We maintain our Market perform recommendation on JD post its 4Q24 results, where it reported a pick up in topline growth, better EBITDA margin, higher FOCF and improving debt metrics; We expect JD’s debt metrics to improve over the next 12 months as the JD Home Appliance Trade-In Alliance program and expanding supermarket category supports topline growth and a continued expansion of the higher-margin 3P sales and better product mix result in better EBITDA margin; we expect JD to cover its increased shareholder rewards with free operating cash flow. We think its positive credit outlook over the next 12 months has been largely priced in given that JD’s $ bond trades largely in-line with Asia A- corporates; we see better value in BABA and TENCNT.

While Chinese regulators have adopted a friendlier stance towards tech companies, any regulatory clampdowns may still adversely affect the business of JD (e.g. antitrust rules, data security & personal data protection laws).

Intensifying competition amongst Chinese eCommerce platforms with the entrance of new live-streaming/short-form video platforms and group buying discount platforms may result in slower topline growth and weaker EBITDA margin for JD as its increase its user/merchant incentives and promotional activities to defend its market share.

There are regulatory risks involving the use of variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs). Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.