Insights

3 Positive Takeaways From JD.com’s Latest Earnings

JD.com Inc (NASDAQ: JD) (SEHK: 9618) delivered another solid quarter. Here’s what investors should know. – JD.com

JD.com Inc (NASDAQ: JD) (SEHK: 9618) is one of the leading e-commerce players in China, alongside Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988) and Pinduoduo Inc (NASDAQ: PDD).

Earlier this week, JD.com announced its second-quarter results for the year ending 31 December, 2020. Here are three positive things that investors should know about its latest results.

Solid growth

JD reported that net revenue came in at RMB 201.1 billion (US$29 billion), an increase of 34% from the second quarter of 2019.

Net product revenues grew by 34%, while net service revenues jumped 36% as compared to the same period in 2019.

Similarly, operating income more than doubled from RMB 2.3 billion to RMB 5.0 billion, thanks to the growth in revenue and the expansion of operating margins.

The strong financial performance came on the back of solid growth in annual active customers, up by 30% year-on-year to 417.4 million.

Also, mobile daily active users in June 2020 increased by 40% as compared to June 2019.

JD Retail

In the past, investors had concerns about whether JD could generate sustainable profits for its first-party e-commerce business.

Critics opined that the company’s capital-intensive business model would prohibit it from making sustainable profits.

In the latest quarter, JD continued to defy the skeptics. It already reported positive operating margins in the past few quarters and did so again after it reported a positive operating margin of 3.0%, up from 2.8% for the same period last year.

The expanding operating margin indicates that the retail business is benefitting from the economies of scale as it continued to grow in the quarter.

Other ventures

Another area to focus on is the performance of other ventures like JD Logistics, JD Health, and JD Digits.

These ventures are highly important to the company to sustain its high growth rate. In the latest quarter, these businesses grew revenue at 51%, much higher than the company-wide growth rate of 34%.

Moreover, JD entered into an agreement to raise US$830 million in equity from Hillhouse Capital for JD Health. It also acquired 36.8% in JD Digits via the conversion of its profit-sharing rights.

All said, the conglomerate continued to grow its new ventures, which should help sustain its high growth rate for the foreseeable future.

Foolish takeaway

Overall, JD delivered a good quarter with stronger metrics across the board.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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