S&P: JD.com's expansion into new businesses may weaken its core business advantages

Rating agency Standard & Poor's stated that JD.com (09618.HK) is gradually strengthening its business. Its rapidly growing department store category and logistics operations make the company more resilient. The proposed acquisition of Germany's Ceconomy AG will also help the portfolio. However, the losses from new businesses such as food delivery remain substantial, which will limit profit growth.

S&P predicts that as JD.com is committed to reducing losses in its food delivery business by improving operational efficiency, its EBITDA profit margin will rebound to 2.8% by 2026. JD.com's EBITDA profit margin has decreased from 5.3% in 2024 to 2.2% in 2025. In 2025, losses from new businesses consumed 82% of the operating profit from retail and logistics operations.

S&P believes that achieving a turnaround will not be easy. JD.com's zero-commission merchant promotion program will end in 2025, and it remains to be seen whether merchants will continue to stay on its platform without this promotion. At the same time, competition is also very fierce: Meituan (03690.HK) and Alibaba (09988.HK) are still committed to maintaining or expanding their market share.

S&P's base case scenario assumes that competition in the food delivery business will not intensify further. If competition does intensify, JD.com's EBITDA profit margin may not recover and could even be worse than the 2025 level, as the company may increase subsidies to remain competitive