JD.com Stock at a Glance
- Fair Value Estimate: HK$ 167.00
- Morningstar Rating: 4 stars
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Wide
JD.com Earnings Update
JD.com’s third-quarter non-GAAP net profit beat Refinitiv consensus as of Nov. 15 by 18% and our estimate by 19%. The beat primarily comes from lower first-party business sourcing costs as a result of its scale in the business. As merchandise currently needs lower order value to qualify for free shipping, this should continue to drive first-party business scale and reduce sourcing costs in the long run, partially offset by higher fulfillment expenses. Management is committed to striking a balance between profitability and growth, which leads us to think that it will not engage in a long-term value-destructive subsidy. We don’t think the 24% revenue CAGR seen from 2017 to 2022 will repeat itself, but we believe the negative impact on revenue growth from business restructuring will be largely behind us, starting from the first quarter of 2024. We forecast a 10-year revenue CAGR of only 4% as consumers increasingly demand value-for-money products, which is not one of JD.com's strengths. We are cautiously optimistic on JD.com.
Management guided that both gross merchandise volume, or GMV, and the supermarket category growth in 2024 would be faster than that of the retail sales of consumer goods in China—better than our expectation. We now assume 6.1% retail sales of consumer goods growth, 6.7% GMV growth, and 12% general merchandise growth in 2024. This has led to a 5% increase in both our 2024 revenue and non-GAAP net profit estimates. We leave our 2023 revenue and non-GAAP net profit largely unchanged, as the higher base resulting from stockpiling of supermarket products in the fourth quarter last year would offset the higher-than-expected third-quarter non- GAAP earnings. We maintain our fair value estimates at US$ 43 per ADS and HK$ 167 per share.
