JD.com investors nurse losses despite strong headline numbers

The first-quarter results of JD.com did little to boost confidence among shareholders, who have been nursing large paper losses over the past 12 months.

Headline figures were acceptable, but JD.com needs more than a solid set of quarterly results at top-line level in order to justify a high valuation on the stock exchange at a time when reported losses are widening.

Quarterly gross merchandise volumes (GMV), a key value driver, “increased by 55% to RMB129.3bn ($120.1bn) from the core GMV (excluding Paipai.com) of RMB83.6bn in the first quarter of 2015”, the group said.

Net revenues of RMB54bn ($8.4bn) rose 47.3% year-on-year, while revenues from services and others – mainly from the e-commerce platform business – stood at RMB4bn ($600m), up 91% from the first quarter of 2015.

That was a respectable performance, but quarterly losses rose to RMB864.9m ($134.1m) from RMB822.6m year-on-year.

On the bright side, non-GAAP losses came in at RMB295.7m ($45.9m) against RMB318m one year earlier, while operating margin of its core JD Mall business was 0.5% versus -0.1% year-on-year, which is a mildly encouraging trend for its core operations.

The group said that annual active customer accounts increased by 73% to 169.1m in the 12-month period ended 31 March, excluding unique customers from Paipai.com. Meanwhile, fulfilled orders came in at 342.1m, up 54% from 221.5m one year earlier, while fulfilled orders placed through mobile devices accounted for about 72.4% of total orders, up more than 160% year-on-year. During the first quarter, JD.com extended its leadership in fulfilment capabilities among China’s e-commerce companies, it claimed.

“We had a solid first quarter of the year with healthy growth in revenues, new users and mobile traffic,” said chief executive Richard Liu.

“JD.com’s commitment to authenticity and unwavering focus on the best user experience continue to win the trust of China’s growing middle class,” he added.

Chief financial officer Sidney Huang pointed out that the “core JD Mall business showed continued top-line growth momentum and solid improvement in profitability, even in a seasonally slow quarter”.

JD.com established partnerships with a number of leading international brands in the first quarter in order “to meet the fast-growing demand from Chinese consumers for high-quality, authentic imported products, and help the brands expand their presence in China”.

The performance of its stock has been poor in recent weeks, and was affected by more volatile trading conditions across the globe.

Its equity value has fallen 21% since the turn of the year.

Source: Transport Intelligence, 25th May 2016

Author: Alessandro Pasetti