JD.com Earnings: Profit Beat Amid Slow Sales Growth; Valuation Lifted by 7%

JD.com's second-quarter results were mixed, in our view, as revenue growth tracked below our full-year estimate, but non-GAAP net profit beat our expectation on lower procurement cost and stronger cost control. Management's deployment of USD 2.1 billion in the quarter to repurchase shares worth about 5% of current market cap is better than our expectation and reflects the firm's commitment to improving shareholders returns. We have raised our fair value estimate by 7% to USD 50 per ADS (HKD 195 per share) after increasing our 2024-26 earnings estimates by 7%-20%. JD.com is undervalued and we believe its intangible assets of high quality and fast delivery services will help to maintain its position as one of the major e-commerce players in China amid competition. We expect the firm to achieve 3% non-GAAP net income CAGR in the coming decade.