Liu Qiangdong: electricity supplier two elections has a real impact on Jingdongs short-term finance.

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 Liu Qiangdong: electricity supplier two elections has a real impact on Jingdongs short-term finance.


After the announcement, Jingdong chairman and CEO Liu Qiangdong, CFO Huang Xuande and Jingdong business city CEO Shen Haoyu attended the analysts telephone conference, read the financial statements and answered the analysts questions. The following is the main content of this conference call Q & a session. EddieLeung: Jingdongs investment in logistics is not only to support the scale of Jingdongs business, but also to enhance the profits of the third party businesses. With the rapid development of Jingdong business, how many logistics services can Jingdong logistics meet from the third party? Huang Xuande: at present, Jingdongs rapid improvement in logistics capabilities comes from proprietary logistics and third party logistics, so it can not be separated. In the latter half of last year, we invested a lot in logistics and needed some time to digest. In the first quarter of 2018, especially in the slowest quarter of the year, the monthly profit of our third party logistics is still rising. Citibank analyst AliciaYap: my question is about the logistics investment cycle. How long will the investment of the logistics be expected to last? As the Jingdong increased its investment in logistics in the fourth quarter of last year, we saw some positive results last quarter, so what would be the trend in the logistics investment? In the long run, what is the optimal profit forecast for logistics business? What is the target profit of the third party logistics business this year? Huang Xuande: Richard (Liu Qiangdong) just mentioned that in the next five years, the profits of Jingdong from third party logistics will exceed 50%. Liu Qiangdong: last year, Jingdong logistics opened to the third party for the first time. We can see that in the fourth quarter, we came from the rapid growth of third party logistics revenue. So we also consciously set up a large number of new warehouses in the fourth quarter of last year, so we have some costs to clamp down in a short period of time and can be digested over a quarter of a quarter and two quarters. In the future, we will build new warehouses every quarter, but we will keep the new warehouse and the actual use stable. After that, there will be no big fluctuations in the price in the four quarter. This is a rare occurrence. Analyst: what did Jingdong gain in clothing category last quarter? In the rapid development of the electricity supplier, what is the comparison between Jingdong and other competitors in the same industry? Huang Xuande: because of the fierce competition in the clothing electricity supplier market, many of our customers have left other competitors. Although some businesses returned to the Jingdong in the first quarter of this year, as we mentioned last year, Jingdong still needs some time to fully recover the benefits of clothing categories. So in the first quarter, the performance of clothing category is still very low. Especially for womens clothing, earnings have not risen or even dropped slightly. However, apart from clothing, our other commodity category has a very substantial growth, which is higher than the overall industry growth. Liu Qiangdong: in the first quarter of last year, the growth rate of clothing category was 92%, which is very high. As Huang Zong said this year, the growth of our clothing category has stagnated, and some womens clothing is still negative growth. Therefore, the two election has a short-term financial impact on us. But I still want to reiterate that two elections can never be a long-term competitive advantage. Management has the confidence and ability to solve two problems in a certain period of time. This is a problem to be solved sooner or later. In addition to clothing category, other categories of Huang Gang just said, the growth is very healthy. Including our previous advantages, such as electrical appliances, including mobile phones. Chinas mobile phone market grew by -26% over the same period, but our mobile phone category is still in the two digit growth range. So the main impact on our profits comes from clothing and home textiles, and other categories have little impact. Huang Xuande: in addition, clothing is a very profitable category, but in addition to this classification, the performance of our other products in the last quarter is still remarkable. JerryLiu, analyst at UBS, in the first quarter of this year, compared with the same period last year, the profit trend is not very strong. Is it expected that the profit of Jingdong mall will increase this year than that of last year? Huang Xuande: as we mentioned before, the profit of Jingdong mall in the first quarter of this year increased by 40% compared with the same period last year. The growth comes mainly from two aspects, one is due to the size of our economy, the profit growth rate of the first party business continues to rise and profitability continues to grow. But the increase in profits is offset by our investment in technology research and development, so overall profit growth is almost flat from last year. We have strong confidence that Jingdong will achieve rapid growth in profits in the next four years. Jin Yong (JinYoon), an analyst at Mizui securities (JinYoon): in general, the first and third quarter earnings will be poor, and the 24 quarter will be relatively better. What is the view of this kind of volatility management? Huang Xuande: for logistics business, the 24 quarter will increase in quantity and capacity utilization. This will also bring impetus to the promotion of marketing units. But our management will generally do a whole business plan for the whole fiscal year, not a quarter. However, as you said, our logistics business showed a quarterly fluctuation last year. Natalie Wu, analyst at CICC (NatalieWu): my question is about the companys proprietary business and the third party business. In the second quarter, the company