Shenwan Hongyuan Group Co., Ltd. has reaffirmed its "Buy" rating for JD INDUSTRIALS (07618). The domestic industrial products market boasts a value exceeding 11 trillion yuan. The company is expanding its coverage of new clients and product categories while enhancing the loyalty and average spending of existing customers. By following clients overseas and pursuing long-term localization development and global operations, the firm possesses robust growth momentum. Internally, JD Industrials continues to improve its supply chain efficiency. In the medium to long term, an increasing proportion of high-margin proprietary brands and overseas business is expected to drive gross margin improvements. The brokerage maintains its adjusted net profit forecasts of 1.638 billion yuan and 2.210 billion yuan for fiscal years 2026 and 2027, respectively, and has introduced a new forecast of 2.786 billion yuan for fiscal year 2028. This represents year-on-year growth of 44.9%, 34.9%, and 26.0%, respectively, corresponding to price-to-earnings ratios of 20, 15, and 12 times.
Key points from Shenwan Hongyuan are as follows:
**Earnings Summary** The company released its fiscal year 2025 report, with performance slightly exceeding expectations. FY2025 revenue reached 23.952 billion yuan, a year-on-year increase of 17.4%. Second-half FY2025 revenue was 13.701 billion yuan, up 16.3% year-on-year. Adjusted net profit for FY2025 was 1.131 billion yuan, increasing by 5.3% year-on-year, which slightly surpassed expectations.
**Steady Growth in Product Sales Revenue Driven by Rapid Expansion of Key Account Clients** Product sales revenue for FY2025 was 22.493 billion yuan, up 17.3% year-on-year, with second-half FY2025 growth also at 16.3%. The gross merchandise volume from key account clients reached 16.5 billion yuan in FY2025, a significant increase of 26.5% year-on-year. The number of key account clients grew to 13,300, a 26% year-on-year increase. The company's broad coverage across multiple industries and accelerated client acquisition were the primary drivers of growth in FY2025. GMV from small and medium-sized enterprise clients reached 17.0 billion yuan, up 8.3% year-on-year.
**High Loyalty Among Key Accounts with Rising Average Spending from Existing Clients** The company's Taipu end-to-end digital system continues to be optimized. By deeply integrating systems, data, and processes, JD Industrials continuously enhances the client service experience and strengthens cooperative loyalty. The transaction retention rate for key account clients reached 116.6% in FY2025, an increase of 10.9 percentage points year-on-year, indicating a consistent rise in average spending per existing client.
**Ongoing Supply Chain Cost Reduction Leading to Improved Gross Margin** The gross margin for FY2025 was 17.4%, an improvement of 1.2 percentage points year-on-year, continuing its upward trend. The company persistently reduces supply chain costs by streamlining distribution layers, connecting directly with original manufacturers, and implementing volume procurement with standardized goods entering warehouses. In 2025, the company launched its first industrial large-scale model, JoyIndustrial, which enhances internal management efficiency through intelligent automation, collectively contributing to gross margin optimization and improvement.
**Expansion into BOM and Overseas Businesses Increases Phased Expenditure** The adjusted net profit margin for FY2025 was 4.7%, up 0.6 percentage points year-on-year, primarily affected by an increase in the fulfillment expense ratio. The FY2025 fulfillment expense ratio was 7.4%, rising by 1.8 percentage points year-on-year, mainly due to investments in expanding new BOM product categories and overseas business operations. As these new businesses scale up, the fulfillment expense ratio is expected to decline.
**Risk Factors** Potential risks include pressure from the external environment hindering gross margin improvement, intensified industry competition leading to product sales revenue falling short of expectations, and slower-than-expected progress in the digital and intelligent transformation of the industrial procurement sector.
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