UBS reports that JD.com (JD, Financial) has significantly expanded its food delivery orders since April, amidst rising industry competition. The second quarter saw an average of 12 to 13 million orders per day, with an estimated RMB 100 billion invested in the food delivery sector. Looking ahead, UBS anticipates JD.com to focus on return on investment for its food delivery operations. The company aims to balance strong seasonal sales with enhancing user experience in the third quarter, with investments expected to reach RMB 140 billion, decreasing to RMB 110 billion in the fourth quarter.
JD.com's second-quarter revenue is projected to grow by 14% year-on-year, outperforming China's online physical goods retail sector. However, after accounting for the RMB 100 billion investment in food delivery, the net profit is estimated to be RMB 5.6 billion, marking a 61% decrease from the previous year. Consequently, UBS revised its earnings estimates for 2025-2027 downward by 10-35%. The target price for JD.com's H-shares was reduced from HKD 226 to HKD 195, and for U.S. shares from USD 58 to USD 50, while maintaining a "Buy" rating.
