JD Logistics announced the 2023 Q3 results: 1) The 2023 Q3 achieved revenue of 41.7 billion yuan, up 16% year on year, up 1.5% month on month; period profit of 450 million yuan, net profit of 210 million yuan, turning loss into profit over 2022/3; adjusted net profit of 840 million yuan, up 2.1% month on month, and adjusted net profit margin 2.0%, flat month-on-month. 2) In 2023, Q1-Q3 achieved revenue of 11.4 billion yuan, an increase of 27% over the previous year, and a loss of 100 million yuan during the period. Compared with the loss of 1.6 billion yuan in the same period last year, the loss was significantly reduced, and the adjusted net profit was 1 billion yuan, which turned a loss into a profit compared to the loss of 100 million yuan in the same period last year.
Revenue from external customers increased to 72%, and there are points of interest in JD's retail policy adjustments. 1) In Q3 of 2023, revenue from external customers was 29.8 billion yuan, up 19.8% year on year, accounting for 71.6%, with a year-on-year increase of 2.4 pct; internal revenue from JD Group was 11.8 billion yuan, up 8.5% year on year, accounting for 28.4%.
2) According to estimates, the revenue of the integrated supply chain of external customers reached 7.8 billion yuan, an increase of 6.6% over the previous year, and the number of customers reached 5,4212. Although the number of customers reached 5,4212, it still decreased 13.4% year on year, but increased by 4.1% month on month. During the reporting period, the company stepped up its integrated supply chain customer development efforts, and has expanded high-quality customers such as Panasonic China, which is expected to be replicated to small and medium-sized customers in the future. The average revenue of a single customer increased to 143,000 yuan, an increase of 22.7% over the previous year, mainly due to the company's increasing depth of cooperation with customers. Revenue from other businesses reached 22.1 billion yuan, up 25.3% year on year. 3) Business revenue from JD Group was about 11.8 billion yuan, up 8.5% year on year. Affected by JD's drop in free shipping threshold and PLUS membership policy adjustments, Q3 revenue from JD Group grew rapidly. Furthermore, the event will begin on August 23, and is expected to have a double impact with the peak e-commerce season of Double Eleven, which will benefit the company's Q4 express delivery business volume growth.
Cost increases are basically in line with revenue, and gross margin improved year over year. In 2023, Q3 achieved a gross profit margin of 7.9%, a year-on-year increase of 0.5pct, a year-on-year increase of 0.5pct, a year-on-year decrease of 0.1pct; from a cost structure, labor costs accounted for 33% of revenue, a year-on-year increase of 2pct; outsourcing costs accounted for 35%, a year-on-year decrease of 2pct; rental costs accounted for 7% of revenue, a year-on-year decrease of 0.7pct; property and equipment depreciation costs accounted for 2.4% of revenue, up 0.2pct year on year; other operating costs accounted for 13.7% of revenue, up 0.3 pct year on year.
We believe that the short-term increase in company costs, especially labor costs, is partly affected by Debon's merger. Currently, the integration and deep collaboration between the company and Debon networks is progressing, and the results of cost reduction and efficiency are expected to be seen in the future.
The year-on-year growth rates of Q1-Q3 employee remuneration were 26%, 25%, and 24%, respectively, showing marginal improvements.
In the future, the company will achieve further development in JD ecology, digital intelligence, Debon cooperation, and overseas business. 1) The positive ecological cycle with JD ensures the continuous growth of the Group's retail business and becomes one of the core barriers to competition. The JD ecosystem exports stable commercial flow support. 2) Externally, digitally and intelligentized integrated supply chain logistics services bring cost reduction and efficiency to enterprises and grow with the times. 3) Debon will effectively supplement the basic logistics resources and network operation capabilities of JD Logistics to promote further cost reduction and efficiency on both sides. 4) The company's overseas layout is progressing steadily. The growth rate of cross-border logistics business is high, and service barriers are expected to be created.
Investment suggestions: 1) Profit forecast: We believe that due to the weak prosperity of the logistics industry this year, the company's Q3 revenue side grew less than expected, while the cost side grew faster due to the acquisition of Debon. Combined with the company's Q1-Q3 latest financial data, we lowered our profit forecast and expected net profit of 174, 9.99, and 2,280 million dollars in 23-25 (previously 20.19, 23.86, 2,978 billion). 2) Investment advice: We use a segmented valuation method: that is, JD's logistics revenue (excluding Debon) is priced at an average of 0.50 times PS in the past year, and Debon is priced at 0.50 times PS in the past year, and Debon is priced at the corresponding market value compared to shareholding. In total, the target market value for 2023 is about HK$84 billion, the corresponding stock price is HK$12.73, and the expected target space is 28%, maintaining the “recommended” rating.
Risk warning: JD's growth rate is lower than expected, third party business expansion is lower than expected, and labor costs have risen sharply.