expects to grow by 29%-43%. What is the possible growth of the first party business and other businesses? Huang Xuande: if the clothing category is not mentioned, the remaining product categories including self run and three party businesses will have a healthy growth trend. But if coupled with clothing, our proprietary business performance is obviously better than the third party business. Credit Suisse analyst Thomas Jean (ThomasChong): what is the status of vip.com after its entry into Jingdong? What is the current development of Jingdong 7Fresh (Jingdong new concept supermarket) and its goals this year? Shen Haoyu: vip.com has just been online to Jingdong, and the two sides still need to make systematic adjustment now. Since we fit together, we can see that the cycle is growing every week, but it may take some time to achieve the effect we want, because it takes some time to accumulate fans and store traffic. At present, the whole cooperation and progress are within the scope of our plan. 7Fresh we have opened two stores in Beijing, which are more than two times more than the traditional business, and are still continuing to upgrade. We are planning to open two more stores in May and three stores in June. It is expected that this year will light 20 to 25 new stores in Beijing, so it will enter a rapid expansion in the second half of this year. Once the iteration of the first two stores is completed, we can open new stores nationwide. At present, we have established the expanded team, and all progress is within the plan. Our goal is to exceed five hundred in five years. Macquarie capital analyst Wendy WendyHuang: my question is about warehousing and profit. In the first quarter of this year, Jingdong built 29 warehouses and compared with 81 new ones in the fourth quarter of last year. What changes will the Jingdongs non GAAP profits in the second quarter bring? Is it going to rise? I found that the first quarter of the capital expenditure rate declined, the report pointed out that 13 million for the construction of facilities, 25 million for other capital investment. Can management explain this 25 million for equipment purchase or automation construction? Huang Xuande: in the first quarter, our equipment utilization rate increased, but we will build more warehouses in the second quarter. We hope that after the expansion of our business, the utilization and logistics capacity of the equipment can increase continuously, while the profit of the logistics business can rise quarterly. In terms of capital expenditure, we bought a lot of equipment in this quarter, including the server and the work development system, and the warehouse automation equipment. In the first quarter, we made a relatively centralized purchase. China control fund analyst: with the gradual maturity of the mobile phone market, the strengthening of various hardware functions, the cell phone replacement cycle has gradually lengthened, and the demand for mobile phones is gradually slowing down. How does the Jingdong deal with this trend? What is the growth strategy of Jingdong for clothing category? Shen Haoyu: the cell phone unit we have a home of the Jingdong, in fact, is the main online store that sells 3C (computer, communications and consumer electronics), and is also expanding. Although the overall decline in the mobile phone industry is sure to have a certain impact on our growth, however, no matter how the market changes, our goal is to maintain the rapid growth of market share. Huang Xuande: we not only wired the Jingdong home, but also the physical stores under the cable to continue to push forward the growth of our market share. In the past, we have been the first market share of the mobile e-commerce market, and we will continue to keep it, because consumers recognition of the Jingdong brand and the scale effect of our economy all make the Jingdong competitive advantage in purchasing and retail. For clothing categories, if you have certain sales experience and customer base, customers will be around you. In addition, we have just mentioned that in the past we have had a good performance in this category, so we have experience in making sales of clothing categories back to a state, but it takes some time. Shen Haoyu: in fact, in every quarter, some brands will return, and eventually all brands will come back. Of course, this will take some time. But its also important that you have quality users, traffic, good reputation and reputation, as well as brand businessmen. When all the partners are dissatisfied with a brand, it is not good for a long-term profit - making platform, which will only make more clothing brands eager to find more ways than being kidnapped by a single brand. At present, all the kidnapped clothing brands in China are desperately looking for new platform cooperation, such as WeChat small programs. Many manufacturers hope to cooperate with them to make their marketing channels more diverse. When a platforms power of discourse control has reached a certain height, it is also the time for Jingdong clothing to accelerate growth. Two election is also to make some brands sober up, because many brands in a long-term operation of the platform did not feel any threat. Nomura Securities Analyst (JialongShi): how do managers think of such a business model? Because I saw that Jingdong recently launched a similar group buying channel. How does the management view the potential of a group buying business? A lot of WeChat has gained a lot of users and GMV (total turnover). How has this pattern affected Jingdongs entry to WeChat? I remember when Jingdong signed an agreement with vip.com, it was mentioned that Jingdong would help vip.com achieve an annual GMV goal. How much is the target value? According to the current vip.com entry performance, can this goal be achieved? Shen Haoyu: there is little conflict between the products of the top of the list and the products sold by the Jingdong, so the impact on Jingdong is very small. A lot of products that are currently on sale are mainly super cheap. Compared with Jingdong users, the quality of products belongs to another