We expect 24Q1 JD Group's total revenue +6.3% YoY, JD retail revenue +6.0% YoY, and non-GAAP net profit of 7.39 billion yuan, or -2.6% YoY. JD's 2024 business adjustment and flexible release is expected. In the long run, it is expected to maintain steady growth and maintain a “highly recommended” rating under the strong barriers of JD's own supply chain, efficient user investment, and the release of 3P merchant business vitality.
Q1 Revenue growth is steady, and the annual revenue growth rate is expected to be higher than the Social Zero market. 2024Q1 benefited from a low base and a staggering peak in the same period last year. GMV and revenue growth were relatively good. Among them, the GMV growth rate in January-January was higher than the zero 5.5% growth rate of the National Bureau of Statistics. We expect 24Q1 JD Group revenue +6.3% YoY and retail revenue +6.0% YoY. Group and retail revenue are expected to achieve a healthy growth rate higher than the social zero market for the whole year, driven by steady growth in the electrified category, the completion of daily 100 adjustments and improvements, and the continued prosperity of the 3P ecosystem.
Q1 Profits are pressured by investment and base figures at the Spring Festival Gala, and profits are expected to remain steady throughout the year. JD's retail operating profit was under pressure in 2024Q1, mainly due to: 1) Spring Festival Gala sponsorship increased marketing investment; 2) employee salary increases, fixed remuneration for first-line business personnel such as JD procurement and marketing rose nearly 100% from January 2024, and the annual average salary increase of more than 20,000 JD first-line customer service employees increased by more than 30% in February; 3) the free shipping threshold was lowered since August last year, and the year-on-year impact of the increase in Q1 execution costs continues; 4) Since the launch of 10 billion subsidies in March last year, the Q1 marketing subsidy fee increase is still having a year-on-year impact. We expect 24Q1 Group's non-GAAP net profit to be -2.6% YoY. Looking at the Group's profit amount based on controlled investment in platform marketing, the Group's profit amount is expected to remain stable throughout the year.
Optimize the user service experience and increase the construction of a content ecosystem. 24Q1 JD implemented a multi-dimensional service upgrade in terms of user experience. In terms of fulfillment, in addition to the main site, JD Express also further lowered the free shipping threshold, with free shipping for purchases over 29 yuan and covering all categories of products in nearly 90% of stores; in terms of after-sales, JD upgraded its own free door-to-door return service, and is also actively promoting this service among 3P merchants. It is expected to cover more than 90% of merchants within a year, increasing the frequency of consumption through continuous optimization of the user service experience. In addition, JD has increased its content ecosystem and will invest 1 billion dollars in cash and flow as a reward to attract more original creators and high-quality content organizations to settle in. It is expected that the future development of JD's content ecosystem is expected to drive increased platform user activity and open up an incremental market.
Investment advice: JD's self-operating model has solid barriers and strong growth in the platform model. It is expected that the 2024-2026 non-GAAP net profit will be 354.7/381.9/40.55 billion yuan, giving 2024 non-GAAP net profit 10 times PE, corresponding to a target price of HK$120.74 per share, maintaining a “highly recommended” rating.
Risk warning: macroeconomic risks; industry competition intensifies; content ecosystem construction results fall short of expectations.