Trip.com’s Q2 Results Fly, JD.com Announces $5 Billion Buyback
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Trip.com Q2 Earnings Overview
Trip.com reported Q2 financial results that beat analyst expectations prior to the Hong Kong market open last night. Trip’s Hong Kong listing jumped +9.05% on the release. CEO Jane Sun summed the quarter up succinctly, stating in the press release that “We are pleased with our strong growth and the resilience of travel consumption in China.” Coincidentally, on Monday, European discount airline Ryanair added Trip.com to its list of approved travel booking partners, which will “allow Trip.com Group to offer Ryanair’s low-fare flights to travelers as part of their dynamic product offerings.”
- Revenue increased +14% YoY to RMB 12.788B ($1.759B) from RMB 11.262B versus expectations of RMB 12.75.
- Adjusted net income increased to RMB 4985B ($686mm) from RMB 3.434B versus expectations of RMB 3.57B.
- Adjusted EPS increased to RMB 7.25 ($1) versus from RMB 5.11 versus expectations of RMB 5.22.
- Cash on the balance sheet totals RMB 99B ($13.6) versus market cap of $27B
Key News
Asian equities were mixed overnight on light volume and little news though China markets continue to give them something to talk about.
Yesterday, Pinduoduo’s US-listed shares fell -28.51%, losing $55 billion in market capitalization, as the value of shares traded was 10X the average at $10.5 billion yesterday with 103 million shares traded versus an average of 8.8 million. PDD fell -4.97% on Friday, losing $10 billion in market cap, as the company’s market cap on Thursday was $204 billion, compared to yesterday’s $138 billion. To put that into perspective, the company is estimated to generate $57 billion in revenue this year! This is despite beating analyst expectations on adjusted net income and adjusted EPS while revenue increased +85% year-over-year (YoY), though revenue slightly missed, coming in at RMB 97 billion versus an expected RMB 99 billion.
Yes, the management spoke to increased competition, lower growth rates going forward (law of large numbers as PDD’s revenue has gone from RMB 13B to RMB 247B in 2023, expected RMB 410B in 2024, RMB 532 in 2025!), no shareholder friendly buybacks nor dividends despite nearly $50 billion worth of cash on the books and just snuff out any optimism management said there is the potential for profits to fall. The fall seems to be outsized, in my opinion, even taking management for their word, which puts the stock at a P/E of 10 and a forward P/E of 7 (Amazon’s forward P/E is 30, Mercado Libre’s is 54, SEA’s is 61, and India’s Zomato’s is 187) versus a historic forward P/E of 17 (-58% vs. average, which is -2.7 standard deviations). PDD took out Alibaba and JD.com’s US listings, which were down -4.27% and -3.84%, respectively, though their Hong Kong-listed shares fell slightly less, at -4.02% and -3.69%, respectively. JD’s forward P/E is now 7 while Alibaba’s is now 9 as tepid domestic consumption remains problematic.
This morning, after the Hong Kong close, JD.com announced its board of directors approved a new $5 billion share repurchase program over the next three years. We had previously speculated that JD was unaware Walmart was going to sell its stake as they had very little buyback left all of which they used in the Walmart sale. The sale was simply driven by Walmart having done so well in China, meaning that they no longer need a partner.
The Hang Seng grinded higher overnight, inching closer to the 18,000 level, though Hang Seng Tech Index was off slightly, as Hong Kong’s most heavily traded stocks were Alibaba, which fell -4.02%, Tencent, which fell -0.05%, Meituan, which fell -2.57% in advance of Q2 results tomorrow, and energy giant CNOOC, which gained +3.38% on financial results and Middle East tensions, and China Construction Bank, which gained +1.75%.
Electric vehicles were higher after XPENG gained +4.3% after stating that it would manufacture in Europe as Canada, following the US’ lead on tariffs, though I doubt China EVs were ever available in Canada in another meaningless click bait “news” story.
Mainland investors bought the Hong Kong Tracker ETF via Southbound Stock Connect in moderate size.
Mainland markets continue their funk on light summer volumes despite July Industrial Profits increasing 4.1% year over year versus June’s 3.6%. Mega cap banks, energy, China Mobile, BYD and China Life gained though nearly 4,000 stocks fell, with only 11 stocks hitting 52-week highs versus 361 hitting 52-week lows.
The National Team appeared to buy their favorite ETFs at the close, which helped mitigate today’s losses.
Shanghai’s local government increased the size of apartments while reducing the number of small and medium apartments to be built in a sign that is considered buyer friendly.
There was little reaction in clean technology, despite the PBOC supporting financing for “green and low carbon development”. Chinese steel and copper futures are rebounding after steep losses. Something to keep an eye on!
The Hang Seng and Hang Seng Tech indexes diverged to close +0.43% and -0.05%, respectively, on volume that increase +9.97% from yesterday, which is 90% of the 1-year average. 270 stocks advanced while 209 declined. The Main Board short turnover fell -5.5% from yesterday, which is 85% of the 1-year average as 16% of turnover was short turnover (Hong Kong short sale turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and large caps outpaced growth and small caps. The top-performing sectors were Energy, which gained +3.73%, Utilities, which gained +1.17%, and Financials, which gained +1.16%. Meanwhile, Consumer Discretionary fell -1.69%, Materials fell -1.11%, and Real Estate fell -0.32%. The top-performing subsectors were energy, media, and banks. Meanwhile, retail, materials, and semiconductors were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $368 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which saw a moderate net buy while Meituan was a small net sell.
