20250711-招银国际-Increasing_investment_in_food_delivery_weighs_on_profit_synergy_remains_key_to_watch_5页_1mb

JD.com (JD US) - Equity Research Analysis Summary

This report, from CMB International Global Markets, provides an update on JD.com (JD US) focusing on financial forecasts, investment in food delivery (FD), and valuation. Key elements include revised financial projections, risks, and a BUY recommendation.

Key Financial Forecasts

• For 2025E, revenue is expected to reach RMB1,292,675 million, with a 11.6% YoY growth, unchanged from previous forecasts. Non-GAAP net profit is forecasted at RMB24.4 billion, representing a 49% YoY decline, primarily due to increased investment in FD.
• In 2024E, revenue grew 6.8% YoY to RMB1,158,819 million, with non-GAAP net profit at RMB47,827 million.
• For the second quarter of 2025 (2Q25E), revenue is projected at RMB337.4 billion (15.8% YoY growth), while non-GAAP net profit is expected to fall 68% YoY to RMB4.6 billion, impacted by FD investments. Total incremental FD investment in 2Q25E could reduce profit by approximately RMB10 billion.

Valuation and Recommendations

• The target price was revised downward from US$55 to US$50, a 9% cut, based on DCF analysis using a WACC of 11.8% and terminal growth of 1.5%. This results in a 2026E P/E of 9.4x, lower than previously.
• CMBIGM maintains a BUY recommendation, reflecting positive potential returns over the next 12 months despite the profit decline.

Business Analysis and Growth Drivers

• The company is increasing investment in FD to drive user growth and shopping frequency, with early signs of cross-selling from FD users to JD Retail categories. This is expected to improve unit economics through higher order volumes and user subsidy optimization.
• Daily active users for the main app show strong growth, and services revenue is projected to sustain 14.2% YoY growth in 2Q25E, supported by GMV expansion in marketplace and advertising segments.
• Financial metrics, such as gross margin (16.2% in 2025E) and net profit margin (1.9% in 2025E), are expected to face pressure, with profitability depending on effective FD cross-selling and user retention.

Risks

• Consumption recovery may lag expectations, business competition could intensify, and aggressive FD investment might further weigh on earnings growth.

Overall Assessment

• Despite revenue growth momentum in E&HA and general merchandise segments, profit declines are anticipated. The BUY recommendation highlights the stock's potential, but investors should monitor FD's unit economics and cross-selling trends.