The macroeconomy is recovering steadily, and 24Q2 revenue is expected to increase slightly year-on-year. Judging from the macro environment, 24H1 retail sales of consumer goods showed a steady recovery trend, recovering to 121% in the same period in '19.

According to data from the National Bureau of Statistics, from January to June 2024, total retail sales of social consumer goods were 23596.9 billion yuan, up 3.7% year on year, down 1 pct from 4.7% in 24Q1, and overall consumption performance was weak; judging from online consumption, online retail sales nationwide were 7099.1 billion yuan, up 9.8% year on year; online retail sales of physical goods increased 8.8% year on year, higher than the overall zero total social market growth rate. By category, household appliances and audiovisual equipment, communication equipment, and daily necessities achieved cumulative retail sales of 4487/3692/392.3 billion yuan respectively, compared with 3.1%/11.3%/2.3%. According to data from the National Bureau of Statistics, from January to June 2024, the country invested 5252.9 billion yuan in real estate development, down 10.1% from the previous year (based on a comparable scale). Overall, the industry is in the process of bottoming out and restoration. Recently, the intensive introduction of stimulus policies from the central government to the local authorities has boosted market confidence to a certain extent. We expect JD Group's 24Q2 revenue to rise 0.5% year-on-year to 289.3 billion yuan, with revenue growth being pressured in the short term. 1) Overall, terminal consumption performance is weak, and the real estate market is at the bottom of consolidation; 2) By category, core categories such as JD 3C home appliances have slowed growth due to last year's high base, and the Japanese 100 category will enter a healthy growth channel under the prosperity of the 3P ecosystem; we believe that with the company's strong supply chain capabilities and internal efficiency optimization, the future will be driven by the improvement of the macroeconomy and the gradual release of consumer demand The company's performance is improving.

Under the construction of the POP ecosystem, product structure is optimized, and net profit is expected to increase year-on-year in 24Q2. Judging from the company's business, the company's own business barriers are deep, and POP ecosystem construction is progressing steadily. Improving the user's consumer experience is expected to form a positive cycle of healthy development by stimulating consumer demand. At the beginning of 2023, JD attracted a large number of new merchants to join by launching the “Chunxiao Plan”. As of June 18, the turnover and order volume of JD 618 reached new highs in 2024, and the number of orders for JD live streaming increased by more than 200% year-on-year. The company achieved 83 brands with a cumulative turnover of over 1 billion during the 618 period, and achieved the goal of sales growth of over 0.15 million small and medium-sized merchants by more than 50%.

At the same time, the 10 billion subsidy continues to provide consumers with a wealth of low-cost big-name choices. The number of online products increased by more than 100% year over year, and the number of 10 billion subsidized users and orders all increased by more than 150% year over year. We believe that with the steady recovery of the Chinese consumer market, the increase in the platform's low price supply abundance may lay the foundation for the subsequent attack on the sinking market and the activation of old users. By category, the electrified category is affected by a high base, and revenue growth is pressured in the short term, and “trade-in” is expected to drive a new round of growth in consumer demand. Affected by last year's hot weather, JD platform air conditioning sales in April-June 2023 were more than 15.9 billion, up 118% from month to month. Under the influence of a high base, revenue growth in the electrified category is under pressure in the short term. During the 618 period, JD and more than 20 provincial and municipal governments increased consumer subsidies. In the 7 provinces and cities of Beijing, Hebei, Hubei, Xi'an, Shenzhen, Guangzhou, and Hainan, the trade-in volume for home appliances increased by more than 100% year-on-year. The supermarket category is expected to continue its high growth rate in the first quarter and achieve double-digit growth. The number of new products in JD 618 clothing, beauty, sports and other categories increased by more than 380% year-on-year. Rich supply and price advantages have driven rapid brand and category growth. We expect the 24Q2 company's non-GAAP net profit to reach 10.79 billion yuan, up 12.1% year on year. The non-GAAP net profit margin increased slightly year over year, mainly due to product structure optimization under the prosperous open platform ecosystem, and the proportion of 3P and Japan100 high gross margin categories continues to increase.

24Q2 has accumulated repurchases of about 0.2 billion US dollars. The repurchase plan is progressing in an orderly manner. According to the company's new share repurchase plan (valid until March 18, 2027), as of May 15, 2024, the company has repurchased a total of about 0.7 billion US dollars, and the remaining amount is 2.3 billion US dollars. We believe that as the repurchase plan progresses in an orderly manner, the company may face a revaluation of the valuation.

Investment suggestions: The impact of short-term corporate business adjustments is declining, POP merchant ecosystem construction is progressing steadily, and consumer demand for core categories is expected to be gradually released. We expect JD's revenue to be 1152.7/1256.7/1318.7 billion yuan (previous values were 11,775/13 ,189/1459.9 billion yuan, respectively), up 6.3%/9.0%/4.9% year over year; adjust net profit attributable to shareholders for 2024-2026 (non-GAAP) ) were 37.3/42.7/44.6 billion yuan, respectively (previous values were 339/365/37.9 billion yuan, respectively). In the long run, the overall coordination of 1P and 3P is coordinated with the low price mentality strategy promoted by the company. We continue to be optimistic about the development potential of the company's core supply chain and logistics capabilities over a long period of time, and continue to advance customer acquisition. At the same time, the application of the AI big model is expected to continue to reduce costs and increase efficiency.

Risk warning: Policy supervision risks; increased competition in the e-commerce industry; organizational restructuring progress falls short of expectations; overseas listing regulatory policy risks; performance forecasts may differ from actual values. Please refer to the company announcement.