JD.com Earnings: Results Beat; New USD 3 Billion Share Buyback Program and Investment Plan Sensible

We are keeping our fair value estimates of USD 46 per ADS (HKD 179 per share) and forecasts for JD.com unchanged after its earnings beat. We think the China e-commerce sector is undervalued, but we prefer 1) JD.com for its turnaround story; followed by 2) Alibaba Group for its capital return to shareholders; and lastly, 3) PDD Holdings, given lower recent sales at PDD’s Temu as reported by Bloomberg Second Measure, and the headline risks from a potential ban and import tariff in the US. We believe JD.com can differentiate itself through its intangible asset of quality logistics offered by JD Logistics. In our opinion, a lower free shipping threshold and free return and exchange of products at customers’ doorsteps will enhance the customer experience. We agree with JD.com’s decision to invest earlier rather than later in user experience to build its reputation amid intensifying competition, although this will affect near-term margins.