The author is founder and CEO of T.H. Capital Tian X. Hou
With its foreseeable growth and profitability outlook, we are initiating on JD.com Inc. with a buy rating.
The company will report second quarter results on Friday, August 7. Its results are highly likely to be better than consensus, mostly driven by its June 18 Anniversary Sale promotion, as well as ongoing expansion in general merchandise.
Our proprietary data showed that JD.com’s gross merchandise value (GMV) of online direct sales may reach RMB62 billion to RMB63 billion, or 58% to 61% year-on-year growth in the second quarter.
For the month of June, direct sales GMV increased 49.9% month-on-month as a result of strong volume growth at 47.2%, according to our data.
Longer term-wise, new category expansion in general merchandise can serve as another growth driver for years to come.
Also, as JD.com is developing faster in its general merchandise and marketplace businesses, which have higher margin profiles, its profitability is foreseeable and is only a matter of time.
We therefore give the company a price target of US$39.00.