Financial Report Preview | JD.com faces short-term performance pressure, but profits are expected to remain stable.

On Thursday, May 11th, JD.com and JD LOGISTICS released their first quarter financial reports.

CITIC Securities predicts that 2023 will be a year of innovation and long-term development for JD.com. In the short term, the company's performance may be disrupted, but the above-mentioned adjustments are expected to enhance the platform's core competitiveness in the medium and long term.

Oriental Securities stated that business adjustments accumulate development momentum, actively organize structural adjustments to improve efficiency, and continue to be optimistic about JD.com's retail operation capabilities based on strong supply chain capabilities.

First Quarter Financial Forecast

Oriental Securities predicts that JD.com's revenue will be under pressure in the first quarter, but its profit performance will remain stable. The overall revenue is expected to be 236.9 billion yuan, a year-on-year decrease of 1.1%.

It is expected that JD.com's first-quarter adjusted net profit attributable to shareholders will be 4.9 billion yuan (originally 5 billion yuan), corresponding to a profit margin of 2.1%, a year-on-year increase of 0.4 percentage points.

The main reasons include: 1) weakly profitable businesses are optimized as part of business adjustments; 2) the retail scale effect releases the gross profit margin; 3) losses in logistics, Dada Nexus, and new businesses continue to decrease year-on-year.

CITIC Securities stated that it is expected that JD.com's revenue in the first quarter will be 238.3 billion yuan, a year-on-year decrease of 0.6%, and Non-GAAP net profit will be 5.06 billion yuan, with a net profit margin of 2.13%. Non-GAAP net profit is expected to be 5.06 billion yuan, corresponding to a net profit margin of 2.13%, a year-on-year increase of 0.44 percentage points.

The first quarter is still in the weak recovery period after the epidemic, and short-term revenue growth is expected to be under pressure, but the profit margin is expected to remain stable and even increase year-on-year.

Sub-item Business Forecast

Oriental Securities predicts that JD.com (JDR) will achieve revenue of 209.6 billion yuan in the first quarter, a year-on-year decrease of 3.6% (originally -3.0%), and JD LOGISTICS will achieve revenue of 35.9 billion yuan, a year-on-year increase of 31.3% (originally 17.8%).

It is expected that JD.com's first-quarter revenue from electrical products will be 113.6 billion yuan, a year-on-year decrease of 4.0% (originally -4.5%); it is expected that the revenue from daily necessities for the company in 1Q23 will be 82.6 billion yuan, a year-on-year decrease of 4.0% (originally 3.3%). It is expected that the company's platform and service revenue in 1Q23 will be 17.3 billion yuan, a year-on-year decrease of 2.3% (originally -2.3%).

CITIC Securities predicts that JD.com's product revenue in 23Q11P will be 196.4 billion yuan, a year-on-year decrease of 3.9%, and advertising and marketing revenue will be 17.1 billion yuan, a year-on-year decrease of 3.4%. It is expected that JD LOGISTICS and innovative business revenue in 23Q1 will be 24.8 billion yuan, a year-on-year increase of 41.4%.

Investment Strategy

Oriental Securities adjusted JD.com's revenue forecast for FY2022-2024 to 1,046.2/1,078.3/1,207.6 billion yuan (originally 1,046.2/1,132.5/1,273.8 billion yuan), and adjusted net profit attributable to shareholders to 28.2/29.8/34.6 billion yuan (originally 28.2/30.9/36.4 billion yuan). China CITIC Securities maintains a "buy" rating for JD.com, but lowers its revenue and Non-GAAP net profit forecasts for 2023E~25E.

JD.com is given a 16x PE for 2023E, plus the discounted value of its subsidiaries' equity, which corresponds to a fair market value of USD 10.18 billion / HKD 79.89 billion for 2023E. This translates to a target price of USD 64/ADS for JD.com's US stock and HKD 253/share for JD.com-SW (09618.HK).

The Longbridge Dolphin's estimated valuation for the company is CNY 776.2 billion, corresponding to a per-share value of HKD 280.2. The "buy" rating is maintained.