Broker: China Galaxy International Securities (Hong Kong) Co., Limited
Date of Report: July 11, 2025
JD.com Faces Profit Headwinds in 2025 Amid Aggressive Food Delivery Expansion
Overview: JD.com’s Strategic Shifts and Financial Outlook
JD.com, one of China’s leading e-commerce and internet services companies, is set for a challenging 2025 as it pursues rapid growth in new business segments, especially food delivery. While topline momentum remains solid, surging investments and intense competition in food delivery are putting significant pressure on earnings, with non-GAAP net profits projected to fall sharply year-on-year. Despite these headwinds, the company’s retail business continues to show resilience, positioning JD.com for potential long-term re-rating.
2Q25 and Full-Year 2025: Revenue Growth Driven by Core Retail, Profits Under Pressure
Management forecasts double-digit revenue growth in 2Q25, driven by strong sales of home appliances, mobile phones, and general merchandise.
Year-on-year revenue growth for 2Q25 is expected at 16.2%, with full-year 2025 forecast at 11.6%.
Despite robust revenue, non-GAAP net profit is projected to decline 65.8% in 2Q25 and 27.9% for the full year.
The primary culprit: escalating losses from JD’s instant and food delivery business, with estimated segment losses of RMB 10 billion in 2Q25 and RMB 20 billion in FY25.
Key Financial Highlights (RMB millions)
|
2Q24 |
2Q25F |
YoY |
FY24 |
FY25F |
YoY |
| Total Revenue |
291,397 |
338,476 |
16% |
1,158,819 |
1,292,795 |
12% |
| Gross Profit |
45,938 |
52,344 |
14% |
183,838 |
205,276 |
12% |
| Operating Income (Non-GAAP) |
11,412 |
3,765 |
-67% |
42,427 |
27,497 |
-35% |
| Net Income to Shareholders (Non-GAAP) |
14,460 |
4,944 |
-66% |
47,797 |
34,480 |
-28% |
| Net Profit Margin (Non-GAAP) |
5.0% |
1.5% |
-3.5pts |
4.1% |
2.7% |
-1.5pts |
Food Delivery: High Investment, High Hopes, High Risks
JD.com’s aggressive push into the food delivery market is marked by heavy subsidies and rapid customer acquisition, achieving 25 million orders by June 1, 2025 since the March launch.
Daily order volume is expected to decline to 20 million in July 2025 as competitors escalate their own subsidies.
Management anticipates food delivery investment losses to peak in 3Q25, especially as the third quarter is seasonally strong for this business.
Despite high losses, unit economics are reportedly improving, aided by economies of scale and more efficient subsidy deployment.
Repurchase rates and cross-selling ratios within JD Retail (notably in supermarket and general merchandise) have shown healthy growth, with further cross-selling increases expected in 3Q25 due to intensified marketing.
Strategic Focus: Ecosystem and User Engagement Over Market Share
JD.com’s management emphasizes the broader ecosystem benefits of food delivery:
A 30-40% year-on-year surge in daily app traffic in 2Q25.
Over 100% year-on-year growth in paid user numbers during the 618 shopping festival.
Strong growth in new user acquisition and cross-selling ratios, especially as food delivery users purchase additional goods on JD Retail’s platform.
The company is prioritizing ecosystem synergies and user engagement over mere market share expansion in food delivery.
OTA (Online Travel Agency) Business: Not a Priority in 2025
JD.com announced plans to increase subsidies and adopt a zero-commission merchant strategy for its OTA business as of June 18, 2025.
However, management does not plan aggressive investment in OTA for 2025, citing lower purchase frequency compared to food delivery.
The company’s focus remains on enhancing hotel selection and user experience, but primary investment will be reserved for JD Retail and food delivery.
Valuation and Rating: Target Price Cut, Add Rating Maintained
Due to higher anticipated losses from food delivery, FY25-27 EPS forecasts have been cut by 14-19%.
The DCF-based target price is lowered from HK$188.0 to HK$160.0 (WACC: 13.4%, Terminal Growth: 3%).
