Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics Second Quarter 2023 Result Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Please note that this English simultaneous translation line will be in a listen-only mode just for the duration of the call, including the question-and-answer session. If you wish to listen to the management's original statement or ask a question during the question-and-answer session, you will need to dial the into Chinese line. I will now turn the call to Mr. Mao Jun, Head of Investor Relations Team at JD Logistics, for opening. Thank you, Operator. Good day, ladies and gentlemen. Welcome to our second quarter 2023 results conference call. Joining us today are our Executive Director and CEO, Mr. Hu Wei, and CFO, Mr. Hao Wu. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. F or definition of the non-IFRS financial measures and the reconciliation of non-IFRS to IFRS financial results, please refer to the announcement of the results for the six months ending June 30th, 2023, issued earlier today. For today's call, management will read the prepared remarks in Chinese, and we'll only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on the interpreter line for the duration of the call. To work with the interpreter, the management will slow down the pace of the speech. Please be kindly noted. The English translation is for convenience purposes only. In case of any discrepancy, the management statement in the original language will prevail. I'd like to turn the call over to Mr. Hu Wei. Please go ahead, sir. Dear investors and analysts, good to see you. I'm Hu Wei, the CEO of the JD Logistics. Thank you for joining us today. This is the second quarter 2023 earnings call. In the second quarter of 2023, the macroeconomy recovery in China continued, and the market demand also gradually released. Meanwhile, our corporate customers' operations were also gradually recovering, leveraging our comprehensive network coverage, in-depth industrial insights, and ever-strengthening digital and intelligence capacities. We continue to create value for our customers through our trusted supply chain services and achieved high-quality growth. Our total revenue for the second quarter 2023 reached RMB 41.0 billion, up 31.2% year-over-year. Revenue from external customers for the second quarter was RMB 28.4 billion, a year-over-year growth of 55.8%, accounting for 69.2% of total revenue. Our non-IFRS net profit in second quarter was RMB 830 million, a year-over-year increase of 288%, with significant net profit margin improvement year-over-year. We continue to promote the broad application of the ISC solutions and high-quality logistics services. As we continually deepen our presence across a wide range of industries, we'll build and enhance our industry-specific capacities and establish benchmark cases in many industries, further solidifying our leadership in the ISC logistics field. In Q2 of 2023, revenue from ISC customers reached RMB 20.4 billion, of which revenue from external ISC customers was RMB 7.8 billion, a year-over-year growth of 9%. While continually developing our industrial-specific ISC solutions and service capacities, we continue to expand our breadth and depth of our collaborations with existing customers, facilitating digital and intelligent supply chain transformation for more customers. In Q2 of 2023, the ARPC from external ISC customers reached RMB 149,000, rising by 31% year-over-year. This fully demonstrates our ability to constantly create value for our customers through our trusted supply chain services with our customer-first approach and ongoing efforts to cultivate our primary business in the ISC services market. We primarily focus on six industries: fast-moving consumer goods, home appliances, home furniture, 3C apparel, automotive, and fresh products. Among them-... FMCG accounted for the highest% of our revenue from external ISC customers. Leveraging our comprehensive network as well as our industrial insights, we provide the customers with fulfillment services tailored to their industry and the business characteristics throughout the supply chain, ensuring their end customer's experience. For example, we have in-depth cooperation with Coca-Cola Beverage, providing warehousing and distribution goods and services for all CPL's online e-commerce channels. In addition to our comprehensive warehouse network and professional warehousing planning, we adopted a multi-regional warehousing mode to help CPL to optimize its inventory deployment. Once the CPL's end customers place an order on any of the platform, JD Logistics will choose the optimal warehouse for shipment and the best performing route, leading to improved delivery efficiency and ensuring optimal fulfillment quality. Additionally, we provide the intelligent inventory replacement to forecast the services, further optimizing CPL's end-to-end supply chain costs. In the process of empowering industrial customers, we have accumulated the value experiences and reinforced our service capacities. We are delighted to see that CPL's recognition of our services and capacities grow. Our service scope has been expanded to more products and