Uncovering Value in China's E-Commerce Logistics: JD Logistics and Deppon's Q2 Outlook

The rapid expansion of China's e-commerce sector has fueled unprecedented demand for efficient logistics solutions, creating opportunities for investors to capitalize on undervalued players in the space. JD Logistics (JD.O) and Deppon Logistics (603056.SS) are two key players positioned to benefit from this trend. As both companies approach their Q2 2025 earnings releases, their valuations and financial trajectories offer compelling entry points for investors seeking growth in a sector still undervalued relative to its potential.

JD Logistics: A Strong Foundation with Room to Grow

JD Logistics, the supply chain arm of JD.com, is set to report Q2 2025 results on August 26. Forecasts suggest net income of 2.51 billion CNY, reflecting a 3.5% year-over-year increase in net sales to 50.3 billion CNY. While these figures signal steady growth, the company's valuation metrics paint an even more promising picture.

As of July 2025, JD Logistics trades at a TTM P/E of 12.2x, nearly half the sector average of 27.8x. Its P/B ratio of 1.5x also sits below its historical highs, suggesting the market undervalues its asset-heavy model. This discount is puzzling given JD Logistics' 10.8% ROE and its strategic focus on high-margin services like cold-chain logistics and AI-driven warehouse automation.

The company's integration with JD.com's e-commerce ecosystem provides a stable revenue base, while its expansion into third-party logistics (3PL) and international markets opens new growth avenues. Analysts expect a 42% upside to its current share price of HK$13.34, driven by margin improvements and sector-wide consolidation.

Deppon Logistics: A Solid Bet on Undervalued Assets

Deppon Logistics, a leading express delivery provider, will release its Q2 results on July 25, just days after this article's publication. Analysts project net income of 699 million CNY, supported by a 25.7% year-to-date stock surge. While its valuation is less discounted than JD Logistics', Deppon still offers attractive multiples:

With a P/E of 23.2x and P/B of 1.93x, Deppon trades at a 15% discount to the sector's P/E but commands a premium to its own historical averages. This reflects investor confidence in its high cash reserves (CNY 925 million) and strong balance sheet, with a net cash position of CNY 0.91 per share.

The company's focus on express delivery and cross-border logistics positions it to benefit from rising consumer spending in China's tier-2 and tier-3 cities. Its 13.5% FCF yield further underscores its financial health, though its lower ROE (8.6%) compared to JD Logistics hints at operational inefficiencies.

Comparing the Two: Which Offers Better Value?

While both companies are undervalued relative to the sector's 27.8x P/E, JD Logistics appears more compelling due to its sub-15x P/E and superior profitability metrics. Its strong cash flows and strategic investments in technology should drive margin expansion, while its upcoming earnings report could catalyze a revaluation.

Deppon Logistics, however, offers stability and a higher dividend yield of 0.9%, making it a safer bet for income-focused investors. Its July 25 earnings release will be critical: if net income meets or exceeds expectations, its shares could close the gap with sector averages.

Risks and Considerations

The sector faces headwinds, including U.S. tariffs on Chinese goods and geopolitical tensions that could disrupt supply chains. Both companies also face competition from state-backed rivals like STO Express and YTO Group, which may undercut pricing power.

Investment Recommendation

• Buy JD Logistics for its undervalued multiples and high-growth potential. A target price of HK$18.96 (based on analyst consensus) implies a 42% return.
• Hold Deppon Logistics until its Q2 results clarify its earnings trajectory. Investors seeking lower risk might wait for a pullback to CNY 15 before entering.

In a sector where logistics firms are still catching up to their potential, JD Logistics and Deppon Logistics present two distinct avenues for capitalizing on China's e-commerce boom. For contrarians, now is the time to act before the market recognizes their true value.

Disclosure: This analysis is for informational purposes only and should not be construed as personalized investment advice. Always conduct thorough due diligence before making investment decisions.