JD.com: 2023 Is a Year of Restructuring, Which Will Pressure Sales Growth

We have cut our estimates for wide-moat JD.com’s JD first-quarter revenue and full-year revenue and non-GAAP net margin to account for a greater impact from the strategy to fulfill low-margin merchandise using third-party platforms instead of the company’s own first-party business, the creation of a flatter organization, and integrating the first- and third-party businesses under the same merchandise category leader. Our fair value estimate is unchanged at USD 90 per ADS and HKD 349 per share, after we cut it on March 10 to reflect business performance uncertainty. In the China e-commerce space, we prefer Alibaba for its plan to unlock value and PDD Holdings for its higher take rate expansion.

We have lowered our total revenue year-on-year growth estimate for the first quarter to negative 1% from positive 0.6%. Our forecast for first-quarter non-GAAP net margin improvement of 10 basis points is intact. For the full year, we have slashed our total revenue year-on-year growth forecast to 2% from 12%. The higher-than-expected impact from fulfilling low-margin merchandise through the third-party business instead of the first-party business accounts for half of the 1,000-basis-point cut in our full-year year-on-year revenue growth estimate. We now expect a full-year non-GAAP net margin of 2.8%, an 11-basis-point increase year on year, compared with 2.9% previously estimated. We forecast a 10-year revenue compound annual growth rate of 6% and non-GAAP net income CAGR of 13%.