Institution: JD.com’s national subsidies drive performance growth, will continue to benefit in Q4

Performance Review

On November 14, 2024, the company disclosed its Q3 2024 performance announcement, achieving revenue of 260.4 billion yuan in Q3 2024, a year-on-year increase of 5%, and a NON-GAAP net profit attributable to shareholders of 13.2 billion yuan, a year-on-year increase of 24%.

Operational Analysis

The core 3C home appliance category benefited from national subsidies, accelerating revenue growth, and is expected to continue benefiting in Q4. In Q4 2024, the company's merchandise revenue reached 204.6 billion yuan, a year-on-year increase of 4.8%, with 3C home appliance revenue at 122.6 billion yuan, a year-on-year increase of 2.7%, showing an improvement in growth rate compared to the previous quarter (Q2 2024 year-on-year -4.7%). After the launch of the old-for-new policy, the prosperity of the home appliance category has significantly improved, and as the core product category of the company, 3C home appliances are expected to continue benefiting in Q4. During the Double Eleven shopping festival, the number of JD.com shopping users increased by over 20% year-on-year, and the order volume from JD.com's live commerce increased by 3.8 times year-on-year. Daily necessities revenue reached 82.1 billion yuan, a year-on-year increase of 8%, exceeding industry growth for three consecutive quarters. In Q3 2024, the company announced a comprehensive layout in the apparel category, achieving double-digit growth in clothing.

JD Logistics: Profitability reaches a new high, integration with TaoTian is expected to gain incremental customers. In Q3 2024, JD Logistics' NON-GAAP net profit reached 2.57 billion yuan, a year-on-year increase of 205%, driven by the company's technological innovations (automation in warehousing and sorting), improved operational efficiency, and optimized product structure. In October 2024, the system integration with TaoTian was basically completed, allowing more products on TaoTian to choose JD Logistics as their service provider, which is expected to attract more incremental customers in the future.

Continuing to invest in merchant ecosystem construction and improving user experience while maintaining operational efficiency. In Q3 2024, the company's overall operating profit margin was 4.6%, a year-on-year increase of 0.8 percentage points, with JD Retail's operating profit margin at 5.2%, year-on-year flat, and JD Logistics' profit margin expected to reach 4.7%, a year-on-year increase of 4 percentage points. The number of transactions from 3P merchants increased by over 20% year-on-year, with order volume increasing by 30%. The company reinvested over 4 billion yuan in subsidies and resources to improve user experience by optimizing category structure and enhancing logistics services in certain regions.

Share repurchase is steadily underway, with the new share repurchase plan effective since September. As of September 30, 2024, the company has repurchased a total of 255.3 million Class A ordinary shares, totaling 3.6 billion USD. The 3 billion USD repurchase plan announced by the company in March 2024 has been fully utilized, and in August 2024, the company announced a new repurchase plan effective from September 2024, allowing for the repurchase of shares worth up to 5 billion USD over the next 36 months until the end of August 2027.

Earnings Forecast, Valuation, and Rating

We expect the company's revenue for 2024/2025/2026 to be 1,141.4/1,208.0/1,286.6 billion yuan, with NON-GAAP net profits of 45.6/50.6/55.6 billion yuan, corresponding to a current PE of 8.56/7.70/7.02X, maintaining a "Buy" rating.

Risk Warning

Consumer recovery may be less than expected; market competition may intensify; national subsidy policies may not drive GMV growth as expected; low-price strategies may not convert as expected, leading to profit erosion, etcSource: Guojin Securities