Citigroup: Raise JD LOGISTICS (02618) target price to HKD 18, rated "buy", expects efficiency gains to offset impact of oil prices.

Citigroup released a research report stating that JD LOGISTICS (02618) first-quarter performance slightly exceeded market expectations. Although the rise in fuel costs brought additional expenses, the improvement in gross profit margin offset the related impact. Taking into account factors such as share buyback plans and RMB appreciation, Citigroup raised the target price for JD LOGISTICS from HKD 17 to HKD 18, maintaining a "buy" rating, and slightly adjusted profit forecasts for 2026 to 2028. The bank believes that, despite challenges in oil prices and non-operating income, JD LOGISTICS is not overvalued and efficiency continues to improve, therefore optimistic about its prospects. The bank expects JD LOGISTICS' organic revenue growth to continue into the second quarter, and to accelerate in the second half of the year benefiting from the normalization of base comparisons with the Deppon business. Management mentioned that the additional costs from the surge in oil prices in the second quarter account for about 1% of total revenue, but the bank believes that efficiency improvements can largely offset the related impact. The bank mentioned that JD LOGISTICS' first-quarter revenue increased by 29% year-on-year to RMB 60.6 billion, exceeding market expectations, with 32% growth in self-operated integrated supply chain customers (1P ISC), 15.5% growth in third-party integrated supply chain customers (3P ISC), and 32% growth in other customers. The gross profit margin increased from 7.2% in the same period last year to 8%, while the adjusted operating profit margin improved from 0.5% in the first quarter of this year to 1.8%, mainly benefiting from a lower base and control of operating expenses.