2Q revenue was basically in line with market expectations, and profit was significantly higher than market expectations
The company announced 2Q24 results: revenue of 291.4 billion yuan, up 1.2% year on year, basically in line with market expectations; non-GAAP net profit of 14.5 billion yuan, up 68.6% year on year, exceeding market expectations by 51.3%, mainly due to JD Logistics's profit exceeding expectations, as well as an increase in other revenue due to increased interest income, government subsidies and other one-time events.
Furthermore, as of June 30, 2024, the total repurchase amount of the company since this year was 3.3 billion US dollars. The total number of shares repurchased accounted for about 7.1% of its common shares issued as of December 31, 2023, and the repurchase speed exceeded expectations; the remaining balance of the $3 billion repurchase plan approved by the company in March this year (valid until March 18, 2027) was about 0.4 billion US dollars.
Development trends
Revenue from the supermarket category and advertising continued to recover, and revenue from the electrified category declined year-on-year. 2Q Group's revenue increased 1.2% year over year, retail revenue increased 1.5% year over year, and the number of quarterly active users and user shopping frequency maintained double-digit growth. We estimate that GMV increased by about 2.9%, of which 3P GMV grew slightly faster than 1P. Looking at the nature of revenue, 1) Revenue from 1P products was basically flat year on year. Revenue from the charged category and revenue from the uncharged category fell 4.6% and increased 8.7% year on year, respectively. The decline in revenue from the charged category was mainly affected by the high base for the same period last year; revenue from the supermarket category increased by double digits year on year, mainly due to improvements in product and service quality and price competitiveness. We believe this growth trend is expected to continue. 2) Commission and advertising revenue increased 4.1% year on year, and continued to improve month on month. Among them, we expect the year-on-year decline in commission revenue to narrow, mainly due to the gradual decline of the base impact before the commission reduction, and advertising revenue achieved a double-digit growth rate, mainly benefiting from the company's further optimization of traffic distribution efficiency. Looking ahead to 3Q, we expect the Group's revenue growth rate to rise to 5.6%.
2Q profit reached a new high in a single quarter. 2Q Group's non-GAAP net profit achieved a 69% year-on-year increase, corresponding to a non-GAAP net profit margin of 5%, mainly due to improved operating efficiency and a significant increase in other revenue. At the same time, JD retail OPM increased to 3.9% year over year, which was better than our expectations, thanks to: 1) the company took advantage of supply chain capabilities and scale effects to achieve an increase in gross margin in multiple categories; 2) Disciplined promotion activities during the 618 shopping festival. We expect the 3Q retail OPM to be around 4.7%, and OPM is still slightly declining compared to last year.
Profit forecasting and valuation
As the company's profit improvement exceeded expectations, we raised our 24-/25-year non-GAAP net profit forecast 15%/9% to 43.7 billion yuan/44.9 billion yuan, an increase of 24%/3% year over year. We maintain an outperforming industry rating and maintain a target price of $41, corresponding to a non-standard price-earnings ratio of 9.9 times in 24/25 and 9.7 times in '25, with 58.3% upside compared to the current stock price; the current stock price corresponds to a 24-year/25-year 6.3x/6.1 times non-standard price-earnings ratio.
risks
Macro consumption is weak, competition has intensified, and the results of organizational structure reforms have fallen short of expectations.