JD.com (9618.HK): A Retail Infrastructure Powerhouse

Introduction

JD.com is a leading technology-driven e-commerce and retail infrastructure service provider in China. The company empowers consumers to purchase products anytime and anywhere through its advanced retail infrastructure. Beyond retail, JD.com opens its technology and infrastructure to partners, brands, and various sectors, driving productivity and innovation across industries.

Main Business Segments

• JD Retail: Focuses on online retail, online marketplaces, and marketing services.
• JD Health: Offers online and offline retail pharmacies and integrated healthcare services catering to both retail and corporate clients.
• JD Logistics: Primarily responsible for logistics operations for JD.com’s e-commerce platforms and external logistics businesses.

Q3 Performance Overview

Despite headwinds such as China’s economic downturn and weakened consumer confidence, JD.com achieved impressive financial results in Q3:

• Revenue: RMB 260.4 billion (+5.1% YoY)
• Operating Profit: RMB 12.0 billion (+29.5% YoY)
• Operating Profit Margin: 4.6% (+0.8 percentage points YoY)
• Net Profit Attributable to Shareholders: RMB 11.7 billion (+47.8% YoY)
• Net Profit Margin: 4.5% (+1.3 percentage points YoY)

The improvement in margins, despite consumer subsidies and economic challenges, showcases JD.com’s robust management and operational capabilities. These results underline the company’s ability to navigate adverse market conditions while continuing to grow profitably.

Future Outlook

JD.com is well-positioned to benefit from China’s policies aimed at stimulating consumption and improving economic conditions. The company’s e-commerce platform is particularly strong in selling electronic products and home appliances, which align with China’s “trade-in for new” subsidy policy. As the government rolls out more measures to boost consumer spending, JD.com is expected to maintain its growth trajectory.

Recommendation

Phillip Securities Group views JD.com favorably due to its strong operational performance, alignment with policy directions, and its ability to capitalize on China’s economic stimulus measures. Investors are advised to consider JD.com as a promising investment opportunity in the e-commerce sector.

Li Auto (2015.HK): Driving Growth in China’s New Energy Vehicle Market

Introduction

Li Auto has emerged as a leader in China’s new energy vehicle (NEV) market, offering innovative electric vehicle (EV) solutions. With five models currently available, the company has maintained its position as the top-selling Chinese brand for NEVs priced over RMB 200,000 for seven consecutive months. In 2024, Li Auto reached a significant milestone, becoming the first Chinese luxury car brand to deliver over one million vehicles.

Product Line

Li Auto’s portfolio includes sport utility vehicles (SUVs) and a multi-purpose vehicle (MPV):

• SUVs: L6, L7, L8, and L9, priced between RMB 240,000 and RMB 460,000.
• MPV: Li Auto MEGA, priced at approximately RMB 560,000.

In 2024, the company delivered a total of 500,508 vehicles, bringing cumulative deliveries to approximately 1.1338 million units.

Q3 Performance Overview

Li Auto delivered robust financial results in Q3, despite economic challenges and low consumer confidence:

• Revenue: RMB 42.9 billion (+23.6% YoY)
• Gross Profit: RMB 9.2 billion (+20.7% YoY)
• Gross Profit Margin: 21.5% (-0.5 percentage points YoY)
• Operating Profit: RMB 3.4 billion (+46.7% YoY)
• Operating Profit Margin: 8% (+1.3 percentage points YoY)
• Net Profit: RMB 2.8 billion (+0.3% YoY)

Li Auto’s gross profit margin of 21.5% remains competitive, on par with industry leaders like BYD (1211.HK) and Tesla (TSLA.US), and significantly higher than other NEV competitors such as:

• NIO (9866.HK): 10.7% gross profit margin
• Xpeng (9868.HK): 15.3% gross profit margin

The company’s monthly sales figures have recently exceeded 50,000 units, nearing historical highs, driven by China’s “trade-in for new” EV policy.

Future Outlook

Looking ahead, Li Auto plans to integrate artificial intelligence (AI) into its vehicles and is also developing humanoid robots. These initiatives aim to enhance the appeal and functionality of its offerings, ensuring the company remains at the forefront of innovation in the NEV market.

Recommendation

Phillip Securities Group recognizes Li Auto’s strong performance, competitive positioning, and alignment with China’s policy directions. The company is recommended as a compelling investment, particularly for those looking to capitalize on the growth of the NEV market and China’s supportive policies.