We haven’t owned JD.com long however there’s been a lot thrown at the position since we entered in early February around ~US$40. A leading player in Chinese e-commerce, JD has been in the cross hairs of sentiment swings around China facing equities; however, operationally, they’ve been performing, overnight reporting the fastest pace of sales growth since 2022, thanks in part to consumer-targeted stimulus that subsidises purchases of electronics and household appliances.
For 1Q25, JD’s results were solid, and while not materially above expectations, they did beat.
- Net revenue 301.08 billion yuan, +16% y/y, ahead of consensus of 289.44 billion yuan
- Adjusted earnings (Ebitda) of 13.70 billion yuan, +27% y/y, ahead of consensus of 12.64 billion yuan
- Higher margins, with underlying operating margin of 3.9% vs. 3.4% y/y, and ahead of expectations for 3.54%
In terms of commentary/outlook, there was no specific guidance. However, they said “user growth was particularly strong during the quarter, reflecting the increasing trust and mindshare JD has earned from consumers and further strengthening our ecosystem.”
They are pushing into food delivery, and doing so by under-pricing a rival, and this is costing them money, though strength in other segments is more than offsetting this. They have bought-back $1.5bn worth of stock year to date, with ongoing share repurchases likely.
While FY25 is still likely to be a challenging year from an earnings perspective, with sales expected to grow 9% while earnings are only expected to lift 6%, they are ideally positioned as a beneficiary of stimulus aimed at Chinese consumption, which is a focus area of the Chinese administration. Further, JD is priced on just 8x FY25 earnings, which means there is room for an expansion in the multiple if earnings growth exceeded expectations, which would amplify any share price performance.
- To read our original thoughts on JD when we purchased the position, click here
MM remains long and bullish JD US
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