Introduction to this report:
Continuing to increase the platform ecosystem construction. It is expected that JD retail GMV and revenue will grow healthily in FY24Q2. JD Logistics will benefit from the 618 promotion and steady growth.
Key points of investment:
Profit forecast and investment suggestions: adjusted JD FY2024E/FY2025E/FY2026E operating income was 1120.9/1177.1/1237.7 billion yuan (RMB, same below) (previous value was 1166.1/1235.9/1298.3 billion yuan), adjusted FY2024E/FY2025E/FY2026E adjusted net profit was 40.3/42.4/46.8 billion yuan respectively (previous value was 37.8/ billion yuan) 40.3/44.9 billion yuan). Hong Kong stocks (9618.HK) were given a target price of 166 HKD for FY2024, maintaining the “Overweight” rating.
Total revenue growth remains stable, and profitability continues to improve. We expect the company's FY2024Q2 revenue to be 290.1 billion yuan, +1% year over year. Since the high temperature in 2023 occurred in May and June, earlier than in 2024, the base is large, so household appliances such as refrigerators, fans, and air conditioners are under pressure. The company's adjusted net profit for FY2024Q2 is expected to reach 10.1 billion yuan, and the adjusted net interest rate increased by 0.2 pct to 3.5% year-on-year, mainly due to reduced subsidies, without significant subsidies.
JD Retail: GMV and revenue both increased, fully benefiting from the achievements of platform ecosystem construction. We expect the FY24Q2 retail GMV growth rate to be 1-2% higher than revenue, and the gap with revenue is narrowing; JD retail revenue will increase slightly: 1) Merchant side: JD attracts merchants to settle in through measures such as simplifying the merchant entry process and traffic incentives. The number of active merchants is expected to accelerate growth and provide rich pallets. The 3P GMV growth rate is higher than 1P, and the 3P revenue growth rate is slower than 1P. 2) User side: JD deepens content and service innovation. During the 618 period, JD Yunyansai Digital People livestreamed for more than 0.4 million hours, accumulated over 0.1 billion viewers, and continued to lower the self-operated free shipping threshold to improve the user experience. NPS for user satisfaction is expected to continue to increase, accelerating the growth of users and order volume.
3) Platform side: The company's new business “Jingxi Self-operated” targets low-tier cities and is expected to further expand the unique advantages of logistics infrastructure and achieve consumption classification within the platform in the face of white label merchants. We believe that making full use of 1P's self-operating advantages and continuing to increase the platform ecosystem will help achieve a positive cycle of business and profit growth.
JD Logistics: The “618” promotion is beneficial, and revenue certainty is high. According to data from the State Post Office, the national express delivery business volume exceeded 15 billion units in June 2024. We believe that JD Logistics is expected to benefit from the “618” promotion and increase. We are optimistic about the steady growth of JD Logistics for a long time.
Risk warning: consumption recovery falls short of expectations; industry competition intensifies; 3P ecosystem construction falls short of expectations