Matters:
24Q2 JD achieved revenue of 291.4 billion yuan, +1.2% year over year; operating profit of 10.5 billion yuan, operating profit margin of 3.6% (+0.7 pct year on year, +0.6 pct month on month), of which JD retail operating profit margin was 3.9% (+0.7 pct year on year, -0.2 pct month on month); achieved net profit from non-GAAP to mother of 14.46 billion yuan, +69.0% year on year; non-GAAP net profit margin of 5.0% year on year +2.0pct, +1.5pct month-on-month.
Commentary:
The Japan100 category grew strongly, and the 3C digital “trade-in” policy unleashed consumption vitality. 24Q2 achieved revenue of 291.4 billion yuan, up 1.2% year over year. By business: 1) Achieved product revenue of 233.91 billion yuan, the same as the previous year. Among them, the revenue of the 3C household appliances category was 145.06 billion yuan, a year-on-year decrease of 4.6%. This is due to the impact of a high base, and disciplined investment rather than reliance on subsidies during the promotion period to promote consumer purchases. It is expected that the “trade-in” policy is expected to continue to bring consumption vitality. The data shows that 3C digital trade-in orders increased by nearly 100% year-on-year during the JD 618 period. The revenue of the household department store category was 88.85 billion yuan, up 8.7% year on year, and the growth rate increased month-on-month. Among them, the supermarket category achieved double-digit growth. 2) Achieved service revenue of 57.49 billion yuan, a year-on-year increase of 6.3%. Among them, revenue from platforms and advertising services was 23.43 billion yuan, up 4.1% year on year, and the growth rate stabilized; revenue from logistics and other services was 34.06 billion yuan, up 7.9% year on year.
Profits greatly exceeded expectations, and profit margin guidelines were raised. Q2: JD's profit reached a new high, with non-GAAP net profit of 14.46 billion yuan in a single quarter, +69.0% year over year; non-GAAP net profit margin was 5.0%, +2.0pct year over year, and +1.5pct month-on-month. Behind the drastic improvement in profit levels is JD's strong supply chain capabilities, which drive an increase in gross margin. Q2 achieved a gross profit margin of 15.8%, +0.1pct year over year, and +0.5pct month-on-month. Management guided the year-on-year increase in profit margins and profit amounts for the whole year, and target medium- to long-term profit margins in high units. Looking at the segment, JD Retail achieved operating profit of 10.11 billion yuan, operating profit margin of 3.9%, +0.7 pct year on month; JD Logistics achieved operating profit margin of 2.18 billion yuan, operating profit margin 4.9%, +3.7 pct year on year, and +4.4 pct month over month, a significant improvement; and loss of 0.7 billion yuan from new business.
Insist on share repurchases to protect shareholders' rights and interests. According to the announcement, in the six months ending June 30, 24, the company had repurchased a total of 0.22 billion Class A common shares (equivalent to 0.11 billion American Depositary Shares), with a total amount of 3.3 billion US dollars. The repurchased shares accounted for about 7.1% of its tradable shares on December 31, 2023.
Investment advice: Considering the weakness in consumer spending power, we slightly lowered JD's 24-26 revenue forecast to 1.14/1.21/1.28 trillion yuan (previous value 1.17/1.25/1.33 trillion yuan); however, the company actively reduced costs and improved profitability, and raised 24-26 non-GAAP net profit to 44.2/45.5/51.5 billion yuan (previous value 35.5/39.2/43.1 billion yuan). Maintaining the original valuation assumption, the target market value for 24 years was HK$595.1 billion, corresponding to a target price of HK$187 per share, maintaining the “Recommended” rating.
Risk warning: Consumer confidence is low and competition is intensifying.