Despite JD.com's excellent profit performance, slower revenue growth and macroeconomic challenges still need attention. Therefore, Daiwa Securities' outlook for JD's future growth is cautious, maintaining a target price of $28 and a "hold" rating.
JD.com released its Q2 financial report on Thursday which exceeded expectations, causing its stock price to surge by over 4%. Although the report was generally bullish, Morgan Stanley pointed out that against the background of a weak consumer market and increasingly fierce e-commerce competition, JD.com's revenue growth increased by only 1.2% YoY, which should attract market attention. It is expected that JD.com's revenue growth will not see a significant recovery in the second half of the year.
Specifically:
Revenue: In Q2, the company's net revenue was RMB 291.4 billion (approximately $40.1 billion USD), an increase of 1.2% YoY, with an estimate of RMB 290.51 billion.
Profit: Operating profit was RMB 10.5 billion, an increase of 26.5% YoY from RMB 8.3 billion in the same period last year. Adjusted operating profit margin was 4%, up 1 percentage point from the same period last year, with an estimate of 3.43%.
Morgan Stanley pointed out in its report on Thursday that although JD's Q2 profit exceeded expectations, its revenue growth increased only by 1.2% YoY, which should attract market attention.
JD management maintains the guidance for full-year revenue growth, with a forecast from Morgan Stanley:
In the first half of the year, JD and JD Retail revenue increased by 3.9% YoY, slightly higher than the 3.7% growth in total retail sales of consumer goods announced by the National Bureau of Statistics of China in the first half of the year.
Morgan Stanley predicts that JD Retail revenue will increase by 4.4% and 4.7% in the third and fourth quarters, respectively. It is expected to increase by 4.2% for the whole year.
In the first half of this year, JD's net income increased by 45% YoY. JD's management is therefore confident in the growth of net income. Morgan Stanley predicts that JD's net income for the full year will increase by 22% to RMB 43 billion.
At the same time, Morgan Stanley has cautiously lowered JD's revenue expectations.
We have lowered our revenue expectations for JD in 2025 and 2026 by 5% and 10%, respectively, reflecting our conservative view of JD's recovery momentum in the fiercely competitive industry.
In summary, despite JD's outstanding profit performance, slowing revenue growth and macroeconomic challenges still need to be considered. Morgan Stanley holds a conservative attitude towards JD's future growth and maintains a target price of $28 and a "hold" rating.