Key points of investment
Both revenue and profit have exceeded expectations and will maintain steady growth in 24 years: JD Group announced results for the first quarter of 2024, with revenue of 260.05 billion yuan, up 7.0% year on year. Bloomberg's agreed forecast was 258.35 billion yuan, higher than market expectations; achieved non-GAAP net profit of 8.90 billion yuan, an increase of 17.2% year over year, higher than Bloomberg's agreed forecast of 7.41 billion yuan. Based on improved user experience and increased market share, the company expects steady growth in absolute revenue and profit for 24 years.
The supermarket category recovered strongly, and the service and 3P business grew year on year: 2024Q1 product sales revenue was 208.51 billion yuan, up 6.6% year on year. Thanks to the strong recovery in the supermarket category, Bloomberg's agreed forecast was 206.26 billion yuan, higher than market expectations; service and other revenue was 51.54 billion yuan, up 8.8% year on year, higher than market expectations of 51.30 billion yuan.
Fulfillment costs have increased, and cost reduction and efficiency have continued to advance: 2024Q1 cost reduction and efficiency continued to advance, gross margin increased by 0.5 pct year on year, execution fee rate increased 0.1 pct year on year, management fee ratio decreased 0.3 pct year on year, R&D cost rate decreased 0.2 pct year on year, and sales expenses increased 0.3 pct year on year, mainly due to increased spending on promotion activities, but overall cost reduction and efficiency were still remarkable. The gross profit margin on performance (calculated by dividing gross profit on performance by revenue: gross profit on performance = revenue - operating costs - performance expenses) was 8.8%, an increase of 0.3 pct over the previous year.
Share repurchases: From January 1, 2024 to May 15, 2024, the company repurchased a total of 98.3 million Class A common shares (equivalent to 49.2 million ADS American Depositary Shares) for a total amount of $1.3 billion. The company's new share repurchase plan is valid until March 18, 2027. As of May 15, 2024, the company has repurchased a total of approximately US$700 million; as of May 15, 2024, the remaining amount under the company's new share repurchase plan is US$2.3 billion.
Profit forecast and investment rating: Considering that the company's revenue and profit will continue to grow steadily in 24 years, we adjusted the EPS (non-GAAP) forecast for 2024-2025 from $12.7/14.4 to $11.5/12.6, which is expected to be $13.3 for 2026, corresponding to PE 10.9/9.9/9.4 times for 2024-2026 (HKD/RMB = 0.93, 2024/5/18 data). The company will build a stronger competitive advantage, and we maintain the company's “buy” rating.
Risk Warning: Supply Chain Expansion Risks, Macroeconomic Risks