JD.com: Raising 2023 Revenue and Non-GAAP Net Margin Estimates; Lifting Our Fair Value by 7%

We increased JD.com’s 2023 year-on-year revenue growth estimate by 50 basis points to 2.9%, mainly driven by better-than-expected results at JD Retail in fourth-quarter 2023. Better operating leverage as a result of a higher revenue estimate and cost controls led to a 50-basis-point increase in our 2023 non-GAAP net margin estimate to 3.1%. We raised our fair value estimates by 7% to USD 46.00 per ADS and HKD 179.00 per share. Following our earnings revisions, the 200-basis-point increase in the five-year operating income CAGR estimate more than offsets a reduction of 30 basis points in the 2024 non-GAAP net margin estimate, as a result of the compensation increase at JD Retail. We think the China e-commerce sector is undervalued currently, but PDD Holding is our preferred pick due to stronger growth in revenue and earnings, followed by JD.com, and then Alibaba Group.