JD Group announced its 2024 2Q24 results announcement. 2Q24 achieved revenue of 291.4 billion yuan, up 1.2% year on year; non-GAAP net profit reached 14.5 billion yuan, up 69.0% year on year.
Share repurchases: From March 31, 2024 to June 30, 2024, the company repurchased a total of 136.8 million Class A common shares, totaling 2.1 billion US dollars; this is approximately 4.5% of the common shares in circulation until March 31, 2024. As of June 30, 2024, according to the $3 billion share repurchase plan approved by the company in March 2024, the total repurchase amount of the company was about 2.6 billion US dollars, and the remaining amount was 0.4 billion US dollars.
Brief review:
The company's 2Q24 revenue increased 1.2% year over year. Household appliances 3C decreased 4.6% year over year, and FMCG increased 8.7% year over year.
2Q24 service revenue increased 6.3% year over year to 57.5 billion yuan. Among them, logistics and other services increased 7.9% year over year, and platform and advertising increased 4.1% year over year. Disassemble the highlights of performance:
(1) Gross margin increased by 1.4 pcts: 2Q24 gross profit margin was 15.8%, up 1.37 pcts year-on-year. Benefit from supply chain capabilities and continuous improvement in price competitiveness rather than relying on subsidies.
(2) The supermarket category increased 8.7% year on year: the revenue of the supermarket category increased 8.7% year on year, and the revenue of the charged category was affected by the base figure decreased by 4.6%;
(3) The 3P ecosystem continues to improve: the number of new third-party merchant stores increased 46% over the first quarter; the “Chunxiao Plan” upgraded 32 support measures in the first half of the year, including AI stores.
1. Financial analysis
2Q24 revenue was 291.4 billion yuan, up 1.2% year over year, and non-GAAP net profit was 14.5 billion yuan, up 69.0% year over year.
(1) Users & merchants: The number of active users and user shopping frequency continued to grow in double digits in the 2Q24 quarter; the number of brands and merchants maintained high growth, bringing more new products to users. The number of new third party merchants added by JD increased 46% over the first quarter; Yanxi Digital People joined hands with 5,000 brands in JD 618 to launch the broadcast, and 21 digital presidents appeared, and the total number of viewers exceeded 0.1 billion.
(2) Direct sales: 2Q24's direct sales revenue was 233.9 billion yuan, which remained stable. Among them, 3C household appliances fell 4.6% year on year, and FMCG increased 8.7% year on year.
(3) Services: 2Q24 service revenue was 57.5 billion yuan, up 6.3% year on year; of these, platform and advertising of 23.43 billion yuan increased 4.1% year on year, and logistics and other revenue of 34.06 billion yuan increased 7.9% year on year.
The gross margin has increased, and the cost ratio is well controlled. 2Q24 gross profit margin was 15.8%, up 1.37 pct year on year; 2Q24 marketing expense ratio was 4.1%, up 0.3 pct year on year, mainly due to increased spending on promotion activities; R&D expenses ratio of 1.4%, which remained stable compared to 2Q23; and administrative expenses ratio of 0.7%, a decrease of 0.1 pct year over year, mainly due to a decrease in equity incentive costs.
Division, JD Retail 2Q24 operating margin 3.9% (+0.7pct); JD Logistics operating margin 4.9% (+3.7pct).
Non-GAAP net profit increased 69.0% year over year. 2q24non-GAAP operating profit was 11.6 billion yuan, profit margin 4.0% (+1.0pct); non-GAAP net profit was 14.5 billion yuan, up 69.0% year over year, and non-GAAP net profit margin was 5.0% (+2.0pct).
Cash flow situation: Net operating cash flow for 2Q24 was $50.738 billion. Excluding effects such as JD White Bar in operating cash flow, 2Q24 free cash flow was 49.555 billion yuan; cash, cash equivalents and restricted cash at the end of the period was 92.045 billion yuan, down 7.16% year on year.
2. Update profit forecasts and valuations
We expect the company's 2024-2026 non-GAAP net profit of 41, 43.5, and 46.6 billion yuan respectively; considering the business structure, we give the company a segmented valuation. The valuation method is as follows:
(1) Give retail business 10-12xPE in 2024;
(2) Refer to the latest round of post-investment valuations and shareholding ratios for its subsidiaries, such as JD Industrial Products, to calculate the corresponding equity valuation; JD Logistics and JD Health will evaluate their equity from 2024/08/21 market value and give a 20% discount.
In summary, the company was given an overall reasonable market value range of HK$425.2-483.3 billion in 2024, corresponding to the reasonable value range of HK$134-152 per share for H shares, giving it a “superior to the market” rating.
Risk warning: Competition in the industry is intensifying; infrastructure economies of scale are not significant.