JD.com: Strong profits, conservative outlook on future growth

JD announced its second-quarter financial report on Thursday, with profits exceeding expectations and the stock price rising by over 4%. While the overall financial report is positive, Morgan Stanley pointed out that amid weak consumption and increasingly fierce competition in e-commerce, JD's revenue only grew by 1.2% year-on-year, which should draw market attention. It is expected that JD's revenue growth will not show significant recovery in the second half of the year.

Specifically:

Revenue: The company's net revenue in the second quarter was RMB 291.40 billion (approximately USD 40.1 billion), an increase of 1.2% year-on-year, slightly higher than the estimated RMB 290.51 billion.

Profit: Operating profit was RMB 10.5 billion, a 26.5% increase from the same period last year. The adjusted operating profit margin was 4%, up 1 percentage point from the previous year, estimated at 3.43%.

In its report on Thursday, Morgan Stanley pointed out that although JD's second-quarter profits exceeded expectations, the revenue growth was only 1.2% year-on-year, which should be a cause for market attention.

JD's management maintains its full-year revenue growth guidance, with Morgan Stanley predicting:

In the first half of the year, JD and JD Retail's revenue grew by 3.9% year-on-year, slightly higher than the 3.7% growth in total retail sales of consumer goods announced by the National Bureau of Statistics in the first half of the year.

Morgan Stanley predicts that in the third and fourth quarters, JD Retail's revenue will grow by 4.4% and 4.7% respectively, with an expected full-year growth of 4.2%.

In the first half of this year, JD's net profit increased by 45% year-on-year. JD's management is confident in the growth of net profit. Morgan Stanley predicts a 22% increase in JD's full-year net profit to RMB 43 billion.

At the same time, Morgan Stanley 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 on JD's recovery growth momentum in the intense industry competition.

In conclusion, Morgan Stanley stated that despite JD's excellent profit performance, the slowdown in revenue growth and macroeconomic challenges still need attention. A conservative stance is maintained on JD's future growth, with a target price of $28 and a "hold" rating