< Results First Take> JD Logistics (2618 HK): Margin recovery on track in 1Q22
- Reinforced external customer expansion capability to support record-high external revenue contribution.
- Gross margin recovery on track with sharply narrowed non-IFRS loss in 1Q22.
- Continuous investment commitment in technology and infrastructure network.
- Maintain strategic focus with foreseeable synergy with the acquisition of Deppon (603056 CH) ahead.
- We currently have a BUY rating with TP at HK$30.5, equivalent to 1.2x FY22F P/S.
- Reinforced external customer expansion capability to support record-high external revenue contribution. Total revenue grew 22% y-o-y to Rmb27.4bn in 1Q22, of which external revenue contribution reached new high at 58.4%, mainly backed by robust external expansion with the number of external integrated supply chain (ISC) customers reached 58,818 (+20% y-o-y), while average revenue per customer (ARPC) increased to Rmb111k (+4% y-o-y).
- Gross margin recovery on track with sharply narrowed non-IFRS loss in 1Q22. The company’s gross margin improved significantly from 1.0% in 1Q21 to 5.3% in 1Q22, mainly supported by refined cost controls, optimized customer portfolio and enhanced economies of scale amid business development. Moreover, non-IFRS loss for the period reduced significantly from Rmb1.4bn in 1Q21 to Rmb798mn (-42% y-o-y).
- Continuous investment commitment in technology and infrastructure network. The company’s research and development expenses recorded Rmb744mn (+9% y-o-y) in 1Q22, with its percentage as of revenue remain stable at 2.7% in 1Q22. Moreover, the company’s management guided a capex at c.5% of total revenue for FY22F, signifying its continuous effort to strengthen its infrastructure network.
- Maintain strategic focus with foreseeable synergy with the acquisition of Deppon (603056 CH) ahead. While continued to focus on six core vertical industries, the company indicated to deepen its penetration in smaller-to medium-sized customers through a modularization strategy. Besides, the acquisition of Deppon is pending approval by the relevant PRC authorities in relation to antitrust review, as well as necessary internal approvals. We expect this acquisition to further strengthen its infrastructure network, and consolidate customer resources.
- We currently have a BUY rating with TP at HK$30.5, equivalent to 1.2x FY22F P/S.