JD Earnings Results
JD.com’s first quarter earnings sheet demonstrated impressive sales figures and profitability metrics growth.
For instance, net revenues rose 1.4% to reach 243.0 billion yuan, while the company’s autonomous delivery service platform, Dada, saw its sales spike a massive 274% from 688 million yuan in 2022 to 2.58 billion yuan for the three months ended March 31 this year.
Likewise, non-GAAP net income grew a considerable 90% to 7.6 billion yuan, with the net margin on that up 144 bps year-on-year at 3.1%.
According to Lei Xu, the CEO of JD.com, this earnings haul was driven by operational streamlining, product portfolio optimization, and expanded service offerings. Xu emphasized the firm’s commitment to reforming its business structure to further develop the enterprise’s user base across China.
On top of that, JD’s Chief Financial Officer, Sandy Xu, also highlighted the significant growth of service revenues, which accounted for 20% of total revenues in the first quarter. This success was attributed to attracting a record number of third-party merchants to the JD.com platform, resulting in solid margins.
Looking ahead, Xu expressed optimism for the second quarter, anticipating positive financial and operational trends as the company continued its proactive adjustments. JD.com aims to maintain the quality of its businesses while providing an excellent platform for merchants and suppliers, focusing on exposure, traffic, and cost efficiency to foster sustainable long-term growth.
JD Partners with Tesla
It wasn’t just the company’s quantitative performance that shone in the first quarter of 2023; JD also showcased other notable business milestones across its various divisions.
For example, in a boost to its brand portfolio, JD.com welcomed Tesla as an official flagship store partner earlier this year. The partnership is intended to leverage the company’s omnichannel advantages to support the development of Tesla’s online presence on the platform.
Furthermore, JD expanded its offerings in the luxury sector with the launch of Longines’ official flagship store, which, utilizing the Chinese business’s intelligent supply chain capabilities, logistics fulfillment, and authentic product ecosystem, can provide customers with a wide selection of new and classic timepieces.
And finally, Dada, JD.com’s on-demand retail platform, witnessed notable collaborations and advancements too. JDDJ, a sales channel under Dada, launched the new Huawei P60 models, solidifying its position as Huawei’s official on-demand retail partner. With over 2,000 authorized Huawei stores on its platform, JDDJ provides extensive coverage across 260 cities in China, ensuring sufficient inventories to meet customer demands.
Retail Fell 2%
While JD has shown strong momentum in many of its key operating indicators, some lagging areas might be of concern to investors.
For instance, the company’s Retail segment saw its revenues decline 2% for the quarter, with its trailing twelve-month free cash flow of 19 billion yuan way short of the 35.6 billion yuan in FCF it recorded in 2022.
In fact, this points to another worrying trend hidden in the corporation’s financial literature: the business’s net cash used in operating activities has skyrocketed for the quarter, from 3.5 billion yuan last year to 21.6 billion yuan today.
Nevertheless, with falling sales and an alarming rise in its ability to burn cash, there’s no guarantee it’ll be plain sailing for JD’s shareholders from here on out.
Is JD.com A Buy?
Although the firm’s top line came in more or less flat this time around, the headline number of 243.0 billion yuan represented a beat of US$560 million when weighed against the Street’s previous expectations.
Similarly, JD’s valuation is appealing for all the right reasons. Its forward non-GAAP PE ratio of 11.3 trades at a discount to its close rival, Pinduoduo, whose own bloated multiple of 15.1 makes it appear decidedly expensive by comparison.
It has to be noted, however, that the business is reckoned to have low revenue growth in the short term, and its gross profit margin of 8.3% leaves a lot to be desired.
That said, year-on-year EBITDA growth is slated to come in at 183.3%, which augurs well given the Consumer Discretionary median is presently in the negative.
Ultimately, a bet on JD.com is a bet on China. And if Michael Burry and Chase Coleman are ready to place a stake, maybe other could follow suit.
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