In September, the zero growth rate of the Society increased month-on-month, and the 3C growth rate of household appliances was impressive. According to data from the Bureau of Statistics on October 18, in the first three quarters of this year, the total retail sales of social consumer goods in China was about 35.36 trillion yuan, an increase of 3.3% over the previous year. Among them, the total amount of social zero in September was about 4.11 trillion yuan, an increase of 3.2% over the previous month, and the growth rate was 1.1 percentage points faster than the previous month. By category, retail sales of household appliances and audiovisual equipment increased 20.5% year-on-year in September.

JD is an e-commerce platform that benefits the core of the appliance trade-in policy. The Ministry of Commerce introduced consumer purchase subsidies for 8 categories of household appliances, with a maximum subsidy of 2,000 yuan for a single product. In addition to the home appliance category, many places are independently expanding more subsidy categories, such as Guangzhou adding home furnishings categories, and Shenzhen adding 3C categories such as mobile phones, tablets, watches, and headsets to meet consumer needs in a more flexible and diverse manner.

According to the Ministry of Commerce's National Appliance Trade-In Data Platform, as of October 15, more than 10 million consumers had purchased 14.624 million units of 8 types of household appliances and enjoyed a central subsidy of 13.17 billion yuan, driving sales of 69.09 billion yuan. JD's home appliance revenue accounts for a high proportion of overall revenue, and the benefits are more obvious compared to other e-commerce platforms.

The Double Eleven promotion season is here, and we are entering the peak e-commerce season. According to JD's official website, the JD Double 11 Promotion will start at 8 p.m. on October 14. On October 31 and November 10 at 8 p.m., JD will launch the “10 billion subsidy day” and “peak 28 hours” respectively; during this period, there will be more than 1 billion new products, products supplied directly from the industrial belt, and more than 100 service upgrades. On the supply side, in response to the good goods brought by the industry, JD launched a “10 billion subsidy for factory goods” to provide users with good goods brought by the industry and good goods directly from the factory. Currently, Jingxi Self-Management has steadily cooperated with many core industrial belts. On the logistics side, JD Logistics was also upgraded in all aspects during the Double Eleven period to ensure a “worry-free and fast” shopping experience.

Reiterate the “gain” rating. In the short term, we expect JD's GMV growth rate to be stable in July and August in Q3. September is expected to outperform the retail market by benefiting from the electrical appliance trade-in policy. We expect the company to maintain mid-single digit growth on both the Q3 revenue side and the non-GAAP net profit side.

We forecast the company's 2024-2026 revenue of 1137.8/1198.9/1261.1 billion yuan, up 5%/5% year on year, and non-GAAP net profit of 42.9/47.3/51 billion yuan, up 22%/10%/8% year on year.

In terms of valuation, based on 11x 2025e P/E, we believe that JD's reasonable market value is RMB 520.5 billion, and the corresponding share price is the target price of 46 USD (JD.O) and HKD 181 (9618.HK). We are optimistic that the company will benefit from the trend of appliance trade-in policies and maintain an “gain” rating.

Risk warning: Platform merchant ecosystem development falls short of expectations; consumer spending intentions fall short of expectations; innovative business losses exceed expectations; investment exceeds expectations.