Analyst Note| Chelsey Tam |
We are lowering our fair value estimate of wide-moat JD.com to USD 105 (and HKD 407 for the Hong Kong traded share class) from USD 113 (HKD 438), as we expect losses in some new businesses to weigh on the pace of margin expansion in the near term. We previously assumed that JD non-GAAP operating margin could reach 2.3% in 2022, after a year of particularly low level of 1.3%, versus 2.1% in 2020. Now we expect non-GAAPoperating margin to reach 1.2% in 2022, after registering 1.1% in 2021. By 2030, non-GAAP operating margin is expected to reach 4.8% now, versus 5.5% previously. We continue to believe that JD is trading at an attractive valuation for long-term investors. We project 24% topline year-over-year growth in the fourth quarter this year, a slowdown from 28.6% registered from double 11 sales to reflect weakness after the double 11 event. We expect JD.com to generate a non-GAAP net margin of 1.0% in the quarter with non-GAAP net income of CNY 2.7 billion.