Core views

2024Q3 JD achieved revenue of 260.387 billion yuan, up 5.1% year on year, and achieved non-GAAP net profit of 13.174 billion yuan, up 23.9% year on year, corresponding net interest rate of 5.06%, compared to 4.29% in the same period of the previous year. Both revenue and profit levels exceeded Bloomberg's agreed expectations. This quarter was affected by the restoration of a clean base for the electrified category and the implementation of the national subsidy policy. The revenue growth rate of the charged category recovered, and the Nippon 100 category continued to maintain a higher growth rate, which together led to a recovery in retail and group revenue growth. On the profit side, the Group's profit margin increased year-on-year in the third quarter, and the logistics sector contributed more to incremental profits. Since September, the trade-in policy has boosted the recovery in the electrified category. We still need to pay attention to the continuation of the consumer stimulus policy in the first half of next year and the recovery in endogenous demand for the electrified category.

occurrences

On November 14, 2024, JD released its results report for the third quarter of 2024.

2024Q3 JD achieved revenue of 260.387 billion yuan, up 5.1% year on year, and achieved non-GAAP net profit of 13.174 billion yuan, up 23.9% year on year, corresponding net interest rate of 5.06%, compared to 4.29% in the same period of the previous year. Both revenue and profit levels exceeded Bloomberg's agreed expectations.

Brief review

The national subsidy policy boosted a recovery in revenue growth in the third quarter. In the third quarter, JD achieved revenue of 260.387 billion yuan, up 5.1% year on year, of which 1P revenue was 204.613 billion yuan, up 4.77% year on year, and 3P revenue was 55.774 billion yuan, up 6.5% year on year.

In the 1P business, revenue from electronics and household appliances increased by 2.72% year on year, and revenue from general products increased by 8.0% year on year; in the 3P business, commission and advertising revenue increased 6.3% year on year, and revenue from logistics services increased 6.5% year on year. By sector, JD retail achieved revenue of 224.986 billion yuan in the third quarter, up 6.1% year on year. GMV's growth rate was faster than JD's retail revenue growth rate, and 3P growth was higher than 1P. Looking at the structure, with the restoration of a clean base for the charged category and the implementation of the trade-in policy, the revenue growth rate of the charged category recovered in the third quarter, and the growth rate in September was significantly better than in July and August. The national subsidy policy has boosted the recovery of the electrified category. It is expected that the mid-term boom will continue in the fourth quarter, especially during the peak season for the Double 11 electrified category. The logistics sector achieved revenue of 44.4 billion yuan in the third quarter, an increase of 6.6% over the previous year. Among them, revenue from external customers reached 31.6 billion yuan, accounting for more than 70% of total revenue, achieved adjusted operating profit of 2.086 billion yuan, corresponding profit margin of 4.7%, and continued to maintain a high level. By the end of the third quarter, including cloud warehouses operated by third party owners, JD Logistics had more than 3,600 warehouses, with a total management area of over 32 million square meters. The warehousing network covered almost all counties and districts in the country. Furthermore, JD Logistics continues to upgrade its overseas strategy. It is planned that the global self-operated overseas warehouse area will grow by more than 100% by the end of 2025, while further laying out and constructing bonded warehouses and direct mail warehouses.

Profit growth exceeded expectations, and the logistics sector contributed more to incremental profits. The logistics sector achieved an adjusted operating profit of 2.086 billion yuan in the current quarter, corresponding to a profit margin of 4.7%, compared to 0.288 billion yuan in the same period last year, corresponding to a profit margin of 0.69%, a significant increase over the previous year; the adjusted operating profit margin for this quarter was 5.16%, compared to 5.19% for the same period last year, which was basically the same. At the group level, JD's gross margin rose 1.65 pct to 17.30% year on year in the third quarter, reaching a record high. The performance fee ratio increased 0.10 pct to 6.25% year over year, mainly affected by the base of the drop in the free shipping threshold. The sales expense ratio increased 0.63 pct to 3.84% year on year, the management fee ratio decreased 0.11 pct to 0.89% year on year, and the R&D expense ratio increased 0.16 pct year on year to 1.69% year on year. The Group's overall non-GAAP net interest rate increased to 5.06% year-on-year in the third quarter, compared to 4.29% in the same period last year, which was better than market expectations and reached a record high.

The speed of repurchases has slowed down, but the level of shareholder returns is still at a high level among internet companies throughout the year. The company repurchased a total of 31 million Class A common shares in the third quarter, totaling about 0.39 billion US dollars. In the first three quarters, the company repurchased a total of 255.3 million Class A common shares, totaling about 3.6 billion US dollars. The company has made full use of the authorized repurchase amount under the $3 billion share repurchase plan announced in March 2024, and adopted and announced a new share repurchase plan in August 2024. According to the new share repurchase plan, the company can repurchase shares worth up to 5 billion US dollars over the next 36 months to the end of August 2027.

Profit forecast and valuation: The company's revenue for 2024 and 2025 is estimated to be RMB 1141.6 billion and RMB 1202.3 billion, respectively, and non-GAAP net profit of RMB 44.823 billion and RMB 49.014 billion respectively. Maintaining a “buy” rating, the target price was given at HK$197.89, corresponding to 13 times the Group's PE in 2024.

Risk warning: low shareholder return expectations; weak macroeconomic and social zero growth; market share falling beyond expectations; continuing low expectations of the national supplement policy; trade-in overdraft demand, subsequent recovery of endogenous demand falling short of expectations; profit margins of e-commerce businesses are under pressure; there is limited room for future cost reduction and efficiency, increasing profit margins of new businesses; industry regulatory risks; low expectations for the asset securitization process of subsidiaries; potential risks from Dada and other subsidiaries; US inflation data exceeds expectations, the Fed's interest rate cut process is low; uncertainty about the development of Sino-US relations; Overview of stock delisting risks; others Overseas risk factors affecting the overall performance of China Internet.