On Monday, JPMorgan updated its financial outlook on JD (NASDAQ:JD) Logistics Inc (2618:HK) (OTC: JDLGF) shares, increasing the price target to HK$20.00 from the previous HK$19.00. The firm maintained an Overweight rating on the stock. This adjustment follows a notable rise in JD Logistics' share price, which saw a 22% increase after the company reported its second-quarter results on Friday.
The analyst from JPMorgan highlighted JD Logistics' performance, emphasizing the company's consistent margin expansion since its initial public offering (IPO). This was particularly significant given the challenging macroeconomic environment. The strong second-quarter results of 2024 were seen as evidence of the management's ability to deliver on this front.
JD Logistics, which is part of the broader JD Group, has been previously undervalued according to JPMorgan. This undervaluation was attributed to two main factors: the market's initial skepticism about the sustainability of JD Logistics' business model as an internet logistics company and the perception of the company merely as a cost center for JD.com.
The recent financial results have addressed these concerns, as JD Logistics' core earnings before interest, taxes, depreciation, and amortization (EBITDA) margin and net profit margin now surpass those of its logistics peers. This demonstrates the economic viability and competitive edge of JD Logistics' business model.
Furthermore, JD Logistics' operational performance now represents approximately 24% of the JD Group's overall operations. This significant contribution underlines JD Logistics' role as a central component in helping JD Group achieve its long-term margin targets.
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