Current price: HK$123.6, implying a 29.4% upside to the new target price.
Consensus: 35 Buys, 1 Hold, 0 Sells.
Major shareholders include Tencent (21.3%), Qiangdong Liu (20.0%), and Walmart (10.8%).
Key Financial Metrics
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue (RMBm) |
1,084,662 |
1,158,819 |
1,292,795 |
1,394,199 |
1,488,017 |
| Net Profit (RMBm) |
35,200 |
47,797 |
34,480 |
39,297 |
44,572 |
| Core EPS (RMB) |
11.10 |
15.54 |
11.21 |
12.78 |
14.49 |
| Core EPS Growth (%) |
25.1 |
40.0 |
-27.9 |
14.0 |
13.4 |
| FD Core P/E (x) |
10.09 |
7.07 |
9.80 |
8.60 |
7.58 |
| Dividend (RMB) |
2.71 |
3.61 |
2.13 |
2.82 |
3.42 |
| Dividend Yield (%) |
2.40 |
3.20 |
1.88 |
2.49 |
3.02 |
| ROE (%) |
15.8 |
20.3 |
13.7 |
14.2 |
14.6 |
Cash Flow and Balance Sheet Highlights
JD.com maintains a strong cash position, with total cash and equivalents forecast to grow from RMB 197.7 billion (2023) to RMB 355.0 billion (2027).
Net gearing is expected to remain negative, improving from -61.5% in 2023 to -81.2% in 2027, reflecting strong liquidity.
Free Cash Flow to Equity is projected at RMB 19.8 billion in 2025F, rising to RMB 21.7 billion in 2026F before moderating to RMB 6.1 billion in 2027F.
Capex requirements are seen rising in the medium term, reflecting ongoing investments in logistics and new business lines.
Balance Sheet Snapshot (RMBm)
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Cash & Equivalents |
197,652 |
241,361 |
279,803 |
323,086 |
355,032 |
| Total Assets |
628,958 |
698,234 |
774,040 |
861,710 |
964,312 |
| Total Liabilities |
332,578 |
384,937 |
436,477 |
497,555 |
570,104 |
| Total Equity |
296,380 |
313,297 |
337,564 |
364,155 |
394,208 |
Operational and Market Highlights
JD Retail: Maintains mid-teen year-on-year operating profit growth in 2Q25, with flat operating margin due to a high base in 2Q24.
High sales base for home appliances and electronics in 4Q25 expected due to a major trade-in program launched in September 2024.
Double-digit revenue growth in FY25 is still targeted, underpinned by product mix changes and a stronger third-party ecosystem.
The 618 shopping festival delivered a surge in paid users and new customer acquisition.
Key Risks and Catalysts
Upside Catalysts:
Stronger-than-expected revenue growth, especially from home appliances and general merchandise.
Improvement in net profit margin in 1H25.
Downside Risks:
Weakening consumption trends in China.
Escalating price competition in food delivery, impacting margins.
Delays in achieving break-even for new business segments.
Shareholder Structure and Market Performance
Major shareholders: Tencent (21.3%), Qiangdong Liu (20.0%), Walmart (10.8%).
Market cap: US$45.8 billion (HK$359.3 billion).
Average daily turnover: US$253.4 million.
Free float: 51.0%.
Price performance: Down 6.3% in 1M, -12.8% in 3M, up 19.0% in 12M (absolute); underperformed HSI by -5.7%, -29.0%, -18.5% respectively over same periods.
Conclusion: Growth Ambitions with Profit Headwinds
JD.com is navigating a complex transition in 2025. While revenue growth remains robust, particularly in its retail segment, aggressive investments in food delivery are weighing heavily on earnings. The company’s focus on ecosystem development and user engagement over market share signals a long-term strategy, but near-term profitability will remain under pressure. With a significant upside to the revised target price and a strong balance sheet, JD.com remains a compelling story for investors seeking exposure to China’s evolving e-commerce landscape, but risks from competition and shifting consumer demand should not be underestimated.
