Investment Rating - The report assigns a "Buy" rating for JD Industrial (07618) as a first-time coverage [1]. Core Insights - JD Industrial is a leading provider of industrial supply chain technology and services in China, having established a comprehensive digital infrastructure for end-to-end supply chain solutions. By 2024, it is projected to become the largest player in the MRO procurement market in China, serving over 11,100 key enterprise clients and offering approximately 81.1 million SKUs from around 158,000 suppliers [5][18]. - The company is expected to achieve a revenue of CNY 20.4 billion in 2024, with a compound annual growth rate (CAGR) of 25.4% from 2021 to 2024. The adjusted net profit is forecasted to reach CNY 909 million, with a CAGR of 21.9% during the same period [4][25]. - The Chinese industrial supply chain market is the largest globally, with a market size of CNY 11.4 trillion in 2024, but the digital penetration is only 6.2%, significantly lower than the 15% in the U.S. [5][50]. - JD Industrial's market share in the domestic industrial supply chain technology and services market is 4.1%, while its share in the MRO procurement market is only 0.8%, indicating substantial growth potential [5][59]. Financial Data and Profit Forecast - Revenue and profit forecasts for JD Industrial from 2023 to 2027 are as follows: - Revenue: CNY 17.34 billion (2023), CNY 20.40 billion (2024), CNY 24.49 billion (2025E), CNY 29.91 billion (2026E), CNY 35.96 billion (2027E) [4]. - Adjusted net profit: CNY 818 million (2023), CNY 909 million (2024), CNY 1.10 billion (2025E), CNY 1.74 billion (2026E), CNY 2.30 billion (2027E) [4]. - The expected price-to-earnings (PE) ratios are 41 (2023), 36 (2024), 30 (2025E), 19 (2026E), and 14 (2027E) [4]. Industry Overview - The industrial supply chain market in China is characterized by its vast size and the early stage of digital transformation. The MRO procurement market is projected to reach CNY 3.7 trillion in 2024, with a CAGR of 6.1% from 2019 to 2024 [5][55]. - The market is highly fragmented, with JD Industrial being a key player. The company is positioned to benefit from the ongoing digitalization trends, which are expected to accelerate market consolidation [5][58]. - The report highlights that the U.S. leading MRO companies have consistently outperformed the growth of the manufacturing value added, indicating a potential for similar trends in China as the market matures [5][8].

Core Viewpoint - The Chinese manufacturing industry is entering a phase of efficiency reshaping driven by AI, with increasing willingness for digital transformation in procurement processes, highlighting the urgency for companies to adopt smart solutions [1] Group 1: Industry Overview - The Chinese MRO market is still in the early stages of online penetration, but there is a clear trend towards digitalization in manufacturing, driven by policy support and industry upgrades [2] - The MRO procurement service market in China is projected to exceed $500 billion by 2024, surpassing the combined size of the US and European markets, indicating significant growth potential [3] Group 2: Company Positioning - Zhenkunhang (震坤行) is a leading digital MRO procurement platform in China, leveraging iterative digital technologies and a comprehensive product matrix to provide one-stop procurement and management services [1][2] - The company aims to expand its private label system, targeting a long-term goal of achieving a 30% sales contribution from private brands, which is expected to enhance overall profit margins [2][3] Group 3: Financial Performance - Since 2022, Zhenkunhang has maintained double-digit growth in GMV, with improvements in operational efficiency and a declining overall expense ratio, indicating a path towards profitability [3] - The company’s adjusted losses have been narrowing annually, with management projecting a transition to a high-quality growth phase with profitability expected next year [3] Group 4: Competitive Advantages - Zhenkunhang has established significant advantages in product strength, delivery network, and digital capabilities, positioning itself as a leader in the MRO industry [4][5] - The company has developed a comprehensive industrial product matrix with over 20 million SKUs and a robust delivery network, addressing the "last mile" delivery challenges effectively [4] Group 5: Technological Innovations - The company has built an extensive industrial product data dictionary and launched several AI-driven products, including the "Xingjia Linglong" AI model, which has received regulatory approval and enhances its technical authority in the MRO sector [5][6] - Zhenkunhang's AI tools have significantly improved material management efficiency and procurement processes, contributing over $20 million in sales within a year [5][6] Group 6: Global Strategy - The company is pursuing a two-step global strategy, focusing on serving Chinese private enterprises going abroad and gradually obtaining international certifications for its self-owned products to enter mature markets [8] - Zhenkunhang's status as a US-listed company provides it with stable funding channels for its global expansion efforts, reinforcing its long-term growth logic [8]