Shanghai, Shenzhen, and the STAR Board fell -0.24%, -1.26%, and -1.19%, respectively, on volume that declined -2.99% from yesterday, which is 64% of the 1-year average. 1,004 stocks advanced while 3,962 declined. Value and large caps fell less than growth and small caps. Energy was the only positive sector, gaining +2.09% while Real Estate fell -3.22%, Technology fell -1.7%, and Consumer Discretionary fell -1.20%. The top-performing subsectors were oil & gas, motorcycles, and coal. Meanwhile, real estate services, electronic components, and agriculture were among the worst-performing subsectors. Northbound Stock Connect volumes were light. Treasury bonds were sold. CNY and the Asia Dollar Index were off small versus the US dollar. Copper and steel gained.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.4% |
| Hang Seng Tech | HSTECH Index | 0% |
| Hong Kong Turnover | HKTurn Index | 10% |
| HK Short Sale Turnover | HKSST Index | -5.6% |
| Short Turnover as a % of HK Turnovr | N/A | 15.9% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 368.2 |
| China (Shanghai) | SHCOMP Index | -0.2% |
| China (Shenzhen) | SZCOMP Index | -1.3% |
| China (STAR Board) | Star50 Index | -1.2% |
| Mainland Turnover | .chturn Index | -3% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.3% |
| Japan | NKY Index | 0.5% |
| India | SENSEX Index | 0% |
| Indonesia | JCI Index | -0.1% |
| Malaysia | FBMKLCI Index | 0.8% |
| Pakistan | KSE100 Index | -0.6% |
| Philippines | PCOMP Index | 0.2% |
| South Korea | KOSPI Index | -0.3% |
| Taiwan | TWSE Index | -0.2% |
| Thailand | SET Index | 0% |
| Singapore | STI Index | 0.1% |
| Australia | AS51 Index | -0.2% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | -0.05 |
| Communication Services | 9 | 0.06 |
| Consumer Discretionary | 29 | -1.71 |
| Consumer Staples | 13 | 0.97 |
| Energy | 7 | 3.71 |
| Financials | 24 | 1.14 |
| Health Care | 14 | 0.25 |
| Industrials | 18 | -0.25 |
| Information Technology | 11 | 0.74 |
| Materials | 11 | -1.13 |
| Real Estate | 6 | -0.34 |
| Utilities | 12 | 1.15 |
| China Listed | 487 | -0.72 |
| Communication Services | 13 | -0.21 |
| Consumer Discretionary | 41 | -1.2 |
| Consumer Staples | 32 | -0.81 |
| Energy | 17 | 2.09 |
| Financials | 68 | -0.23 |
| Health Care | 45 | -0.24 |
| Industrials | 74 | -1.08 |
| Information Technology | 93 | -1.7 |
| Materials | 80 | -0.84 |
| Real Estate | 7 | -3.22 |
| Utilities | 17 | -0.41 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.1 |
| Alibaba HK | 9988 HK Equity | -4 |
| JD.com HK | 9618 HK Equity | -3.7 |
| NetEase HK | 9999 HK Equity | 2.8 |
| Yum China HK | 9987 HK Equity | 1.5 |
| Baozun HK | 9991 HK Equity | 3.6 |
| Baidu HK | 9888 HK Equity | 1.3 |
| Autohome HK | 2518 HK Equity | 0.2 |
| Bilibili HK | 9626 HK Equity | -0.9 |
| Trip.com HK | 9961 HK Equity | 9 |
| EDU HK | 9901 HK Equity | -3.2 |
| Xpeng HK | 9868 HK Equity | 4.3 |
| Weibo HK | 9898 HK Equity | 0 |
| Li Auto HK | 2015 HK Equity | 2.2 |
| Nio Auto HK | 9866 HK Equity | 0.8 |
| Zhihu HK | 2390 HK Equity | 6.9 |
| KE HK | 2423 HK Equity | -2.6 |
| Tencent Music Entertainment HK | 1698 HK Equity | 5.7 |
| Meituan HK | 3690 HK Equity | -2.6 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -4 |
| TENCENT HOLDINGS LTD | -0.1 |
| MEITUAN-CLASS B | -2.6 |
| CNOOC LTD | 3.4 |
| CHINA CONSTRUCTION BANK-H | 1.7 |
| JD.COM INC-CLASS A | -3.7 |
| XIAOMI CORP-CLASS B | 0.9 |
| IND & COMM BK OF CHINA-H | 1.3 |
| PING AN INSURANCE GROUP CO-H | 0.8 |
| PETROCHINA CO LTD-H | 4.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SERES GROUP CO L-A | -3.8 |
| ZHEJIANG WANFENG AUTO -A | -2.6 |
| IND & COMM BK OF CHINA-A | 1.6 |
| PETROCHINA CO LTD-A | 3 |
| SICHUAN CHANGHONG ELECTRIC-A | -3.5 |
| KWEICHOW MOUTAI CO LTD-A | -0.6 |
| AGRICULTURAL BANK OF CHINA-A | 1.2 |
| ZHONGJI INNOLIGHT CO LTD-A | -1 |
| ANHUI JIANGHUAI AUTO GROUP-A | -4.4 |
| WULIANGYE YIBIN CO LTD-A | -0.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.12 yesterday
- CNY per EUR 7.96 versus 7.95 yesterday
- Yield on 10-Year Government Bond 2.19% versus 2.16% yesterday
- Yield on 10-Year China Development Bank Bond 2.19% versus 2.16% yesterday
- Copper Price: 0.79%
- Steel Price: 1.37%
