China Fund News reporter Yao Bo
Faced with fierce competition such as Pinduoduo and Tiktok, JD actively responded with a low price strategy, bringing surprises to the market in terms of profits and shareholder returns. In 2023, JD Group achieved a revenue of over 1 trillion yuan, an increase of 3.7% compared to 2022.
After the performance announcement, the stock price of JD.com's US stock market rose by over 18% at one point after the opening; Hong Kong stocks rose slightly. Institutions have significantly raised the company's target price, believing that JD.com still has 60% room for growth.
Revenue of 1084.7 billion yuan in 2023
According to the financial report, JD Group achieved a revenue of 1084.7 billion yuan in 2023, an increase of 3.7% compared to 2022; The net profit attributable to ordinary shareholders was 24.2 billion yuan, an increase of 132.8% compared to the previous year.
Such outstanding performance proves JD's success in addressing market challenges. In the past year, low price strategy has become an important means for the e-commerce industry to cope with market competition. JD Group Chairman Liu Qiangdong has been emphasizing that low prices are the only fundamental weapon since the end of 2022. In 2023, JD.com increased its promotion efforts for its low price strategy by launching a billion dollar subsidy channel, while also attracting consumers through direct price reductions. JD is also optimizing its logistics services, lowering the threshold for free shipping, and taking many measures to align with Pinduoduo.
In 2023, JD.com will focus on deepening platform ecosystem construction and improving user experience as its strategic leadership. JD Group CEO Xu Ran stated that in 2024, JD will take firm and stable steps to implement existing strategies, promote user experience improvement and market share expansion, continue to focus on price competitiveness and improve platform ecosystem construction, and pay more attention to the implementation of these strategies.
By optimizing performance costs and leveraging economies of scale, JD.com not only saves costs but also creates greater profit margins for businesses.
In terms of expenses, JD.com has reduced the proportion of warehousing and logistics, sales, technology, and content expenses to revenue by 0.25 percentage points, equivalent to a profit of nearly 3 billion yuan.
The low price strategy did not lead to a significant decrease in JD's profits, but instead achieved growth through refined management. JD's optimization in internal management and external market strategy demonstrates that sustainable development can be achieved even in a fiercely competitive market environment.
According to data from Hidden Horse Research, from January to November 2023, JD's GMV (total commodity transaction volume) increased by 5% year-on-year, making it the only platform in large traditional e-commerce to maintain positive growth. This further indicates that the low price strategy has a positive impact on total transactions, and market share has not fluctuated as much as feared.
Xu Ran pointed out at the financial report meeting that from the perspective of management, they will balance the pace of investment and growth, and continue to focus on how to bring better returns to shareholders.
However, the decrease in self operated product prices and the improvement in service quality have still brought financial and cost pressures to JD.com. Proactively controlling the price of self operated goods, which account for a large proportion of revenue, will directly affect the overall revenue level and reduce the gross profit margin.
Valuing shareholder returns and increasing dividend repurchases
Against the background of peak traffic growth and slowing growth of e-commerce, JD pays more attention to returns to shareholders, which is not common in Internet companies that focus on growth, traffic, market share, and dividends and returns.
JD.com recently announced that its cash dividends for 2023 will be $0.38 per ordinary share and $0.76 per American depositary share, totaling approximately $1.2 billion. Meanwhile, JD.com also announced a $3 billion repurchase plan.
JD Group's Chief Financial Officer, Shan Su, stated at the financial report meeting that JD focuses on the long-term healthy development of its business, values long-term shareholder returns, and will give back to shareholders in different ways. He revealed that the company's balance sheet is very strong. It is reported that JD.com has accumulated dividends of $4.2 billion for three consecutive years.
Institutions claim there is still room for growth
After the performance release, many analysts expressed optimism about JD's future growth potential and expected it to continue to demonstrate strong competitiveness in the consumer electronics market and overall retail sector.
HSBC Research and several other institutions have expressed a more optimistic attitude towards JD's future revenue growth and market performance. HSBC has raised JD's profit forecast for 2024-2025 to 4% and raised its target price from HK $148 to HK $152, maintaining a "buy" rating; There is approximately 60% growth potential for the current price of HKD 152.
CICC is also optimistic about JD.com, stating that its self operated platform and third-party merchant GMV will become more balanced. The institution predicts that JD's GMV and revenue growth rate will both reach over 6% this year, and adjusted net profit and retail operating profit can at least remain stable.
JPMorgan Chase, Macquarie, and other analysts have also expressed positive views on JD's future, particularly in increasing shareholder returns, dividend payouts and repurchases, and optimizing supply chain management. The above-mentioned institutions claim that JD has successfully maintained its profit margin and achieved revenue growth through effective market strategies and cost control. In addition, JD's continuous investment in retail business, measures to maintain core business stability, and continuous investment to maintain its market share have all increased institutional confidence.
However, some institutions have expressed concerns about whether JD's profits can continue after its stock price rises. Bank of Communications International pointed out that JD's stock price rose by 16% after the performance announcement, and expectations have been reflected. The industry competition is long-term and intense, and the potential for profit growth in JD's retail industry remains to be observed. We will maintain a neutral rating on its stock price.