JD announced 2024Q1 results. The quarter achieved operating revenue of 260 billion yuan, +7.0% year on year, JD retail revenue of 226.8 billion yuan, +6.8% year on year, retail operating profit of 9.3 billion yuan, -5.3% year on year; non-GAAP net profit was 8.9 billion yuan, +17.2% year over year. This quarter, JD's business adjustments completed and returned to a healthy growth trend. It is expected that throughout the year, the company will continue to invest in users to seek growth on the basis of maintaining stable profit amounts. Over the long term, it is expected to maintain steady growth and maintain a “highly recommended” rating under the strong barriers, efficient investment, and release of the operating vitality of 3P merchants in JD's own supply chain.
Q1 Revenue was in line with expectations, and profit growth exceeded expectations. 2024Q1 achieved revenue of 260 billion yuan, +7.0% year on year, of which JD's retail revenue was 226.8 billion yuan, +6.8% year over year. Revenue growth was basically in line with expectations. At the same time, order volume, purchase frequency, and number of active users all achieved double-digit year-on-year growth. On the 1P side, Q1 product sales revenue was +6.6% year-on-year, gradually returning to steady growth as the supermarket business adjustments ended; on the 3P side, the Q1 platform's service revenue was 19.3 billion yuan, +1.2% YoY. The growth rate of advertising revenue improved sharply from month to month as the business vitality of new 3P merchants continued to be unleashed. On the profit side, JD's gross margin reached 15.3% in Q1, an increase of 0.5 pct over the previous year, mainly due to the improvement in gross margin and increase in category share after the restructuring of the Japanese category; non-GAAP net profit to mother was 8.9 billion yuan, +17.2% year over year, higher than market expectations. Looking at the full year of 2024, the company will continue to invest in user experience on the basis of maintaining a stable profit amount. It is expected that GMV and revenue will achieve steady growth higher than the social zero market for the whole year.
Looking at each category, the electric category benefits from the trade-in policy and is expected to continue to gain market share, and Japan will return to healthy growth. Q1 Revenue from charged products was 123.2 billion yuan, +5.3% over the same period. In terms of home appliance trade-in, JD is currently actively working with many local governments to promote the implementation of subsidies, and has joined hands with 100+ home appliance brands to establish the “JD Home Appliance Home Renovation Alliance” to launch trade-in subsidy activities one after another in 20 provinces, cities and regions across the country. In 2023, trade-in accounts for a high share of the JD home appliance market. It is expected that 2024 will take advantage of the company's first-mover advantage in terms of trade-in one-stop service for trade-in The trade-in business will be the JD home appliance category Bringing in more increments. Daily 100's revenue was 85.3 billion yuan, +8.6% year-on-year. As business adjustments were completed, revenue returned to healthy growth. At the same time, supermarkets also achieved double-digit GMV and revenue growth in Q1, which is expected to be an important driving force for JD's revenue growth in the long term.
The service continues to be upgraded to optimize the user experience. JD continues to improve the user experience. On the one hand, the price competitiveness of the platform continues to increase, and the number of orders and purchase frequency of users in Q1 low-tier cities remains higher than the overall growth of users; on the other hand, the platform continues to optimize services. Through a series of service innovations such as providing users with richer product choices, lowering the free shipping threshold, upgrading one-click pricing, and supporting refund-only services, up to now, the platform's 59 free shipping policy has basically covered all 3P products. At the same time, the coverage of free door-to-door pickup and return services from 3P merchants is also making significant progress. The improvement in user experience is expected to further support the frequency of purchases and user activity The upgrade.
Investment advice: JD's own business barriers are stable, and the 3P business has wide potential for growth. In 2024, the company is expected to continue to invest in users on the basis of maintaining a stable profit amount. It is expected that in 2024-2026, non-GAAP net profit of 368/393/40.7 billion yuan will be given 12 times PE, corresponding to a target price of HK$150.48 per share, maintaining a strong recommendation rating.
Risk warning: macroeconomic risks; increased competition in the industry.