Ratings agency S&P Global believes Chinese ecommerce giant, JD.com (NASDAQ: JD, HKG: 9618), can maintain its dominant market position.
This is despite JD.com shares tumbling in recent days after the company posted its Q4 2021 results.
The results showed JD.com’s fourth quarter revenue rose 23% year-on-year, the slowest growth rate is six quarters, however S&P Global notes this was at the high end of its analysts expectations.
“JD.com is building on its strengths and distancing itself from peers despite a tough retail environment in China,” said S&P Global analyst, Sandy Lim.
“We maintain our forecast that JD.com’s revenue will hit Chinese RMB 1 trillion in 2022. This is a slower growth rate than previously expected, reflecting a tougher macro environment.
“While margins are narrowing, JD.com’s strategies to strengthen user experience are boosting customer growth.”
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JD.com active users continues to surge
JD.com says its active customers reached 569.7 million in December 2021, up 17.5 million from September 2021, and a 97.8 million increase from a year ago.
In further good news, shopping frequency and average revenue per user remained on an uptrend.
“JD.com’s growth rate is set to slow from last year, but it will continue to outpace China’s broad retail gains,” said Lim.
“This is driven by, one – expansion of partnerships to expand category offerings; two – ability to attract suppliers and merchants through support on managing operating costs; and three – relatively better control of its operations given its supply-chain ownership amid persistent COVID-related disruptions in China.
“EBITDA performance could stay muted in 2022, after dropping about 2% in 2021 against 27.6% top-line growth. Consolidation of Dada Nexus Ltd. and China Logistics Property Holdings Co. Ltd. in the first quarter of 2022 will slightly hit EBITDA.”
However, S&P notes, the company has warned of lower profitability in the first quarter of 2022, largely from the sponsorship fee it paid for the CCTV Spring Festival Gala and discount sales.