Facing high base, but remaining committed to shareholder return

Facing high base, but remainingcommittedtoshareholder return Target PriceUS$46.80(Previous TPUS$50.50)Up/Downside56.6%Current PriceUS$29.88 For 4Q25E, we anticipate JD.com (JD) to post total revenue of RMB349.2bn, up0.6% YoY, largely inline with Bloomberg consensus, and to report non-GAAPnet profit of RMB484mn, down 96% YoY,due to: 1)YoYincremental investmentin food delivery(FD)business; 2)additionaluser subsidiesfor thee-commercebusiness to stimulate consumptionamid macro headwinds,on ahighbase ofnational subsidiesin 4Q24. We are anticipatinga25% YoY decline in OP for JDRetail (JDR) to RMB7.6bn in 4Q25E, owing to incremental user subsidies. Wehavebaked in OP loss of RMB14.5bn for new businesses segment in 4Q25E,(3Q25:loss ofRMB15.7bn), among which we are looking for a narrowed QoQloss from FD businessto RMB10.4bn, aided by improvement in unit economicsdrivenby optimization in user subsidies and improvement in operatingefficiency, whilepartiallyoffset by sequentiallyhigherinvestment in other newbusinessessuch as Jingxi and international business.We cut 2025revenue/non-GAAP net income forecastsby2/9% to factor inlikely greater-than-weexpectedsubsidiesto drive e-commerce business development, and slower-than-expected lossreductionin food deliverybusiness.Our target price hasbeenlowered to US$46.8,reflecting the combined impact of downwardrevisions to our earnings forecast and the roll-forward of our valuationperiodto2026E. With US$1.5bn in share repurchases completed in 4Q25 (and a total ofUS$3.0bn for the full year 2025), we believe JD remains committed to enhancingshareholder returns. This could act as a catalyst for a valuation rerating oncethe market fullyfactors in the short-term headwinds from the high-base effect,in our view. Maintain BUY. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Stock Data Revenuegrowthto slow furtheronahighbaseand macro headwinds.For 4Q25E, against the high base of national subsidies in 4Q24, we forecasta 4.5% YoY decline innet product revenue (4Q24: +14.0%; 3Q25: +10.5%).We expect JD’s net services revenue to grow 22.5% YoY in4Q25E (3Q25:+30.8%), with marketplace and advertising revenue projected to rise 10.9%YoY. Core JDR business to deliver healthy earnings growth.For JDR, weforecast a 3.3% YoY decline in revenue andan OPM of 2.5% in 4Q25(4Q24: 3.3%).The margincontractionis due to: 1) additional user subsidiesfor the e-commerce business to stimulate consumption, against the highbase of national subsidies in 4Q24; and 2) a higher revenue contributionfrom general merchandise, which typically carries a lower operating margin. Restartedshare repurchase to enhance shareholder return.JDannounced (8 Jan) that it has repurchaseda total of approximately 91.6mnADSs for a total of approximately US$3.0bnin 2025, which implied that itrestarted share repurchase since the suspension announced in 1Q25earningscall, and has repurchased US$1.5bn worth of shares in 4Q25. JDshould announce its annual dividend for 2025 in the coming earnings call inMarch 2026. The move to enhance shareholder return could serve ascatalyst for stock price, inour view. Source: FactSet Revision in financial forecast and valuation DCF-based target price of US$46.8 Our target priceofUS$46.8isderived fromtheDCF valuation methodology (WACC of 11.8% and terminal growth of1.0%).We have fine-tuned our terminal growth rate assumption from 1.5% to 1.0% to reflect the increasing maturity ofJD’s business. Risks 1) Consumption recovery takes longer than we expect; 2) moreintensified-than-expected business competition; 3) moreaggressive-than-expected investment on FD businessmayweigh on earnings growth. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsiblefor the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/herassociates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with po