level. Although our group buying platform has a similar pattern on the WeChat entrance and collage, the goods and the user experience are completely different. We mainly focus on the brand with quality assurance. We have mentioned vip.com just now, the progress of our cooperation is on the agenda now, and we are very satisfied. We do have an annual sales target with vip.com, but it is not convenient to disclose it at present. John, JohnChoi of Da he securities analyst: Jingdongs advertising revenue in the last quarter? Now that Jingdong has many businesses in WeChat small program, how many GMV and economic benefits can management expect to get through this way? Shen Haoyu: compared with Chinas main electricity supplier platform, its GMV is not much higher than ours, but advertising revenue is more than ten times that of ours. So advertising revenue accounts for GMV, Jingdong has not yet reached the level of an industry. In particular, our clothing category, because the advertising is more dependent on this category, once we have increased in the income of clothing, advertising revenue will have a higher growth. For the WeChat applet, we actually went on the line only a month ago, and it is still in its early stage. The marketing of goods at this entrance is very similar to that we sell on our own Jingdong platform, but we can manage consumers and users independently. Some merchants who have not entered the Jingdong platform can shop in Jingdong through WeChat applet, but the two member welfare and promotion measures will be different. In the next quarter, we will update more information for you. Morgan Stanley GraceChen: how does the third party logistics affect gross margin? What is the long-term target revenue for the third party logistics? What is the expected earnings of the physical stores next? Huang Xuande: for the third party logistics, we are providing terminal terminal supply chain service, which is due to the traditional logistics companys mode. Therefore, we believe that long-term profits will grow faster and better and become one of the best logistics companies in the world. For 7Fresh, its too early to talk about earnings. We will intensify our cooperation with partners this year and continue to expand further. Shen Haoyu: at present, in the whole of China, the only logistics system that can be covered by the whole country is only one Jingdong, not second. The other is either a single express company or a storage company, which can only provide a category or a product in the logistics service. And Jingdong from the integration of integrated logistics to cold chain logistics to short distance O2O (line to line) logistics to cross-border logistics and then to express, it can be said that the whole logistics service Jingdong has coverage, and is covered all over the country. So at present, we can not hesitate to say that Jingdong logistics has no real competitors in the whole country. At present, the user of the Jingdong logistics is not only the merchant in the Jingdong platform, but many Jingdong and Jingdong have also started to use the logistics service in the past without any cooperative relationship. Huang Xuande: our profits grew very fast in the second quarter of last year, and we will continue to grow this year, but the growth rate is expected to have a slight decline over the same period of last year. For logistics warehousing equipment, we hope that the second quarter will have a higher utilization rate, and we will further improve the equipment. You will see Jingdongs progress in this regard this year. XiaoyanWang:, an analyst at 86 Securities Research Co., recently issued a new version of a mobile client with a custom home page. Will this function affect user conversion and GMV, etc.? Will this function affect sales volume for the 618 Shopping Festival coming soon? Huang Xuande: the mobile client that you see with a personal home page is the first version of a custom APP tried by the Jingdong, and will continue to upgrade, hoping to bring more and better functions before the 618 Shopping Festival. This new feature allows users to get better product recommendations, and it takes some time to improve and upgrade, so its too early to open up the data in your question. Barclays Bank GregoryZhao: I heard that the Jingdong will be equipped with more robots to improve the companys overall automation level, then the impact of the move on the companys profits from a short and long term perspective. From the third party entry, such as WeChat, to the proportion of the total number of Jingdong users? Shen Haoyu: in the past few years and in the future, we will continue to invest in R & D, which will lead to higher cost in the short term. Our R & D costs in the first quarter of this year have increased considerably compared with the same period last year, but in the long run these inputs will gradually be transformed into a fall in operating costs. For example, our warehousing robots and distribution robots, with the rise in labor costs in China and the shortage of labor, our investment in robots will create a great deal of value for shareholders in the long run. (Qin Xin) source: NetEase science and technology report editor: Bai Xin _NT4464 Barclays Bank GregoryZhao: I heard that the Jingdong will be equipped with more robots to improve the companys overall automation level, then the impact of the move on the companys profits from a short and long term perspective. From the third party entry, such as WeChat, to the proportion of the total number of Jingdong users? Shen Haoyu: in the past few years and in the future, we will continue to invest in R & D, which will lead to higher cost in the short term. Our R & D costs in the first quarter of this year have increased considerably compared with the same period last year, but in the long run these inputs will gradually be transformed into a fall in operating costs. For example, our warehousing robots and distribution robots, with the rise in labor costs in China and the shortage of labor, our investment in robots will create a great deal of value for shareholders in the long run. (Qin Xin)