Date of Report: October 15, 2024
Broker Name: UOB Kay Hian
Company Overview
JD Logistics, Inc. (JDL) is China’s leading integrated supply chain and premium e-commerce logistics service provider. It boasts the largest domestic warehouse network and utilizes a warehouse-based distribution model that differentiates it from traditional express delivery operators. As of 2023, JDL held a 13.3% market share in China’s integrated supply chain market and a 35.7% market share in the premium e-commerce logistics segment (2022 data).
Stock Data
- Bloomberg Ticker: 2618 HK
- Market Capitalization: HK$92,765.1 million (approximately US$11,945.2 million)
- Shares Issued: 6,626.1 million
- 3-month Average Daily Turnover: US$19.9 million
- 52-week High/Low: HK$15.60 / HK$6.61
Shareholders
The majority shareholder of JD Logistics is JD.com, holding 63.56% of the company.
Financial Performance
JD Logistics demonstrated a significant financial turnaround in 1H24. The company reported a net profit of HK$2.26 billion, marking its first positive 1H performance since listing. This recovery was driven by revenue growth and improved cost efficiencies.
- 2024 Financial Forecasts:
- Net turnover: RMB181,367 million
- EBITDA: RMB16,755 million
- Net Profit (adjusted): RMB4,151 million
- Earnings Per Share (EPS): 64.6 fen
- Price-to-Earnings (PE) Ratio: 19.8x
The company is expected to deliver a core earnings CAGR of 9.3% from 2025 to 2027, supported by growth in demand for its integrated supply chain and logistics services.
Collaboration with Alibaba
A key positive development for JDL is its new partnership with Alibaba, which has integrated JDL’s logistics services into the Taobao and Tmall platforms. Alibaba holds approximately 40% of China’s domestic e-commerce GMV, and this collaboration is expected to drive growth in JDL’s premium e-commerce logistics business. Although the financial forecasts do not yet account for this partnership, it is estimated that every 5% increase in JDL’s share of Alibaba’s premium logistics volume could raise its revenue by 3.4-3.9% and core earnings by 7.0-7.5% for 2025-2027.
Core Strengths
JD Logistics’ key strengths include:
- Efficient warehouse-based distribution backed by China’s largest nationwide warehouse network.
- Leadership in logistics technology and innovation.
- Strong understanding of supply chain challenges across various industry verticals.
- Self-operated last-mile network ensuring high service quality.
- Robust brand image and customer recognition.
- Comprehensive social welfare coverage for delivery personnel.
Growth Opportunities
JD Logistics is positioned to benefit from China’s domestic consumption growth. Over 95% of JDL’s revenue is derived from the domestic market, particularly from consumption-related sectors. Its leadership in integrated supply chain solutions makes it a direct beneficiary of any successful push to boost domestic consumption in China.
Valuation and Recommendation
The broker initiates coverage of JD Logistics with a “BUY” recommendation and a target price of HK$18.72, based on a discounted cash flow (DCF) valuation using a WACC of 11.0% and a terminal growth rate of 2.5%. JDL is currently trading at 1.5x its projected 2025 price-to-book (P/B) ratio, which is 0.5 standard deviations below its historical mean of 2.1x since its listing in May 2021.
Key Risks
The potential risks that could affect JD Logistics include:
- Weaker macroeconomic conditions leading to reduced logistics demand.
- Intensified competition in the logistics sector.
- Unfavorable cost fluctuations.
- Risks associated with mergers and acquisitions.
Conclusion
JD Logistics, Inc. has successfully positioned itself as the leader in China’s integrated supply chain and premium e-commerce logistics sectors. With strong financial performance, promising collaborations, and significant market potential, JDL is well-poised for continued growth and operational excellence in the coming years.
