Broker: UOB Kay Hian
Date of Report: 11 July 2025
JD.com 2Q25 Results Preview: Double-Digit Growth Continues Amid Margin Pressures from Food Delivery Investments
Overview: Solid Top-Line Growth, Margin Erosion Expected
JD.com, a leading online direct sales platform in China, is set to maintain its robust double-digit revenue growth in 2Q25, aligning with the 15.8% year-on-year increase recorded in 1Q25. Despite strong top-line performance, the company is bracing for margin pressure due to significant investments in its food delivery (FD) segment, with a projected FD loss of RMB 10 billion in 2Q25 and further investment expected in 3Q25 during the peak season.
The company’s strategic focus on its core commerce business underpins its confidence in achieving double-digit revenue growth throughout 2025. However, fierce competition and aggressive investments in food delivery are expected to weigh on near-term profitability. UOB Kay Hian maintains a BUY rating on JD.com but lowers the target price to HK$158.00 (US$40.00), reflecting a more cautious outlook on margins.
JD.com: Key Shareholder and Stock Data
- Share Price: HK\$123.60
- Target Price: HK\$158.00 (down from HK\$185.00)
- Upside Potential: +27.8%
- Market Cap: HK\$359.3 billion (US\$45.8 billion)
- Major Shareholders: BlackRock (5.1%), Vanguard (4.1%), Tencent (2.8%)
- 52-Week High/Low: HK\$192.3/HK\$94.65
2Q25 and 2025 Outlook: Revenue Growth Driven by Core Segments
JD Retail anticipates double-digit revenue and net profit growth in 2Q25, closely tracking the 16.3% year-on-year revenue growth posted in 1Q25. Key growth drivers include:
- Home Appliances & FMCG: Both categories reported double-digit growth in 2Q25, aided by exceptionally hot weather in northern China, which boosted home appliance demand.
- Momentum into July: The home appliance segment remains strong, with continued resilience expected in July.
- 2025 Full-Year Guidance: JD.com is confident in achieving double-digit revenue growth, although a slowdown is anticipated from September onward due to high base effects, particularly in electrified SKUs and home appliances.
- Net Margin Guidance: Expected to remain steady year-on-year at 4% for 2025.
Food Delivery Investments: Margin Impact and Strategic Focus
- 2Q25 FD Loss: The company expects RMB 10 billion in incremental net loss from FD in 2Q25.
- Core Commerce Profitability: Estimated net profit from core commerce exceeds RMB 14.5 billion, but group net profit is projected at RMB 4.8 billion, marking a 65% year-on-year earnings decline in 2Q25.
- 3Q25 Outlook: FD investment will ramp up further due to seasonal order surges.
- 4Q25 Outlook: Moderate investment is expected in the traditional off-season for FD.
- Unit Economics: Continued improvements in unit economics and rising order volumes may temporarily outpace cost optimization, necessitating further investment.
- Dinner Orders: These remain the primary contributor to FD volume, supporting a higher average order value (AOV) compared to peers due to a focus on high-quality merchants.
Cross-Selling Synergies Between JD FD and JD Retail
- User Base Evolution: Initially skewed towards younger, more female users, the FD demographic is broadening with expansion.
- Targeted Strategies: JD has begun bundling retail coupons with FD offers and promoting retail items post-FD checkout.
- Effective Categories: Supermarkets, consumer goods, local services, and even on-demand phone accessories have seen strong cross-sell momentum.
