JD Group-SW (9618.HK): Plans to spin off production and development and industry, which will help boost JD Group’s valuation

It plans to spin off Jingdong Production and Development and will continue to hold more than 50% of the shares after the spin-off.

On March 30, JD.com and JD.com submitted listing applications to the Hong Kong Stock Exchange. JD.com plans to spin off JD.com and JD. As of March 30, 2023, JD.com, through its wholly-owned subsidiary, holds approximately 74.96% of JD.com's total issued share capital of JD.com and has approximately 74.96% of the total issued share capital of JD.com. About 77.95% of that. After the spin-off is completed, Jingdong Group will continue to indirectly hold more than 50% of the equity of Jingdong Chanfa and Jingdong Industry.

JD.com was established on January 19, 2012. It is a modern infrastructure development and management platform, mainly including 1) logistics infrastructure; 2) multiple industrial parks; 3) intelligent property services; 4) comprehensive energy management; 5) asset management services, etc. It has covered 29 provinces in China and 25 overseas projects. The total area of the management park exceeds 20 million square meters. The customer base has expanded to third-party logistics, e-commerce, manufacturing, retail, and other new economic industries.

Founded on November 5, 2019, JD Industry is China's leading industrial supply chain technology and service provider. The transaction volume will reach RMB 22.3 billion in 2022, and the compound annual growth rate will be 38.4% from 2020 to 2022. By the end of 2022, JD Industry will have served 6,900 vital corporate customers and more than 2.6 million small and medium-sized enterprises.

The independence of Jingdong Production and Development and Jingdong Industry is conducive to its development and to raising the valuation of Jingdong Group.

Jingdong Group's spin-off of production and development and industry is a mutually beneficial move:

1) The split is conducive to improving the independent image of the JD Industry and JD Industry to external customers and is conducive to the growth of the JD Industry and JD Industry itself;

2) JD.com and JD.com will be able to conduct equity and debt financing independently after listing, and the data disclosure will be more transparent, which will help investors better distinguish JD.com, JD.com and JD.com to re-evaluate the corporate value, respectively ;

3) The independent listing of JD Industry and JD Industry is conducive to better motivating the management of JD Industry and JD Industry, and shortening the decision-making chain will also help JD Industry and JD Industry better respond to market changes;

4) JD.com, as a holding group, will benefit from an increase in the value of its subsidiaries.

Because the independent listing of Jingdong Industrial Development and Jingdong Industry has not yet been implemented, and the shareholding ratio of Jingdong Group after the listing has not yet been clarified, we temporarily maintain the forecast of the company's 2023/2024/2025 Non-GAAP net profit attributable to the parent company of 35.541/41.596/47.008 billion yuan. The independent listing of JD.com and the JD Industry will help boost the overall valuation of JD.com and maintain a “buy” rating.

Risk warning: the recovery process of consumption willingness and confidence is not as good as expected, the loss of equity investment is relatively significant, and there are regulatory risks.