JD LOGISTICS(02618.HK)：2Q24 PROFIT BEATS; PROFIT MARGIN IMPROVES NOTABLY YOY AND QOQ-格隆汇

机构：中金公司
研究员：Qibin FENG/Yang BAI/Gangxian LIU/Jiulu LI/Vicky WU/Xin YANG

2Q24 profit beats our expectation and market consensus
JD Logistics announced its 2Q24 results: Revenue rose 8% YoY and 5% QoQ to Rmb44.21bn, in line with our expectation. Non-IFRS net profit jumped 197% YoY and 271% QoQ to Rmb2.46bn, the highest on a quarterly basis since its IPO. Non-IFRS net margin rose 3.5ppt YoY and 4.0ppt QoQ to 5.6%, beating our expectation and market consensus, as the efforts in cost reduction and efficiency enhancement were more effective than expected.
2Q24 revenue: Revenue from customers in the integrated supply chain industry rose 4% YoY to Rmb21.3bn. Specifically, revenue from JD Group increased by 7% YoY to Rmb13.53bn, thanks to the lower postage-free threshold on JD.com's retail platform. Revenue from external customers remained largely flat YoY at Rmb7.77bn, with the number of customers rising 11% YoY to around 58,000 and average revenue per customer dropping 10% YoY to around Rmb134,100. This shows that demand continued to recover.
Revenue from customers in the express delivery and freight delivery industries rose 11% YoY to Rmb22.91bn, as parcel volume increased thanks to higher network efficiency and improved user experience. The company gained market share in express delivery. It took a leading position in the domestic freight delivery industry as measured by parcel volume and revenue.
Revenue from external customers as a percentage of total revenue rose 0.2ppt YoY to 69.4%.
Costs: Operating cost rose 3% YoY. GM increased by 3.6ppt YoY and 4.2ppt QoQ to 11.9%. Employee compensation and welfare expenses, outsourcing costs, and rental costs recorded changes of +13%, -3%, and 0% YoY. In addition to maintaining the salaries and benefits of employees, the company also improved its profit margin through optimizing its product structure and enhancing its network efficiency.
Trends to watch
We expect the company to continue benefiting from growing domestic orders in 2024; watch the expansion of its overseas supply chain and international businesses. We think the company's domestic orders will continue to increase, given the improved postage-free program of the retail platform. Revenue from JD.com and third-party merchants may keep increasing.
In addition, the company expanded its presence in the US and UAE in 1H24. It currently has nearly 100 bonded warehouses. We think the number of customers in the integrated supply chain industry and revenue per customer will increase, and revenue from external customers as a percentage of total revenue will remain high, given the company's efforts to expand its international business.
We lift our 2024 non-IFRS net margin forecast to 2.6%, as the company's efficiency improvement is becoming increasingly visible thanks to the orderly consolidation of multiple resources. We believe the company's profit margin will improve alongwith reveue gowth, given: 1) Adjustment of the organizational structure; 2) cost reduction and efficiency improvement enabled by the process-based and automated logistics network operation; 3) higher profit margin of the freight delivery business following the use of Deppon's freight delivery network; and 4) the improved earnings of the express delivery business driven by increased market share as measured by parcel volume. We expect its non-IFRS profit margin to reach 2.6% in 2024.
Financials and valuation
We lift our 2024 and 2025 non-IFRS earnings forecasts 34% and 28% to Rmb4.79bn and Rmb5.55bn, to reflect its higher-than-expected profit margin. The stock is trading at 9.7x 2024e and 8.4x 2025e non-IFRS P/E. We maintain an OUTPERFORM rating and our target price of HK$13.7. Our TP implies 17.1x 2024e and 14.7x 2025e non-IFRS P/E, offering 76% upside.
Risks
Demand for logistics is weaker than expected; costs soar; geopolitical risks weigh on overseas businesses.