rate of 2.82%, compared to 3.12% for the same period of the previous year.
Sentiment has recovered, and revenue growth continues to pick up. Since the first quarter, the domestic macroeconomy and consumption have been recovering steadily. At the same time, compounded by the low base of last year's New Year's Festival and JD's return to the Spring Festival Gala, the company's GMV and revenue growth rate have continued to pick up. JD's retail revenue is expected to increase 6% year-on-year this quarter, slightly lower than the group's growth rate. GMV growth is faster than revenue growth, and 3P growth is higher than 1P. Looking ahead to 2024, the company's GMV growth rate is expected to be higher than the social zero growth rate, and is expected to achieve high single-digit growth. The growth rate of the charging category is expected to be faster than the industry, the growth rate of commercial supermarkets is expected to resume, and the construction of the POP ecosystem is expected to continue to advance, and investment in user acquisition and experience may increase.
JD's retail profit margin is expected to fall year-on-year in the first quarter. Considering the 10 billion subsidy, base issues after the free shipping threshold was lowered, and the impact of JD's sponsorship of the Spring Festival Gala, this quarter's profit margin may be under pressure. It is estimated that JD's retail profit margin in the first quarter was about 3.7%, compared to 4.6% in the same period of the previous year, but this year, due to the low price strategy, the user acquisition and retention effects brought about by the Spring Festival Gala event may be more positive. At the group level, non-GAAP net interest rates are expected to fall year-on-year in the first quarter, with reference to 22Q1. Looking ahead to 2024, it is expected that the absolute profits of retail and the Group as a whole will remain steady. In the year of investment, it is recommended to focus on revenue side growth rate and changes in market share compared to profit. In the long run, the construction of JD's POP ecosystem continues to advance, platform merchants continue to pour in, and the share of 3P GMV is expected to further increase, thus boosting the profit margin elasticity of JD's main retail business.
Profit forecast and valuation: The company's revenue for 2024 and 2025 is estimated to be 1157.5 billion yuan, 1232.6 billion yuan, and non-GAAP net profit of 35.682 billion yuan and 43.368 billion yuan, respectively. Maintaining a “buy” rating, the target price was given at HK$123.89, corresponding to 10 times the Group's PE in 2024.
Risk warning: low shareholder return expectations; weak macroeconomic and social zero growth; weak market share; weak real estate and home appliance boom; 10 billion subsidy investment exceeded expectations, had limited driving effect on users in the sinking market, putting pressure on e-commerce margins; limited room for future cost reduction and efficiency, increasing profit margins of new businesses; industry regulatory risks; low expectations of the asset securitization process of subsidiaries; potential risks from Dada and other subsidiaries; US inflation data exceeded expectations, the Federal Reserve's interest rate cut process was low; uncertainty about the development of Sino-US relations;; China Securities Delisting Risk; Other overseas risk factors affecting the overall performance of China Internet.