geographically to multiple warehouse nationwide. By strengthening the breadth and depth of our collaboration with customers, we help them to improve their supply chain efficiency of the online business and achieve the goal of reducing costs, increasing efficiency. In the auto industry, we also continue to deepen and strengthen our business cooperation with leading customers to fully leveraging our advantages to build an innovative business model on ISC services for auto after-sales spare parts. By utilizing big data tech, we built an auto after-sales spare parts supply network, aiming to elevate supply chain efficiency, help the industry customers comprehensively optimize their business across the inventory levels, service satisfaction rates, as well as the delivery timing and operation costs. In the first half of 2023, we replicated and applied this model to Li A uto and many other new auto customers at home and abroad. We provide the efficient and high-quality auto sales spare parts, warehousing, and logistics services, promptly meeting their timely requirements of different order types. Also, through comprehensive system integration, we enabled the fully visibility and controllability throughout our customer supply chains, addressing their inventory deployment, safety management, and service response needs. We'll continue to innovate and optimize our services to create benchmark projects for the auto industry, laying foundations for our reach to build our operating capacities in the auto industry, while also contributing to the industry development. In Q2 2023, our revenue from customers, primarily including express and freight delivery services, increased up to RMB 20.6 billion, up by 18.7%. This increase was mainly due to our consumer-centric efficiency improvements and customer service enhancements, which drove our business volume growth. In June this year, thanks to Kunshan Asian No. 1 Intelligent Logistics Park officially commenced operation. It has a total floor area of over 500,000 square meters with equipment scale and automation level in the park, which represent the world-leading standard will help us further improve our operation efficiency and service capacities. Meanwhile, we, together with Deppon Logistics, continue to improve our logistics infrastructure network to build a safe, reliable, and highly efficient logistics supply chain system. As of June 30, 2023, we operated over 1,600 warehouses, including those managed by Deppon Logistics. The GFA of our warehouse network, including warehouse-based managers through open warehouse platform, exceeded 13 million square meters. While continuously strengthening our core competitiveness, we also remain dedicated to undertaking our social responsibilities and sustainability. In April, we jointly released a supply chain emission management platform with the Green Supply Chain Special Committee of the All-China Environment Federation. This platform is a carbon footprint management platform encompassing over 140 carbon emission factors of the line haul transportation vehicles in China, and calculate the carbon footprint of a line haul transportation at the most granular level possible based on the carrier's actual operating trajectory, keeping carbon emission monitoring, reporting, and verification on one single platform. This platform helps enterprises directly and accurately track carbon emissions from logistics and transportation, tally their carbon assets, and precisely implement carbon reduction technologies through big data emissions. This empowers more enterprises to realize efficient, low cost carbon reduction, and ultimately achieve their net zero emission targets. As for example, we established a carbon amount for Decathlon China through this platform, and provided solutions for the calculation of the greenhouse gas carbon footprint and decarbonization pathways for its e-commerce business. We accurately calculated its carbon footprint for each Decathlon China's orders and the verifiable greenhouse gas emission reductions to meet its requirements for this precision, granularity, and the visualization of the carbon management. Over the years, we have made persistent effort in leveraging our supply chain infrastructure advantages, industrial insights, as well as tech strengths, to promote cost reduction and efficiency enhancement for the company throughout the industry value chain and core supply chains. We also proactively fulfill our social responsibilities to foster high-quality employment and carbon emission reductions in up and downstreams. Going forward, we will continue to unlock our value as innovative real economy-based enterprises, capitalizing on our deep roots-... in the real economy to facilitate a high quality, sustainable growth for the enterprises, industries, and our society. Thank you. Next, I'd like to invite Mr. Hao Wu to discuss details of the financial performances. Thank you, Mr. Hu Hello, everyone, this is Hao Wu, CFO for JD Logistics. I'm pleased to present JD Logistics financial performance for the second quarter of 2023. China's macroeconomic conditions rebounded and continued to improve in the second quarter of 2023. Market and consumption demand