Expecting better-than-feared 2Q26 results

Expecting better-than-feared 2Q26 results Target PriceUS$47.50Up/Downside64.5%Current PriceUS$28.88 For 2Q26E, we expect JD.com (JD) to report total revenue of RMB341.4bn,down 4.3% YoY, mainly due to a high base and soft consumption sentiment—broadly in line with Visible Alpha (VA) consensus—and non-GAAP net profit ofRMB7.8bn, up 6% YoY on narrowing losses in the food delivery (FD) business,2% ahead of consensus. We estimatethe operating loss from new businessessegmentwill be largely stable QoQ at RMB10.2bn in 2Q26E; within this, weexpect the FD business to halve its operating loss YoY to RMB6.1bn, whilelossesfrom other new business initiatives should widen slightly QoQ onincremental investment to support the expansion of Jingxi and the internationalrollout of Joybuy. We trim our 2026E revenue forecast by 2% to factor ingreater-than-expectedmacro headwinds, while raising our non-GAAP net profit forecastby 1% to reflect a better-than-expected loss reduction trajectory in the FDbusiness and stronger-than-expected operating efficiency gains in the core JDRetail (JDR) business. Greater visibility on group-level earnings growth, alongwithenhancement inshareholder returns, remains the key share price driver, inour view. Maintain BUY, with our DCF-based TP unchanged at US$47.5. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk YeTAO, CFA(852) 3850 5226franktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk Expecting near-term revenue growth headwinds on a high base.Weforecasttotal revenue of RMB341.4bn in 2Q26E,down 4.3%YoY,comprising 9.6% YoY growth in net servicesrevenue,offsetby a 7.9% YoYdecline in net product revenue on the high-base effect from the nationalsubsidy program.Within net services revenue, we expect YoY growth inmarketplace and advertising revenue to decelerate QoQto 9.0% in 2Q26E(1Q26: 18.8%) onahigh base. That said, we note the YoY decline in netproduct revenue improved in June relative to April and May 2026, which inour view should drive a recovery in revenue growth in 3Q26E; we forecasttotal revenue growth to recover to 4.9% YoY in 3Q26E. Stock Data Expecting YoY stable margin trend for JDR despite revenue headwind.Owing to the high base, we expect JDR revenue to decline 6.4% YoY in2Q26E. However, we look for a YoY-stable OPM of 4.5%, underpinned byoperatingefficiency improvements.Our 2Q26E JDR OP forecast ofRMB13.1bn is 1% ahead of consensus. FD business loss reduction likelyin linewithourexpectation.Weexpect the FD operating loss to narrow to RMB6.1bn in 2Q26E, fromRMB13.3bn in 2Q25 and RMB7.0bn in1Q26 (our estimate), driven byoptimization of user subsidies, improved operating efficiency, a better ordermix, and higher commission and advertising revenue. We currently forecastthe FD loss to narrow to RMB25.0bn in 2026E from RMB36.9bn in 2025E,andthe overall operating loss from new businesses to narrow to RMB41.2bnin 2026E (2025: RMB46.6bn). Source: FactSet Revision in financial forecast and valuation DCF-based target price of US$47.5 Our target priceofUS$47.5isderived fromtheDCF valuation methodology (WACCof 11.8% and terminal growth of1.0%; both unchanged), translating into 16x/12x 2026/2027E. Risks 1) Consumption recovery takes longer than we expect; 2) more intensified-than-expected business competition. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for 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 compensationwas, 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/her associates (as defined in the code of conduct issued by The Hong KongSecurities 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 coveredin this report. CMBIGMRatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant b