Results for the first quarter of 2024: Revenue of 42.1 billion yuan (RMB, same below), up 15% year over year, higher than our/Bloomberg market expectations of 4%. External revenue accounted for 69% of revenue, which was basically the same year on month. The growth rate of domestic orders was 15%, higher than our previous forecast of 8%. Customer restructuring and scale effects increased gross margin by 3 percentage points to 7.7% year over year. The adjusted net profit/profit margin was 660 million yuan/ 1.6%. For the first time since listing, profit was achieved in the first quarter. Thanks to continuous optimization of the business structure and improved operating efficiency, the profit greatly exceeded our expectations of 69 million yuan.

Key performance points: 1) In-house orders accelerated, up 15% year on year, further improving compared with the 11% growth rate in the fourth quarter of last year, thanks to the growth of JD's retail business and lowering the free shipping threshold to drive business volume. 2) Revenue from external integration increased by 5%, the number of customers was 56,000, and the year-on-year recovery was up to 2%. The average revenue of a single customer increased by 3% (+15% in the fourth quarter of last year). The growth rate has slowed down, mainly due to the relatively low contribution of new major customers in the initial cooperation phase. 3) Other revenue increased by 18%, mainly driven by the increase in express delivery business volume. The focus was on time-sensitive services such as Ciqendai, and e-commerce cooperation on live streaming continued to advance.

Outlook and valuation: Management maintains the guidance of high single-digit revenue growth and an adjusted net profit margin of 1.7% to 2% for the year. We have fine-tuned our revenue forecast. Based on the profit for the first quarter exceeding expectations, the adjusted net profit margin for 2024 was raised by 8%, and the adjusted net profit margin is expected to be 2.2%. We believe that through refined operations and scale effects, the net profit margin is expected to be better than the upper limit of the guideline. Revenue growth in the external integration business still lags behind other segments of the business, and it will still take time for new customers to increase its ARPU. Therefore, we maintain the view that the company should value according to the industry average. Based on a 15 times price-earnings ratio in 2024, the target price will be raised from HK$9.5 to HK$10.1, maintaining a neutral rating.