Financial Highlights: 2023-2027 Key Metrics
| Year to 31 Dec (RMBm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
1,084,662 |
1,158,819 |
1,304,162 |
1,382,596 |
1,449,685 |
| EBITDA |
16,285 |
33,865 |
50,147 |
74,368 |
86,381 |
| Operating Profit |
25,204 |
38,736 |
22,942 |
47,051 |
58,645 |
| Net Profit (adj.) |
35,200 |
47,827 |
29,851 |
44,269 |
45,946 |
| EPS (Fen) |
1,108.7 |
1,572.7 |
983.6 |
1,458.6 |
1,513.9 |
| PE (x) |
10.2 |
7.2 |
11.5 |
7.7 |
7.5 |
| Dividend Yield (%) |
4.4 |
2.5 |
2.8 |
3.1 |
3.4 |
| Net Margin (%) |
2.2 |
3.6 |
1.8 |
2.8 |
3.1 |
| ROE (%) |
10.5 |
17.5 |
9.2 |
13.5 |
13.7 |
Industry Trends and Strategic Developments
- Retail Sales Momentum: According to NBS data, retail sales of physical goods grew by 8% year-on-year in May 2025, with notable strength in home appliances (+53%), communication equipment (+33%), and furniture (+25.6%), attributed to demand from the 618 shopping festival.
- Double RMB 10 Billion Initiative: On 8 July, JD.com launched this initiative, pledging over RMB 10 billion to support benchmark brands with traffic, marketing, and after-sales service, aiming to elevate sales of select brands above 1 million items on its platform.
- Hotel Industry Entry: JD.com officially entered the hotel sector, offering up to three years of zero commission fees to hotels joining its PLUS Membership Programme. JD.com boasts over 800 million high-spending users and partnerships with over 30,000 large enterprises and 8 million SMEs. The travel move is not expected to impact the FD subsidy budget.
Earnings Revisions and Risks
- Revenue Forecasts Raised: 2Q25/2025 revenue forecasts increased by 2%/1%, now representing 16%/13% year-on-year growth.
- Profit Forecasts Cut: Non-GAAP net profit forecasts for 2Q25/2025 reduced by 29%/20% due to larger-than-expected FD losses and the merchant support initiative.
- Adjusted Net Margin: Estimated at 1.4% for 2Q25 and 2.3% for 2025.
- Risks: Potential consumption and logistics disruptions from future pandemics, intensified competition in fresh produce and FMCG, and a risk of consumer spending downgrades.
Valuation and Recommendation
- BUY Rating Maintained: Target price set at HK\$158.00, which implies a 14.7x 2025F PE.
- Current Valuation: JD.com trades at 11.5x 2025F PE, 1 standard deviation below its historical mean.
- Top-Line Confidence: Bolstered by trade-in subsidies, but with a cautious stance on 2025 profitability due to FD competition.
SOTP Valuation Breakdown (2025F)
| Segment |
Revenue (RMBm) |
EBITDA (RMBm) |
EV/EBITDA (x) |
Value to JD (HK\$m) |
Stake |
Value to JD (HK\$m, discounted) |
HK\$/Share of TP Value |
| JD Retail |
1,142,726 |
45,709 |
6 |
274,254 |
Majority |
246,829 |
78 |
| JD Logistics |
75,422 |
— |
81% |
54,983 |
— |
17 |
11% |
| New Business & Others |
70,470 |
— |
37% |
23,467 |
— |
8 |
5% |
| JD Health |
— |
— |
3x PS |
74,288 |
67% |
44,796 |
14 |
9% |
| Key Investments |
— |
— |
— |
28,188 |
— |
9 |
6% |
| Net Cash |
— |
— |
— |
96,942 |
— |
32 |
20% |
| SOTP Value |
|
158 |
Share Price Catalysts and Investment Thesis
- Robust revenue growth, ongoing user and margin expansion, and improved operating efficiency.
- Further extension of logistics services to both internal and external customers.
- JD.com’s valuation remains attractive relative to historical averages, with multiple catalysts to drive share price performance in the coming quarters.
Conclusion
JD.com continues to deliver impressive top-line growth and expand its ecosystem through strategic investments in food delivery, cross-selling, and new market entries. While margin pressures are likely to persist in the near term due to heavy investment in food delivery and merchant support, the company’s strong positioning in core commerce and its robust financials underpin its long-term growth story. Investors should watch for further developments in the competitive FD landscape, the effectiveness of cross-selling strategies, and the realization of synergies from new ventures such as travel and hotel services.
Disclaimer
This article is for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making investment decisions.
