Revenue grew steadily and repurchases increased: the company's 2Q24 revenue was RMB 291.4 billion, up 1.2% year on year, in line with market expectations; gross margin was 15.8%, up 1.4pp year on year, up 0.5pp, a record high in recent years; adjusted net profit increased 69% year over year to 14.5 billion yuan, higher than market expectations 15.7%; adjusted net interest rate was 5.0%, up 2.0pp year on year, up 1.6 pp month on month. The company bought back about 2.1 billion US dollars in the second quarter, and tradable shares decreased by 4.5% compared to the end of the first quarter.
The supermarket category continued to grow, and the 3P ecosystem continued to develop: 2Q24 product revenue remained flat year on year, with the charged category falling 4.6% year on year, mainly affected by last year's high base and prudent strategy during this year's 618 promotion; daily use department store revenue increased 8.7% year on year, and the supermarket category achieved double-digit growth. The growth trend is expected to continue in the second half of the year. 2Q24 service revenue increased 6.3% year over year, with platform and advertising services growing 4.1%, and logistics and other services increasing 7.9%. User growth was strong, and the number of quarterly active customers achieved double-digit year-on-year growth for three consecutive quarters. It also drove a double-digit increase in order volume, offsetting the decline in average customer unit prices due to changes in category structure. The 3P ecosystem continues to improve. 3P orders increased by more than 20% year on year in the second quarter, driving 3PGMV growth higher than the company's market, and 3P advertising revenue also achieved double-digit growth. Commission revenue is expected to resume growth in the second half of the year as last year's impact on 3P merchant support measures, including lower commissions and cancellation of platform usage fees, gradually subsided. The company maintained an annual growth rate exceeding the social zero market target.
Profit margin improvement was better than expected: in 2Q24, JD's retail revenue was 257.1 billion yuan, up 1.5% year on year; with improved supply chain efficiency and disciplined promotion, operating profit margin improved 0.7 pp to 3.9% year on year; JD logistics revenue was 42.2 billion yuan, up 7.7% year on year. As scale expansion and operational efficiency improved, operating profit margin increased 3.7 pp to 4.9% year on year, reaching a record high. With disciplined investment in supply chain capabilities, user experience, and market share expansion, the company expects to achieve high single-digit profit margins over the long term.
Maintaining the “hold” rating and target price of HK$122/$31: We slightly adjusted the company's 2024E/2025E revenue forecast to $1129.2 billion/$1188.3 billion, and maintain the target price of HK$122/$31, corresponding to 8.5x/8.7x P/E for 2024E/2025E. As competition in the e-commerce industry is still fierce and macro-consumption uncertainty, the “hold” rating is maintained.
Investment risk: Upside risk: Macro consumption is better than expected, market share expands, and profits are better than expected; downside risk: industry competition intensifies; profit margins fall short of expectations due to increased investment.