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JD Will See Faster Long-Term Growth at the Expense of Higher Costs

Chelsey Tam Senior Equity Analyst

Analyst Note

| Chelsey Tam |

The largest takeaway from JD's results is it will be able to carry forward its fast top-line growth in 2020 to 2021, but we think the non-GAAP net margin is unlikely to increase in 2021 due to reinvestment in the businesses. We increased 2021 sales growth to 29% from 20% previously. Our 2021 non-GAAP net margin is now flat versus 2020. We expect to see 10-year revenue CAGR reaching 16% by 2029 versus 13% before, and the non-GAAP net margin to reach 5.1% by 2029 compared with 5.5% previously. We think community group purchase business presents another growth area for JD, increasing JD’s long-term top-line growth, but margin expansion will be slower due to higher investments. As such, we raised JD’s fair value estimate by 37% to USD 100 per ADS or HKD 390 per share, implying a price/non-GAAP net income of 43 times for 2021. The shares are fairly valued.

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Company Profile

Business Description is China's second- largest e-commerce company after Alibaba in terms of transaction volume, offering a wide selection of authentic products at competitive prices, with speedy and reliable delivery. The company has built its own nationwide fulfilment infrastructure and last-mile delivery network, staffed by its own employees, which supports both its online direct sales, its online marketplace and omnichannel businesses. launched its online marketplace business in 2010.

No. 18 Kechuang 11 Street, 20th Floor, Building A, Yizhuang Economic and Technological Development Zone
Beijing, 101111, Cayman Islands
T +86 4006065500
Sector Consumer Cyclical
Industry Internet Retail
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 314,906