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Yes, JD’s fundamentals are at its weakest point in history Since taking the initiative to spin off key subsidiaries in 2020 and 2021, JD has fallen behind in innovations, in our view. Its falling behind in overseas footprint vs. what BABA and PDD have done is indicative as such. Over the same time, similar premium retailer Coupang successfully penetrated the Taiwanese market, suggesting that the business model of merchandise selection and specialized logistics can find global appeal. Yes, JD’s focusing on domestic low pricing is a wrong strategy We do not think JD’s brand reputation can sit well with a low-priced strategy in the same geography. Consumption downgrade is here to stay and consumers are willing to sacrifice quality for price. If JD cannot uproot BABA and PDD in China, then trying to be for-all is a meaningless exercise. But, JD’s unique strength hasn’t changed JD today is still led by its original founder which has proven his business acumen and execution ability again and again. It is led by a capable management working together for a long time with clearly defined responsibilities. JD’s unique strength in logistics, brand reputation and supply chain knowhow in key industries are valuable and unmatched. Management has guided for more than double digit revenue growth in 2024, meaningfully higher than consensus. Upgrade JD for valuation and long-term potential We notice that periodic adjustment in strategy and organization happened before, each time leading to a rebound. We believe this time is no exception. We further will turn more positive if JD starting to apply its strength overseas. |