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JD shares jump in Hong Kong as analysts welcome Q2 outlook, CEO change


Shares of Chinese e-commerce giant JD.com
9618,
+6.89%

were higher in Hong Kong trade, with analysts unfazed by a management change and welcoming a positive outlook in the wake of first-quarter earnings.

Shares were up 6.9% at HK$144.30 in Friday morning trade, paring year-to-date losses to 34%. The gain comes after the company posted a 1.4% on-year rise in first-quarter revenue, along with a net profit of 6.26 billion yuan (US$900.9 million), reversing from a net loss of CNY2.99 billion a year ago.

JD surprised many with news that its chief executive will retire next month and will be replaced by Sandy Ran Xu, the company’s chief financial officer, but analysts said the move was unlikely to change operations.

Citi analysts said that based on Xu’s “long association as auditor and recent experience as CFO, we are confident” she will lead the company through an adjustment period. Nomura analysts said JD’s founder and chairman, Richard Liu, “remains as having the most significant influence on JD strategies and operations, in our view.”

Regarding earnings, Citi analysts in a research note highlighted JD’s mention of a recovery in demand for large appliances in April and its expectation of faster growth in gross merchandise value in the second quarter.

They retreated a buy rating on an “undemanding valuation,” with JD trading around 12x and 9x Citi’s estimated 2023 and 2024 earnings, respectively, as well as expectations of a turnaround in operations. The analysts forecast revenue to rise 4.2% on year in the second quarter, and kept a target price of $68.00 on U.S.-traded ADRs, which last closed up 7.2% at $37.63.

Nomura analysts Jialong Shi and Thomas Shen in a research note kept a buy rating and target price of $59.00, citing first-quarter results and margins above expectations.

They also noted that the company is considering returning capital to shareholder through dividends and buybacks, adding that “we think these moves are likely to enhance the appeal of JD shares to long-term investors.”



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