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JD.com (JD US) Summary Report

Core Content Overview

This report provides an analysis of JD.com (JD US) and its strategic partnership with Google, as well as its financial performance and market position. It highlights JD's growth in the Chinese e-commerce market, its expansion into international markets, and the potential benefits of its collaboration with Google amidst ongoing US-China trade tensions.

Main Points and Key Information

Strategic Partnership with Google

• Investment: Google invested US $550 million in JD.com, acquiring approximately 27 million newly issued shares at $40.58 per share, representing 1% of JD's outstanding shares.
• Collaboration Goals: The partnership aims to develop retail solutions in Southeast Asia, Europe, and the US by combining JD's logistics and supply chain capabilities with Google's technological expertise.
• Product Expansion: JD will list a selection of high-quality products on Google Shopping in the US and Europe, as part of its strategy to diversify beyond the Chinese market.
• Mutual Benefits: The partnership is seen as a win-win, helping JD expand internationally and Google to strengthen its online retailing and advertising revenue.

618 Sales Performance

• GMV: JD's 618 sales reached RMB 127.5 billion, surpassing the previous year's GMV of RMB 119.9 billion in 17 days.
• Growth: The GMV grew by 6% YoY, despite the highly competitive Chinese e-commerce market.
• Product Categories: Top 5 product categories by GMV are cellphones, PCs, ACs, digital products, and F&B. Top 5 by number of items sold are F&B, personal care, household cleaning, PCs, and mom&baby products.
• Delivery Efficiency: 90% of orders were fulfilled through JD's same-day and next-day delivery, with prepositioned warehouses and night shifts ensuring fast delivery.

Impact of US-China Trade Tensions

• Agricultural Products: Trade tensions may affect the prices of agricultural products imported by JD and Alibaba, but the report suggests that substitutions from other countries can mitigate the impact.
• Market Outlook: Despite these challenges, the report maintains a positive outlook on JD's e-commerce sector and keeps the BUY rating for JD and Alibaba.

Financial Highlights (RMB mn)

Metric	FY16	FY17	FY18E	FY19E	FY20E
Revenue	258,290	362,332	472,323	581,103	708,800
Growth (%)	42%	40%	30%	23%	22%
Non-GAAP Net Profit	2,068	4,968	6,083	8,504	13,258
Growth (%)	NA	140%	22%	40%	56%
Non-GAAP EPADS (USD)	0.22	0.51	0.63	0.86	1.27
P/S (x)	1.59	1.18	0.89	0.74	0.64
ROE (%)	-6.2%	0.3%	4.5%	3.4%	9.6%

Market Performance

• Price Performance: JD US has seen a 22.1% increase in the last month, 4.6% in the last six months, and 14.2% in the last twelve months.
• Target Price: The 12-month target price is US $49, representing a 12% increase from the previous price of US $43.6.
• Sector Comparison: JD US outperformed the CCMP index by 5.3% in the last month, 10.7% in the last six months, and 25.9% in the last twelve months.

Shareholding Structure

• Huang River Investment Ltd.: 18.0%
• Liu Qiangdong: 15.5%
• Wal-Mart: 10.1%

Investment Ratings

• Industry Rating: OVERWEIGHT (Expect the sector to outperform the market over the next 12 months)
• Company Rating: BUY (Expect stock to generate 10%+ return over the next 12 months)

Key Takeaways

• JD.com has a strong partnership with Google, enhancing its global retail capabilities.
• Despite trade tensions, the e-commerce sector in China is expected to remain resilient.
• JD's financial performance shows steady growth, with increasing revenue and net profit.
• The company is focused on technological advancement and international expansion.

Conclusion

JD.com is positioned as a strong contender in the Chinese e-commerce market, with strategic initiatives aimed at expanding globally. Its partnership with Google is seen as a significant step towards achieving this goal, and the company's financial performance supports a positive outlook. The report maintains a BUY rating for JD US with a target price of US $49.