JD.com: A Sleeping Giant or Just a Value Trap?

JD.com, Inc: JD US, 9618 HK

Good Morning,

We are back with yet another instalment of our China Internet series. This time we’re tackling JD 0.00%↑ . As usual the reports are behind the paywall, if you are interested, do consider subscribing. And if you already are a subscriber, we appreciate you!

Previously in the series:

• PDD 0.00%↑ Pinduoduo, owenrs of Temu

• NTES 0.00%↑ NetEase, the gaming company

• BABA 0.00%↑ Alibaba the China online shopping pioneer (free)

• BIDU 0.00%↑ Baidu the search engine aka the google of china

• $700.HK Tencent the owners of WeChat the mega app

This was envisaged as a 6 part series, this being the 6th instalment one would be excused to making a logical leap and assuming that this is the end of the line and this is the final post. Unfortunately (or fortunately) this is not the case - in the precess of reviewing the space we have been positively surprised by how the space has adopted to the changing realities of life in China and overseas, and feel its important to get the message across. There will be an additional company post and the Portfolio Review post this week will include thoughts on how to think about exposure in the space. All of that is paywalled so once again if it’s of interest do consider subscribing.

Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.

On to today’s report.

JD.com has established itself as one of China's leading e-commerce companies, with a distinctive business model focused on self-operated retail and integrated logistics. Since its founding in 1998 and transition to e-commerce in 2004, JD has built a comprehensive ecosystem spanning retail, logistics, and healthcare.

Despite facing intensifying competition from Alibaba, Pinduoduo, and emerging players like Douyin (ByteDance), JD.com has demonstrated resilient financial performance with improving profitability metrics. The company has successfully navigated recent challenges, including COVID-19 disruptions and regulatory changes in China's tech sector.

As is tradition here at Panda Perspectives, the first report on the comapny starts wiht its history and the founder. In JD’s case, its Richard Liu Qiangdong, born in Suqian, Jiangsu province in 1973-1974, graduated from Renmin University of China in 1996 with a sociology degree. While studying, Liu developed computer programming skills that would later prove valuable to his entrepreneurial journey.

In June 1998, Liu established Jingdong in Beijing's Zhongguancun area, initially as a distributor of magneto-optical products. The name "Jingdong" combines "Jing" from his then-girlfriend's name and "Dong" from his own name.

Jingdong began as a physical retail operation, expanding to 12 stores by 2003. The SARS outbreak that year significantly reduced foot traffic, prompting Liu to explore online sales channels as an alternative strategy.

In 2004, Liu launched the company's first B2C website, jdlaser.com, marking Jingdong's entry into e-commerce. By 2007, the company rebranded to Jingdong Mall and adopted the domain 360buy.com, establishing an in-house logistics department to enhance delivery reliability and customer satisfaction.

Key Milestones (2010-2020)

• 2013: The company transitioned to its current domain, JD.com, streamlining its brand identity

• 2014: JD.com went public on NASDAQ, raising $1.78 billion, marking one of the largest IPOs by a Chinese company in the U.S.

• 2017: Invested $397 million in Farfetch, entering the luxury fashion segment

• 2020: JD Health's $3.5 billion IPO became Hong Kong's largest of the year

• 2021: JD Logistics raised HK$24.6 billion ($3.2 billion) in its IPO

By 2024, JD.com had expanded its global sales business to multiple countries including the United States, Japan, Singapore, and Malaysia. The company has diversified beyond its e-commerce roots into logistics, healthcare, and on-demand retail services.