Matters:

In 24Q3, JD achieved revenue of 260.39 billion yuan, +5.1% year over year; operating profit of 12.04 billion yuan, operating profit margin of 4.6% (+0.9 pct year on year, +1.0pct month on month), of which JD retail operating profit margin was 5.2% (flat year on year, +1.2pct month on month); achieved non-GAAP net profit of 13.174 billion yuan, +23.9% year on year; non-GAAP net profit margin of 5.1% year on year + 0.8pct, +0.1pct month-on-month.

In the nine months ended September 30, 2024, the company has repurchased 0.255 billionA common shares for a total amount of US$3.6 billion.

Commentary:

The revenue side slightly exceeded expectations, and the “state subsidy” stimulated a positive change in revenue growth in the household appliances category. 24Q3 achieved revenue of 260.39 billion yuan, up 5.1% year over year. By business: 1) Achieved product revenue of 204.613 billion yuan, an increase of 4.8% over the previous year. Among them, the revenue of the 3C home appliance category was 122.56 billion yuan, up 2.7% year on year. The “trade-in” policy stimulated consumption vitality. More than 20 provinces and cities across the country launched online subsidy activities for home appliances, driving the growth rate of the JD 3C home appliance category to correct. Among them, large-screen televisions were the most popular, and the turnover of 519 categories, such as sweepers and dryers, increased 200% year on year. The revenue of the daily necessities category was 82.053 billion yuan, up 8.0% year on year. It continued to maintain high unit growth, and the momentum continued unabated. Among them, the supermarket category received double digit growth. In the third quarter, the company focused on the clothing category, striving to create a gathering place for top clothing trends, bringing consumers more rich clothing choices, and achieving double-digit growth in the Q3 apparel category. 2) Achieved service revenue of 55.774 billion yuan, up 6.5% year on year, of which revenue from platform and advertising services was 20.763 billion yuan, up 6.3% year on year, and logistics and other revenue was 35.011 billion yuan, up 6.5% year on year.

Profits once again exceeded expectations, and the profit margin of logistics operations increased significantly year-on-year. Q3 JD's profit once again exceeded expectations, with non-GAAP net profit of 13.174 billion yuan, +23.9% year over year; non-GAAP net profit margin was 5.1%, +0.8 pct year on year, and +0.1 pct month-on-month. Improved supply chain efficiency led to increased gross margin (Q3 was 17.3%, yoy+1.7pct, qoq+1.5pct). Looking at the segment, JD Retail achieved operating profit of 11.61 billion yuan, an operating profit margin of 5.2%, the same operating profit margin of +1.2 pct; JD Logistics achieved an operating profit margin of 2.09 billion yuan, an operating profit margin of 4.7%, +4.0pct, and -0.2 pct month-on-month, a significant improvement, mainly due to improvements in the efficiency of core operations, with remarkable results in cost reduction and efficiency; and losses of 0.62 billion yuan from the new business.

Investment advice: The company's strong supply chain capabilities drive the platform ecosystem to become more open and the category structure more perfect. We are optimistic about the release of the company's consumption capacity and the improvement of continuous operation efficiency promoted by the “trade-in” policy. We maintained the 24-26 non-GAAP net profit forecast of $44.2/45.5/51.5 billion. We assessed JD by segment, referring to comparable companies, and gave it a target market value of HK$596.3 billion for 25 years, corresponding to a target price of HK$187.3 per share, maintaining a “recommended” rating.

Risk warning: Consumer confidence is sluggish, competition is intensifying, and policy effects fall short of expectations.