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JD beats profit estimates after boost from partnership deals

Chinese e-commerce giant JD says it does not expect any business impact from a wave of regulations hitting Chinese industry, after beating analysts’ expectations for the quarter through June.

“Undoubtedly, we believe that the introduction of regulatory policies on the internet industry recently is a good thing for the long term and healthy development of industries,” said Xu Lei, CEO of JD Retail, the company’s main e-commerce division, on an earnings call.

Xu added that the company “completed a round of internal self-review and rectification” and foresees no major business impact due to the regulations.

The company’s strong results come amid a crackdown on the tech industry by Chinese authorities that has led to an upheaval in sectors such as e-commerce, gaming, ride-hailing and cryptocurrency.

Since last year, regulators have announced new policies aimed at improving privacy, data security, and market competition and penalised companies who have violated rules.

Most notably, China’s anti-monopoly regulator fined rival Alibaba a record $2.5 million dollars in April for anti-competitive behaviour. Alibaba later missed its revenue estimates for that quarter.

In December, regulators fined JD.com 500,000 yuan for pricing irregularities.

In April, the China Shanghai stock exchange terminated a planned IPO for JD Digits, JD’s fintech division, citing a request from the company to withdraw it. The pullback came after authorities abruptly blocked the listing of Alibaba’s financial affiliate Ant Group

On the JD’s earnings call, executives said that the company added new merchants to its platform following authorities’ banning of a practice known as “two-choose-one,” wherein e-commerce sites ban merchants who list on rival platforms.

They added that the company is in compliance with an upcoming data security law, and highlighted how drivers in its logistics division are employed full-time and receive social and commercial insurance.

When asked about reported changes to preferential tax policies for tech companies, executives said the company has received no notice that such policies will be retracted, and added it expects no impact should a retraction occur as none of its subsidiaries has applied to become a key software enterprise.

Despite the ongoing regulatory tightening, the company added a record 32 million users over the quarter and delivered growth in its logistics and marketplace divisions.

Excluding items, the company posted a profit of 2.90 yuan per American depositary share (ADS), compared with analysts’ expectations of 2.35 yuan.

Net income attributable to ordinary shareholders fell to $122.48 million from $2.53 billion a year earlier.

Net revenue at JD.com rose about 26 per cent to $39.14 billion in the second quarter ended June 30.

  • Reporting by Akanksha Rana in Bengaluru and Josh Horwitz in Shanghai; Editing by Sriraj Kalluvila, Anil D’Silva and Bernadette Baum, of Reuters.

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