Providing stability in turbulent times
? JD reported 4Q21 revenue of Rmb275.9bn, up 23.0% yoy, in line with our expectation,
and non-GAAP net income of Rmb3.6bn, up 49.4% yoy, better than we expected,
mainly because of more efficient expenses control.
? In FY22F, JD will focus more on user retention, ARPU improvement, and increasing the
conversion rate of Plus members.
? We expect JD to achieve revenue growth of 19% yoy in 1Q22F and 20% yoy in FY22F.
We expect 1Q22F non-GAAP OPM to be affected by sponsorship for CCTV’s CNY
Gala, but for full-year FY22F, we expect a yoy stable non-GAAP OPM of 1.5%.
? The loss ratio of new business in FY22F should narrow, and management expects
overall investment in new business in FY22F to be lower than in FY21.
? Reiterate Add with a new DCF-based TP of HK$330. JD is our top pick for the ecommerce sector.
4Q21 results above expectations
JD’s 1P business revenue grew by 22.1% yoy, and marketplace revenue grew by 32.6%
yoy in 4Q21. JD retail (JDR) maintained solid revenue growth of 21.3% yoy, accounting for
90.6% of total revenue, and revenue of JD logistics (JDL) and new business grew rapidly
by 27.7% and 45.5% yoy, respectively, in 4Q21. JDR’s OPM improved by 0.2% pts to 2.1%
in 4Q21, and JDL turned profitable with an OPM of 2.4%. The operating loss ratio for new
businesses expanded to 39.3% (4Q20: 17.1%, 3Q21: 36.2%), as JD stepped up its
investment in Jingxi Pinpin in 4Q21 after the business was restructured in 3Q21 and there
was a lack of one-off gains from JD Property. In the quarter, JD’s fulfillment expenses to
total revenue ratio dropped by 0.7% pts, reflecting the efficiency increase in JD’s logistics
network. JD turned to a GAAP net loss of Rmb5.2bn in 4Q21 vs. a net profit in 4Q20,
mainly because of a fair value change in long-term investments.
Robust operating data growth
4Q21 AAC increased by 20.7% yoy to 569.7m (up c.18m qoq) with quarterly average DAU
up 25% yoy, an all-time high. The number of JD Plus members surpassed 25m, and
average member spending increased by a double-digit percentage yoy. The average
annual spending of Plus members was 10x of that of non-Plus members. As the sole
sponsor of the interactive section of CCTV’s CNY Gala, JD offered Rmb1.5bn in coupons.
We expect its 1Q22F non-GAAP OPM to be affected by the sponsorship, but for full-year
FY22F, we expect a stable non-GAAP OPM of 1.5% yoy, driven mainly by better control of
the fulfilment expenses ratio. In FY22F, JD will focus on user retention, ARPU
improvement, and increasing the conversion of Plus members.
Steady growth in a weak macro environment
To support merchants, in 4Q21, JD reduced the commission rate and lowered the
marketplace access requirements for SME merchants. In 4Q21, JD’s marketplace added
more new merchants than that of 9M21 combined. Management expects to maintain the
low commission rate in the next few quarters, but the advertising income rate will continue
to increase through technology improvements. We therefore expect 3P revenue to
continue to grow faster than its 1P business in FY22F. We expect JD to achieve revenue
growth of 19% yoy in 1Q22F and 20% yoy in FY22F and to continue to gain market share.
Management expects general merchandise revenue to grow faster than 3C products in
FY22F. Although JD’s GPM will be under some pressure in the short term due to the fast
growth of its omni-channel business, like its O2O and offline retail business, in the longer
term, we expect its GPM to gradually improve, driven by stronger 3P revenue growth and
margin improvement in its FMCG business, as well as the loss ratio reduction for new
business.