To The Moon

$JD.com(JD)$ (JD, BUY) - Beat-and-Raise Quarter Fueled by Trade-Ins and Demand Recovery; Strong Momentum Expected to Continue in 1H; Maintain BUY and Raise PT to $50

We are maintaining our BUY rating and increasing PT to $50 (was $45) after JD reported beat-across-the-board 4Q results, and as we believe the strong momentum will likely sustain in the 1H. JD total revenue grew 13% y/y in 4Q (accelerating 8pts from 3Q), with JDR revenue up 15% y/y (vs. +6% y/y in 3Q). Moreover, 4Q gross profit grew 22% y/y, accelerating 6pts from 3Q, and was 9pts faster than revenue growth, with gross margin up 110bps y/y (vs. +165bps in 3Q), again, due to supply chain efficiency improvement and revenue mix shift to higher margin business lines. 3P growth continued to outpace 1P, with order volume growth accelerating from 3Q, and outpaced overall JDR.

Electronics and home appliance revenues grew 16% y/y in 4Q, accelerating meaningfully from +3% in 3Q, primarily due to government’s trade-in incentives and an earlier Chinese New Year holiday (Feb 2025) leading to earlier purchases in Q4 2024. General merchandise revenue grew 11% y/y (vs. +8% in 3Q), with supermarket category’s revenue grew double-digit y/y for four consecutive quarters, and JD believes the momentum will likely continue, driven by More competitive pricing & stronger category operations. Marketplace and marketing service revenue grew 13% y/y (vs. +6% in 3Q).

JD also highlights Q4 marked the fifth consecutive quarter of double-digit growth in quarterly active users. In addition, JD has widely deployed AI across retail, logistics, and supply chain operations. E.g., AI-powered search & recommendations, AI shopping assistant (Jingyan), and AI-driven merchant tools are enhancing user and merchant experiences.

Announced dividend payout of $1 per ADS, +32% y/y. JD repurchased 8.1% of outstanding shares in 2024, and will continue to execute buyback under its $5B share repurchase program announced in Aug. 2024.

For 2025, we believe JD will continue to benefit from the trade-in incentives and revenue will likely continue to grow around 10% in the 1H, partially due to easy comps. We are also optimistic about the recently announced Chinese government plan to expand fiscal spending, with a strong emphasis on boosting consumption, which should also benefit JD. Despite the recent rally, the stock is trading at 9.4x ‘25E EPS, still quite attractive, in our view.

3Q revenue 4% above Tiger/Street. Specifically, electronics and home appliances grew 16% y/y, accelerating 13pts from 3Q. General merchandise grew 11% y/y, accelerating 3pts from 3Q. Total net product revenue grew 14% y/y (vs. +5% in 3Q), and was 5% above Tiger/Street estimates. Marketplace and marketing services revenues +13% y/y, vs. +6% in 3Q. Net service revenue grew 11% y/y (vs. +6% in 3Q), 3%/2% above Tiger/Street.

Adjusted EBIT 5%/11% above Tiger/Street. Gross profit was 3%/6% above Tiger/Street, with gross margin 19bps below Tiger but 37bps above Street. Total Opex was 4% above Tiger but ratio was 4bps below. By segment, JD Retail operating margin was 3.3%, up 0.7pts y/y, and JDL margin was up 0.7pts y/y to 3.5%.

Estimate revisions. Increasing 1Q revenue estimate by 5%, gross profit estimate by 5% on 10bps higher gross margin, and increasing non-GAAP net income by 8%. Increasing '25 revenue estimate by 3%, gross profit by 4%, and non-GAAP net income by 3%.

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