JD.com Q4 Earnings Overview
JD.com (JD US, 9618 HK) announced Q4 financial results post-Hong Kong close/pre-US market open. We knew Q4 would be challenging as zero COVID’s end led to an outbreak across China. Management did a great job navigating a complex macro environment, cutting costs, and cutting unprofitable investments, allowing the company to pay a dividend to shareholders. Revenue barely missed analyst estimates, leading to headlines that “JD Misses” is absurd, especially as adjusted net income and EPS beat expectations handily. One should note the very healthy cash flow generated by the business. The Q&A with analysts was focused on the company’s announced discount/subsidiary program and whether or not a price war would break out amongst e-commerce companies. The answer was pretty standard, as management didn’t provide color on the 2023 outlook other than mentioning the company’s goal of fulfilling customers’ needs cost-efficiently and timely.
- Revenue increased +7% year over year to RMB 295.4B ($42.4B) vs estimate 295.5B ($42.5B) and Q3 2022’s RMB 275B ($39.5B)
- Adjusted Net Income RMB 7.659B ($1.1B) versus estimate 5.494B ($790M) and Q3 2022’s RMB 3.6B ($520M)
- Adjusted EPS RMB 4.81 ($0.69) versus estimate RMB 3.541 ($0.51) and Q3 2022’s RMB 2.21 ($0.32)
Asian equity markets were lower except for Japan overnight as the Asia dollar index posted an inverse James Bond -0.07% and China’s renminbi -0.09% on more Fed hikes.
China and Hong Kong bounced around the room in a volatile intra-day swing driven by light volumes though they fell into negative territory at the end of day trading. The down day is despite February’s CPI of 1% versus expectations of 1.9% and January’s 2.1% and PPI -1.4% versus expectations of -1.3% and January’s -0.8%.
The Hang Seng Index couldn’t hold the 20k level, closing -0.63% at 19,925, while the Hang Seng Tech closed -1.46% with Hong Kong’s most heavily traded Tencent -2.69%, Alibaba HK -1.46% and Metiuan -1.9%. In addition to the US dollar’s strength leading to risk-off sentiment, political rhetoric continues though we should become immune to it. In an indication of the current market funk, the Hong Kong Exchange re-released the companies added to Southbound and Northbound Stock Connect as if telling us, “hey, this is a big deal.” Hong Kong EVs were primarily off less BYD +0.74% despite Hubei province announcing new car buying incentives. Mainland investors were notable buyers of Hong Kong stocks to $759mm overnight.
Mainland China had a choppy session though breadth/advancers versus decliners were far more balanced versus Hong Kong. The STAR Board managed a small gain as domestic semiconductors will become increasingly important as the Netherlands assists the US efforts to limit high-end semis exports. One clarification/correction on the financial regulatory change mentioned yesterday as the banking and insurance regulator will become a new State Administration of Financial Supervision and Regulation (SAFR) and not part of the CSRC, China’s SEC. Apologies. Many thanks to those that reached out, which is a reminder; always feel free to reach out!
The Hang Seng and Hang Seng Tech fell -0.63% and -1.46% on volume -12.38% from yesterday, 82% of the 1-year average. 93 stocks advanced, while 405 declined. Main Board short turnover declined -21.12% from yesterday, 82% of the 1-year average, as 17% of turnover was short turnover. Value factors outperformed growth factors as large caps “outperformed” small caps. All sectors were down, with real estate at 2.67%, utilities at 2.54%, and materials at 2.38%. The only positive sub-sector was telecom, while software, business services, and materials were the worst. Southbound Stock Connect volumes were light as mainland investors bought $759mm of Hong Kong stocks, with Tencent and Meituan being small net buys.
Shanghai, Shenzhen, and STAR Board were mixed -0.22%, -0.07%, and +0.34% on volume +4.94% from yesterday, 83% of the 1-year average. 2,214 stocks advanced, while 2,414 stocks declined. Growth factors outpaced value factors, while small caps outperformed large caps. Energy and tech were the only positive sectors, +1.07% and +0.45%, while discretionary -0.84%, financials -0.64%, and industrials -0.52%. The top sub-sectors were the marine industry, telecom, and computer hardware, while motorcycles, restaurants, and education were the worst. Northbound Stock Connect volumes were light/moderate as foreign investors sold -$599mm of mainland stocks. CNY was off -0.04% versus the US dollar closing at 6.96. Treasury bonds rallied while Shanghai copper and steel posted small gains.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 6.96 versus 6.93 yesterday
- CNY per EUR 7.36 versus 7.36 yesterday
- Yield on 10-Year Government Bond 2.88% versus 2.90% yesterday
- Yield on 10-Year China Development Bank Bond 3.06% versus 3.09% yesterday
- Copper Price +0.51% overnight
- Steel Price +0.12% overnight