20231116-招银国际-Better-than-feared_3Q_results_6页_1mb

JD.com (JD US) recently reported its third-quarter 2023 financial results, which exceeded market expectations. Revenue reached RMB247.7 billion, up 1.7% year-over-year, surpassing the analyst forecast and Bloomberg consensus by 0.7% and 0.5%, respectively. Non-GAAP net income of RMB10.6 billion was ahead of estimates, driven by better-than-feared performance in the JD Retail (JDR) business, contributing to a non-GAAP net profit margin of 4.3%, an improvement from 4.1% in the previous quarter. This demonstrates JD's ability to retain wallet share among its core consumer base, supported by double-digit user and order growth during the Double 11 shopping festival. Management noted that business adjustment impacts are largely fading in 2024, and they expect the company to outperform China's retail sales growth.

The company's net product revenue, led by electronics and home appliance segments, saw a slight decline due to seasonality and high prior-year comparisons, while general merchandise revenue faced challenges from business transitions but is showing improvement as adjustments wear off. Services revenue grew 12.7% YoY, with logistics and advertising segments contributing positively, though commission revenue slowed due to preferential policies for merchants. JDR specifically showed improved operating profit margin of 5.2%, better than forecasts, indicating resilience in a competitive environment.

The analyst rating remains BUY, with the target price increased to US$57.5 (up 2% from US$56.5), reflecting optimism about the stronger-than-expected results and 2024 outlook. Valuation is based on a DCF model with unchanged assumptions for WACC at 11.8% and terminal growth at 1.5%. Financial metrics like P/E and P/B ratios suggest upside potential, but margin volatility could persist due to ongoing competition and strategic shifts. Overall, the outlook is positive, with adjustments expected to stabilize, supporting the current price performance and future growth prospects.