JD.com Inc.

The stable outlook reflects our expectation that JD will maintain its good growth and steadily improve profitability over the next 12-24 months, despite intense competition. We also expect the company's debt-to-EBITDA ratio to stay well below 1.5x, given its strong operating cash flow to fund capital investments. We could lower the rating if JD's debt-to-EBITDA ratio exceeds 1.5x without signs of improvement. This could happen if: (1) the company's profitability deteriorates, possibly due to more intense competition in the retail industry or rising investment in technology or marketing; or (2) JD undertakes more aggressive capital investment than we expect. We could also lower the rating if the company's competitive position weakens materially. A slowing growth momentum or volatile EBITDA margin

...Deeper penetration in lower-tier cities in China supports good growth prospects.We expect JD.com Inc. to maintain its good growth momentum over the next 12-24 months, driven by the company's investments on customer acquisition and fulfillment capability to increase penetration in lower-tier cities in China. JD has opened over 9,000 offline franchise stores selling home appliances in lower-tier cities to increase its brand awareness and better serve customers. The company also launched its social e-commerce platform "Jingxi" in September 2019 targeting the same customer set. Jingxi offers more good-value-for-money products, compared to JD's existing platform. In the third quarter 2019, over 70% of the company's new customers were from lower-tier cities. Good service quality given in-house logistics with nationwide network coverage. We view JD's self-operated logistics network (JD Logistics) as one of its core competitive advantage. The self-operated fulfillment capability helps JD to maintain...

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