JD.com shares rise in Hong Kong after profit nearly doubles

By Tracy Qu

JD.com shares rose sharply in Hong Kong after the Chinese e-commerce giant's profit nearly doubled in the second quarter.

The Chinese company's Hong Kong shares (HK:9618) climbed 8.8% to HK$108.20 on Friday morning, following a 4.25% overnight gain in its shares listed in the U.S. (JD).

JD.com said after market close on Thursday that its second-quarter profit jumped 92% from a year earlier to 12.64 billion yuan, equivalent to US$1.76 billion. Adjusted net profit, which excludes share-based compensation and fair-value changes of long-term investments, among other items, rose 69%. Revenue for the period increased 1.2%, the Beijing-based company said.

Citi analysts led by Alicia Yap described the rise in adjust profit as a "strong" beat in a research note. They expect momentum in electronics & home appliance sales to improve in the second half of 2024 and view any faster-than-expected implementation of China's trade-in initiative as an upside catalyst. China has launched a nationwide campaign to encourage consumers to trade in their old goods for new ones, with a particular focus on household appliances and cars.

Citi analysts raised their full-year adjusted net profit estimate for JD.com by 9.6% but cut the revenue forecast by 0.5%. They keep a buy rating on the stock and trim the target price of its ADRs of US$41.00 from US$42.00 to reflect the tweaks in earnings estimates. JD.com's ADRs last traded at US$27.00.

Daiwa analysts led by John Choi see potential for the company's net margin to grow this year, driven by gross margin improvement led by the supermarket category and better monetization from third-party sellers. In a research note, they also highlighted the Chinese government's home appliance trade-in policy and JD.com's potential acceleration of share repurchases as key catalysts.

Daiwa keeps a buy rating on the stock, with a target price of HK$157.00.

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08-15-24 2329ET

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