JD Group announced its 2024 1Q24 results announcement. 1Q24 achieved revenue of 260 billion yuan, an increase of 7.0% year on year; non-GAAP net profit reached 8.9 billion yuan, up 12.66% year on year.
Share repurchases: From January 1, 2024 to May 15, 2024, the company repurchased a total of 98.3 million Class A common shares, totaling US$1.3 billion; this is approximately 3.1% of the common shares in circulation until December 31, 2023. According to the company's previous share repurchase plan, as of March 17, 2024, the total amount of repurchases was about US$2.1 billion; according to the company's new share repurchase plan, as of May 15, 2024, the total amount repurchased was about US$700 million, and the remaining amount was US$2.3 billion.
Brief review:
The company's 1Q24 revenue increased 7.0% year over year. Household appliances 3C increased 5.3% year over year, and FMCG increased 8.6% year over year.
1Q24 service revenue increased 8.8% year over year to $51.5 billion, of which logistics and other services increased 13.8% year over year, and platform and advertising increased 1.2% year over year. Disassemble the highlights of performance:
(1) 1P business: Revenue from the supermarket category grew rapidly year on year, exceeding the industry growth rate of 8.6%, and revenue from the charged category increased by 5.3%. We believe that, benefiting from procurement system reform and category optimization, 1Q24 gross profit margin was 15.29%, an increase of 0.47 pct year on year.
(2) 3P business: The number of third-party merchant stores exceeded one million, and the “Chunxiao Plan” saved 50% of operating costs; in 1Q24, the average after-sales customer complaint volume of third-party stores was reduced by 15%, and the average service cost rate of each store was reduced by 42%. We believe that the company continues to improve the 3P ecosystem, continue to increase supply, and drive double-digit quarterly growth in the number of active users on the demand side.
(3) Upgrading quality services to strengthen supply chain advantages: Co-brands jointly invested 6.5 billion yuan to increase trade-in; “free door-to-door return” covers 97% of self-operated and 75% third-party merchants; free shipping service expanded to 90% of third-party products, and the free shipping threshold was lowered to 29 yuan.
1. Financial analysis
1Q24 revenue was 260 billion yuan, up 7.0% year on year, and non-GAAP net profit was 8.9 billion yuan, up 12.66% year over year.
(1) Users & merchants: The number of active users in the 1Q24 quarter achieved a year-on-year double-digit increase, and the average shopping frequency and NPS increased at an accelerated pace; the merchant ecosystem became more prosperous, and the number of third-party merchant stores exceeded 1 million; the first live broadcast of “Selling Dongge AI Digital Man” had over 20 million views within 1 hour, and the overall turnover exceeded 50 million yuan.
(2) Direct sales: 1Q24 direct sales revenue was 208.5 billion yuan, up 6.6% year on year. Among them, household appliances 3C increased 5.3% year on year, and FMCG increased 8.6% year on year.
(3) Services: 1Q24 service revenue was $51.5 billion, up 8.8% year on year; of this, platform and advertising revenue of 19.29 billion yuan increased 1.2% year on year, and logistics and other revenue of 32.25 billion yuan increased 13.8% year on year.
The gross margin has increased, and the cost ratio is well controlled. 1Q24's gross profit margin was 15.29%, up 0.47 pct year on year; 1Q24 marketing expense ratio was 3.6%, up 0.3 pct year on year, mainly due to increased spending on promotion activities, including expenses related to Spring Festival Gala sponsorship; R&D expenses ratio of 1.6%, a decrease of 0.1 pct year on year; administrative expenses ratio of 0.8%, a decrease of 0.2 pct year on year, mainly due to a decrease in equity incentive costs.
Division, JD Retail 1Q24 operating margin 4.1% (-0.5pct); JD Logistics operating margin 0.5% (+3.6pct).
Non-GAAP net profit increased 12.66% year over year. 1Q24 non-GAAP operating profit of 8.88 billion yuan, profit margin of 3.4% (+0.2pct); non-GAAP net profit of 8.9 billion yuan, up 12.66% year-on-year, with a non-GAAP net profit margin of 3.4% (+0.3 pct).
Cash flow situation: Net operating cash flow for 1Q24 was -11.315 billion yuan. Excluding effects such as JD Baijiao in operating cash flow, 1Q24 free cash flow was -15.476 billion yuan; cash, cash equivalents and restricted cash at the end of the period was $88.919 billion, up 10.09% year-on-year.
2. Update profit forecasts and valuations.
We expect the company's 2024-2026 non-GAAP net profit of 364, 401, and 44.3 billion yuan respectively; considering the business structure, we give a segmented valuation of the company. The valuation method is as follows:
(1) Give retail business 10-12xPE in 2024;
(2) Refer to the latest round of post-investment valuations and shareholding ratios for its subsidiaries, such as JD Industrial Products, to calculate the corresponding equity valuation; JD Logistics and JD Health take 2024/06/07 market value for equity valuation.
In summary, the company was given an overall reasonable market value range of HK$4587-5161 billion in 2024, corresponding to the reasonable value range of HK$144-162 per share for H shares, giving it a “superior to the market” rating.
Risk warning: Competition in the industry is intensifying; infrastructure economies of scale are not significant.