JD.com: Overstatement of Dada Nexus’ Revenue and Costs Has Minimal Impact

While JD.com’s consolidated subsidiary Dada Nexus, or Dada, overstated an estimated CNY 500 million in revenue and CNY 500 million in costs in the first three quarters of 2023, we think this has minimal earnings impact on JD.com. The overstatement represents 6.1% of Dada’s total revenue but only 0.06% of JD.com’s revenue in the same period. While this speaks to greater corporate governance concerns, we think the recent management changes at Dada and new management with affiliation to JD.com will help to strengthen corporate governance. Henry Jun Mao, who is now JD Logistics' head of investor relations and was the previous director of budgeting and forecast at JD.com, became Dada’s CFO on Dec. 19, 2023. Meanwhile, Ian Su Shan, who is currently the CFO of JD.com, became Dada’s chairman on Dec. 19. We maintain JD.com’s fair value estimates at USD 43 per ADS and HKD 167 per share. JD.com is undervalued currently but we prefer PDD Holdings in the China e-commerce space, due to the latter’s stronger growth and market share win.