Date of Report: 16 October 2024
Broker: UOB Kay Hian
Company Overview
JD.com is the leading online direct sales platform in China, with a strong presence in the consumer discretionary sector. It is known for its dominant position in the e-commerce market and offers a wide range of products, from electronics to daily essentials. As of the report’s date, JD.com had a market capitalization of HK$519.75 billion (US$66.92 billion), with shares issued totaling 2,917.2 million.
Stock Data
- Bloomberg ticker: 9618 HK
- Market Cap: HK$519,754.8 million (US$66,917.5 million)
- Share Price: HK$160.40
- Target Price: HK$197.00 (Up 22.8% from previous target of HK$190.00)
- 52-Week High/Low: HK$192.3 / HK$79.32
- Average Daily Turnover: US$285.1 million
Financial Performance Overview
JD.com showed steady revenue growth with a strong outlook for Q3 2024. The company is expected to post a 4.8% year-on-year revenue increase, reaching RMB 260 billion, supported by growth in gross merchandise value (GMV). JD.com also experienced a robust performance in user and GMV growth, benefiting from government stimulus measures and its trade-in program for electronic devices.
Key financial metrics for 2024-2026:
- FY24 Net Turnover: RMB 1,133.1 billion
- FY24 EBITDA: RMB 60.67 billion
- FY24 Operating Profit: RMB 37.50 billion
- FY24 Net Profit (Adjusted): RMB 43.36 billion
- PE Ratio (2024F): 10.5x
- Dividend Yield (2024F): 1.8%
Q3 2024 Results Preview
JD.com’s growth trajectory remains strong, with revenue for Q3 2024 guided to grow 4.8% year-on-year to RMB 260 billion. This growth is aligned with JD Retail’s performance, which is expected to post a 5% year-on-year increase, driven by high single-digit growth in GMV. Notably, JD saw stable GMV and revenue in July and August, with a significant acceleration in September, largely due to the success of the trade-in program launched in late July.
Strategic Initiatives
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Trade-In Program: JD.com has positioned itself as a key beneficiary of various provincial trade-in subsidy programs for electronics and home appliances. The program, which started in late July and ran through early September 2024, helped boost JD’s revenue from 1P electronics, particularly with a strong performance from the iPhone 16 launch.
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11.11 Shopping Festival: JD’s flagship shopping event kicked off on 14 October 2024, featuring significant discounts, subsidies, and cross-store promotions aimed at stimulating consumption. The festival is expected to positively impact JD’s GMV, with the company offering Rmb10 billion in subsidies, discounts of up to 50%, and various promotions for large-ticket items like appliances and electronics.
User Growth and Merchant Expansion
JD.com continues to execute its user-centric strategy effectively, seeing nearly 20% year-on-year growth in daily active users (DAU) in Q3 2024. Additionally, merchant growth has remained stable, with some sellers experiencing nearly triple-digit revenue growth. Active merchants have also seen double-digit growth during this period, highlighting JD’s strong marketplace dynamics.
Margin and Profitability
JD.com’s operating profit for Q3 2024 is forecasted to grow 22% year-on-year to RMB 11.3 billion, with an operating margin of 4.4%. The company is focusing on optimizing operational expenditure and procurement, which, along with an uptick in 3P revenue, is expected to drive profitability. JD’s adjusted net profit for Q3 2024 is estimated to increase by 6% to RMB 11.3 billion, while Q4 2024 net profit is guided to be between RMB 7 billion and RMB 8 billion.
Risks and Challenges
While JD.com has a positive outlook, certain risks remain, including:
- Potential consumption and logistics disruptions from lingering effects of the pandemic.
- Intensified competition in the fresh produce and fast-moving consumer goods (FMCG) segments.
- Potential consumption downgrades, which could impact future performance.
Valuation and Recommendation
UOB Kay Hian maintains a “BUY” recommendation on JD.com, with an increased target price of HK$197.00, implying a 12x 2025F PE multiple. JD.com is currently trading at 10.7x 2025F PE, which is 1 standard deviation below its historical mean. The broker remains optimistic about JD’s growth potential, particularly in Q3 2024, due to the strong performance of the trade-in program and its focus on user growth.
