JD.com's Q4 revenue increased by 13.4% year-on-year, marking the fastest growth rate in nearly two years, while operating profit rose by 319.3% year-on-year. After the latest earnings call, UBS conducted an in-depth discussion with JD's Chief Financial Officer Ian Shan and Director of Investor Relations Sean Zhang, revealing the three most concerning questions for the market: &#34;JD's recent and long-term growth drivers,&#34; &#34;JD's profit margins,&#34; and &#34;the application of AI and robotics technology.&#34;
On March 10, UBS analysts Kenneth Fong, Sardonna Fong, and Wei Xiong released a research report reiterating their &#34;Buy&#34; rating on JD's stock, stating that as AI technology continues to enhance in the future, it will further help JD improve user experience and fulfillment efficiency, thereby consolidating its future growth potential and profit margin improvement space.
<h2>Trade-in Programs, Mobile Business, and Category Expansion Drive Recent Growth</h2>
UBS analysts pointed out that JD's management is confident about the company's future growth prospects, with certain drivers for both short-term and long-term growth. In the short term, there are three main aspects:
First, benefiting from the ongoing trade-in subsidy policy. Analysts believe that JD will continue to capture market share from online and offline competitors due to its strong consumer mindset and logistics capabilities. This trade-in program also helps JD acquire new users, especially among female groups and in lower-tier markets, bringing cross-selling opportunities, as evidenced by the 11% growth in the daily necessities category in Q4 2024.
Second, the mobile business has become a new growth engine. As the trade-in program expands from 8 home appliance categories to 12 home appliance and consumer electronics categories, management sees mobile phones as a new growth point, which has shown strong growth momentum since the beginning of the year. In addition to subsidies, the price reduction of iPhones and the increasing AI features in smartphones will accelerate the phone replacement cycle.
Finally, the daily necessities business has seen strong growth following category structure adjustments, and this momentum is expected to continue into 2025, thanks to SKU deepening and new user expansion.
In the long term, even as the impact of the home appliance subsidy program gradually weakens, JD still has the potential to surpass the overall growth rate of retail sales in China. In the daily necessities category, the supermarket segment (which has a large market size and low online penetration) and the fashion segment (where JD has hired a new leader with extensive experience in international and domestic e-commerce platforms) are particularly strong in growth.
<h2>Profit Margins: Expected to Reach High Single Digits in the Long Term</h2>
Regarding profit margins, JD's management expects the adjusted net profit margin to remain stable in 2025 and is likely to reach high single digits in the long term (4.1% in 2024). UBS analysts believe that the continuous improvement in gross margin is a key driving factor, attributed to the following aspects:
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Product structure shifting towards higher-margin products;
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Enhancing the efficiency of the self-operated supply chain;
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Improve fulfillment efficiency;
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Increase third-party business with higher profit margins.
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It is worth noting that JD.com’s investment in food delivery services will maintain a high ROI orientation and a cautious attitude, with limited expected impact on the group's profitability. Management believes that based on Dada's existing instant delivery network, the food delivery business can complement JD.com's core business, meet existing consumer demand for quality food delivery, and simultaneously increase purchase frequency and consumer mindset.
<h2>AI and Robotics: Widely Applied in Business</h2>
JD.com’s application of artificial intelligence and robotics has also attracted significant attention. JD.com has widely applied the latest AI and robotics technologies across multiple business verticals, including retail, logistics, healthcare, and fintech:
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Utilizing big data to optimize the logistics network, improving JD Logistics' profit margins through automation and intelligent warehousing, using LLM to assist JD Health's diagnostics, and upgrading advertising technology empowered by AI to enhance consumer experience and product conversion rates in JD Retail (reflected in its rapidly growing market and advertising revenue).
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Analysts believe that with continuous technological advancements, this will further enhance user experience, improve fulfillment efficiency, and lay the foundation for future growth and profit expansion. For example, JD Logistics has significantly increased order processing speed and reduced operating costs through automated warehousing.
Analysts maintain a &#34;Buy&#34; rating on JD.com stock and set a 12-month target price of $67, approximately 58% higher than the current level.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a6d136a6-2b5a-422a-a00d-2c3c768d8b25.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a6d136a6-2b5a-422a-a00d-2c3c768d8b25.png"/>

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UBS stated that as AI technology continues to enhance in the future, it will further assist JD.com in improving user experience and increasing fulfillment efficiency, thereby consolidating its future growth potential and profit margin improvement space. JD.com's management expects that the adjusted net profit margin will remain stable in 2025 and is expected to reach a high single-digit level in the long term (4.1% in 2024)

- JD's Q4 revenue grew by 13.4% year-on-year, marking the fastest growth in nearly two years, with operating profit increasing by 319.3%.  
- UBS analysts highlighted three key growth drivers: the ongoing trade-in subsidy policy, the mobile phone business as a new growth engine, and strong performance in daily necessities.  
- The application of AI and robotics across various sectors is expected to enhance user experience and operational efficiency, supporting future growth and profit expansion.

Wallstreetcn

JD.com

The three questions the market is most concerned about will be clarified in this JD.com call, including "AI and robotics."