Increased investment in ecological construction in the short term, stable supply chain and logistics advantages, maintaining “purchase” ratings. Short-term companies increase user experience, merchant subsidies and marketing investment, but procurement costs, logistics efficiency improvements, and management expenses are strictly controlled. We raised the company's 2024-2026 non-GAAP net profit forecast to 362/410/457 (previous value: 355/407/45.3 billion yuan), corresponding to a year-on-year growth rate of 3.2%/13.3%/11.3%, corresponding to the adjusted EPS dilution of 11.4/12.9/14.4 yuan. The current stock price of 134.1HKD corresponds to 10.9/9.6/8.6 times PE in 2024-2026. Subsequent, along with share expansion, improved platform ecology, and macro-consumption recovery, steady performance has maintained a “buy” rating.
2024Q1 revenue was basically in line with expectations. Gross margin and loss reduction in logistics and new business led to a 7% year-on-year increase in the company's revenue in 2024Q1, which was basically in line with Bloomberg's agreed expectations; non-GAAP net profit of 8.9 billion yuan, higher than Bloomberg's agreed expectations, due to better-than-expected gross margin performance and loss of JD Logistics and new businesses.
On the revenue side, (1) product sales revenue increased 6.6% year on year, electronics and home appliance revenue increased 5.3% year on year; daily use department store revenue increased 8.6% year on year, and business adjustments were gradually completed; (2) service revenue 2024Q1 increased 8.8% year on year, of which platform and advertising services increased 1.2% year on year, and the monetization rate of 3P merchants was still low in the context of continued platform ecosystem construction; logistics and other revenue increased 13.8% year on year, and Dada revenue increased 57% year on year.
Profit side: The profit margin of JD retail operations fell 0.5pct to 4.1% year over year, mainly due to investment in user experience such as Spring Festival Gala marketing investment, lowering the free shipping threshold, and supporting only refunds; JD Logistics turned a loss into a profit, with an operating profit margin of 0.5%.
The GMV growth rate is expected to surpass Social Zero in 2024, and the profit margin or short-term decline. The company indicates that the GMV growth rate in 2024 is expected to exceed Social Zero. The internal strategy is centered on improving user experience and market share, and the core charged categories are expected to benefit from consumer promotion policies such as trade-in. Despite increasing investment in user experience, merchant subsidies and marketing in the short term, the company's supply chain advantage is stable, the platform has strong bargaining power, procurement costs are still expected to decrease, and R&D and management expenses are strictly controlled. Follow up on the progress of 3P ecosystem construction and monetization rate after user purchase frequency and user activity increase.
Risk warning: Increased competition in the industry, macroeconomic performance falling short of expectations, business adjustments falling short of expectations, and regulatory changes.