Guotai Junan released a research report saying that it will maintain$JD-SW (09618.HK)$With the “increase in holdings” rating, the operating income of FY2024E/FY2025E/FY2026E was slightly adjusted to be $1,1661/12,359/1,298.3 billion, respectively. The adjusted net profit was $378/403/44.9 billion, respectively, and the target price was HK$163. With high subsidies and high investment, the company's net profit still grew beyond expectations. The transformation of the mall has paid off. The 3P ecosystem continues to be built, increasing the content ecosystem, and supporting live streaming, which is expected to create a new growth pole.

The report's main points are as follows:

Revenue and profit both exceeded expectations.

FY24Q1 JD Group's revenue was +7% year-on-year to 260 billion yuan, higher than the forecast of 258.3 billion yuan. By type, product revenue/service revenue was +7%/+9%, respectively; by business, JD Retail/JD Logistics were +7%/+15%, respectively. Achieving a gross profit margin of 15.3%, higher than the expected 14.8%, judging that it is mainly due to supply chain optimization and the continuous development of the high-margin 3P ecosystem. With continued subsidies and support for merchants, non-GAAP net profit was still +17% year over year to 8.9 billion yuan, higher than the forecast of 7.4 billion yuan.

JD Retail: Active transformation has paid off, and profits with high subsidies and high investment have exceeded expectations.

FY24Q1 JD's retail revenue was +7% year-on-year to 226.8 billion. The main reason was that the number of active users achieved a year-on-year double-digit increase in the number of active users this quarter, and the average frequency of user purchases and NPS increased at an accelerated pace. Revenue from electrified goods and household goods was +5%/+9%, respectively, mainly driven by a sharp recovery in the supermarket category, and the price power strategy has already paid off; revenue from platforms and advertising services is +1% year-on-year, and the 3P seller ecosystem continues to be cultivated, and is expected to become a subsequent growth engine.

Under measures such as increasing investment and cooperation with the Spring Festival Gala, 10 billion dollars in subsidies, and lowering the free shipping threshold, JD Retail still achieved operating profit of 9.3 billion yuan, much higher than the expected 8.3 billion dollars, reflecting a significant increase in operating efficiency. Continued investment in the construction of a content ecosystem is expected to bring in additional volume. JD invested 1 billion yuan in cash and 1 billion dollars in traffic to increase the content ecosystem. Liu Qiangdong's AI digital live broadcast order volume exceeded 100,000. With the high-quality content ecosystem, it is expected that the “618” card will greatly promote live streaming, bringing in new volume. Dada Express has seen a high increase in animal distribution revenue. FY24Q1 Dada Express revenue increased 57% year over year, driving JD logistics revenue +15% year over year, higher than expected 13%.