1Q24 profit exceeded our and market expectations
The company announced 1Q24 results: operating income of 42.137 billion yuan, +15%/-11% YoY, slightly exceeding our expectations; non-IFRS net profit of 663 million yuan, turning a loss into a profit from 1Q23 net loss of 712 million yuan, the best level in the first quarter since listing, corresponding to a 1.6% non-IFRS net profit margin. It exceeded our expectations and the market's expectations, mainly because cost reduction and efficiency were better than expected.
1Q24 revenue side: Integrated supply chain customer revenue +11.1% to 20.501 billion yuan, with revenue from JD Group +14.9% to 12.883 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 +5.3% to 7.619 billion yuan, and the average revenue per customer was +2.8% to 136,600 yuan, reflecting the company's focus on providing high-quality integration Supply chain services, customer stickiness continues to increase. The revenue of other customers such as Express Express was +18.4% to 21.636 billion yuan, mainly benefiting from the increase in business volume driven by improved network efficiency and enhanced customer experience; the share of external revenue was -0.1ppt to 69.4% year over year, maintaining a high level of about 70%. Cost side: Operating costs were +10.9%, gross margin was +3.2ppt to 7.7% 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
It is expected that it will continue to benefit from the increase in domestic orders in 24 years, and focus on the recovery in business demand in the external integrated supply chain. 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 the average customer revenue per customer are expected to return to a normal growth trend this year, and the share of external customer revenue will remain high.
With the orderly integration of multiple resources, the company's core product service capabilities may continue to improve, and the non-IFRS net profit margin is expected to be close to 2% in 2024. We believe we will benefit from: 1) organizational restructuring; 2) cost reduction and efficiency brought about by the processization and automation of logistics network operations; 3) improvements in the profit margin of the express business under the Debon Express network; 4) JD Airlines' synergy effects are expected to continue to improve. It is expected that profit margins will continue to increase as the company's revenue grows, and the company's non-IFRS profit margin is expected to reach a high level of close to 2% in 2024.
Profit forecasting and valuation
The profit forecast for 2024/2025 remains unchanged. The current price corresponds to 17.1/14.1 times the 2024/2025 non-IFRS price-earnings ratio, respectively. Considering the increasing certainty of the company's profit margin increase, the target price was raised by 25% to HK$13.7, corresponding to the 2024/2025 non-IFRS price-earnings ratio of 23.0/18.9 times, leaving 34% upward space, and maintaining the outperforming industry rating.
risks
Logistics demand fell short of expectations; costs soared.