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JD: Neutral On JD’s Short-Term Performance But Positive On 3Q23 Margins; Recovery Along With China’s Economy

JD will report 3Q23 results on November 15^th before the US markets open with a 7am ET conference call. We are neutral on JD’s short-term performance but remain positive on 3Q23 margins and bottom line. Retail data for 3Q23 show a potential turn in China’s economy, as retail hit the low in July with 2.5% Y/Y growth; however, Y/Y growth recovered to 4.5% in August and 5.5% Y/Y in September. The slower than expected economic recovery has put pressure on e-commerce companies in China. The central government’s economic stimulus did not officially come until August 2023 as a decision was made from the Politburo Meeting on Economy on July 24th. In the last 10 consecutive months, the central bank has been conducting aggressive MLF (medium-term lending facility) operations. In September alone, MLF was RMB591B.  We believe the abundance of liquidity is likely to be reflected in China’s economy sooner or later.