We maintain our Market perform on JD post its decent 1Q25 results; topline growth accelerated, EBITDA margin expanded and gross debt metrics improved, but free operating cash flow turned more negative on increased working capital investments which led to a contraction in net cash. We expect JD’s debt metrics to marginally improve over the next 12 months, with topline growth supported by the domestic stimulus policies, lower EBITDA margin on wider losses for its food delivery expansion, healthy FOCF which should cover its shareholder rewards, flat net cash to YE24, and steady gross leverage. We think its $ bonds trades fair compared to its Asia A/A- corporate and China tech peers, and has likely priced in its stable credit outlook and potential rating upgrade by S&P.

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.