JD.com Inc.

The positive outlook on JD reflects our expectation that the company will maintain its good business growth, increase market share, stabilize and improve profitability, and improve cash flows over the next 12-24 months. We also expect JD to maintain a net cash balance over the period. We could revise the outlook to stable if JD's operating performance deteriorates significantly such that the debt-to-EBITDA ratio exceeds 1.5x without signs of improvement. This could happen if: (1) the company's profitability is worse than we expect due to more intense competition in China; (2) JD undertakes more aggressive acquisitions or capital expenditure than we expect; or (3) the company has difficulty executing its expansion strategy or faces more severe competition than we expect,

...Well positioned to benefit from robust growth in online retail sales, despite intense competition. The online retail market is increasingly competitive with JD.com Inc.'s online competitors such as Alibaba Group Holding Ltd. increasing investments to maintain long-term growth, and offline retailers such as GOME Retail Holdings Ltd. looking to expand their online retail operations. However, as the largest direct online retailer, we expect JD to continue to benefit from robust online retail sales growth. JD's core competitive advantage of a nationwide logistics network and in-house last-mile delivery to support double-digit revenue growth. We expect the company's core competitive advantage to sustain its strong growth in service revenue. JD's service revenue rose 53% year-on-year (YoY) for the nine months ended Sept. 30, 2018, while total revenue grew about 30% YoY. JD's service revenue includes advertising revenue, commissions from third-party sellers on JD's online marketplace, and logistic...

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