and enterprise operations also gradually resumed, supporting JD Logistics' high-quality growth during this quarter. In the face of a constantly evolving consumption structure and the business environment, we've sought to optimize our customer mix and business structure to promote our business health. Meanwhile, we further refined our cost and expense controls and enhanced operational efficiency, benefiting from economies of scale as our business expanded. In the second quarter of 2023, our profitability improved significantly compared with the same period of 2022. Furthermore, we achieved a turnaround to a net profit in the first half of 2023, from net loss in the same period of last year. Our total revenue reached RMB 41.03 billion for the second quarter, up 31.2% year-over-year. Notably, revenue from external customers increased by 55.8% year-over-year to RMB 28.38 billion, accounting for 69.2% of the total revenue, representing a large proportion compared with the same period of 2022. It clearly reflects our success in steadily expanding our business from external customers. In the second quarter, revenue from ISC customers totaled RMB 20.4 billion. This included our ISC revenue from JD Group which amounted to RMB 12.65 billion, down 3.1% year-over-year, primarily due to the adjustment in JD Group 's Jingxi business. Our revenue from external ISC customers grew by 9.0% year-over-year to RMB 7.05 billion, as we further expanded the breadth and depth of our collaborations with existing customers who aid sustained value for their high-quality development. In the second quarter, our average revenue per customer continued to grow at an accelerated pace of 31% year-over-year to RMB 149,000. We firmly believe that a healthy and a high-quality customer and business structure is crucial for our steady and long-term development. In second quarter of 2023, revenues from other customers grew significantly, totaling RMB 20.63 billion, up 85.7% year-over-year. Our cost of revenue in the second quarter was RMB 37.64 billion, up 29.3% year-over-year. In addition to the increase in the cost incurred to support our business expansion, this increase also reflected costs of the Deppon Logistics consolidation, which were reclassified based on our cost and expense standards. Let's move to the main cost of revenue. First, employee benefit expenses were RMB 13.39 billion in the second quarter of 2023, up 25.7% year-over-year. In addition to Deppon Logistics consolidation, this increase was due to increase in the number of our frontline operational employees from 303,000 at the end of the second quarter of 2022 to 347,000 at the end of the second quarter of 2023. This increase in the number of operational employees was mainly due to the addition in the in-house personnel to the key operational process, such as last mile delivery, in order to ensure high-quality services and elevate our customer experiences. In Q2, total employee benefit expenses accounted for 32.6% of total revenue, down 1.4% year-over-year. Outsourcing costs, another important component of our cost of revenue, were RMB 14.5 billion in the second quarter of 2023, up 26.9% year-over-year, mainly due to Deppon Logistics consolidation, and they accounted for 35.3% of total revenue for the quarter, down 1.2% year-over-year. The decrease was largely driven by our proactive business and customer mix optimization, improved operational efficiency, and post-pandemic normalization of resource prices. Third, our total rental cost was RMB 3.3 billion in the second quarter, up 23.2% year-over-year, primarily due to an increase in the number and the floor areas of our logistics facilities, such as warehouses, as well as Deppon Logistics consolidation as of June 30, 2023. we operated over 1,600 warehouses, including warehouses managed by Deppon Logistics. The aggregate floor area of our warehouse network, including warehouse space managed through the open warehouse platform, exceeded 32 million square meters. Our total rental cost in the second quarter represented 8.1% of total revenue, down 0.5% from 8.6% in the same period last year. This increase was primarily attributable to the Deppon Logistics lower rental cost as a percentage of its revenue, which led to a lower consolidated number. Besides the major costs mentioned above, depreciation and amortization and vehicle usage costs, such as fuel costs and tolls, including other costs, also rose as a percentage of revenue after consolidation, which was due to Deppon Logistics' high costs related to self-owned vehicles as a percentage of its revenue. In terms of expenses, our operating expenses in the second quarter of 2023 were RMB 2.92 billion, growing 26.4% year-over-year, and accounting for 10.1% of total revenue, a decline of 0.3% year-over-year. Among them, selling and marketing expenses were RMB 1.21 billion, 3.0% of the total revenue, down 0.1% year-over-year. Selling and marketing expenses accounted for 4.3% of the revenue from external customers, a decline of 1.0 percentage point year-over-year. In terms of the R&D expenses in the second quarter of 2023 were RMB 920 million, accounting for 2.2% of total revenue, essentially flat with same period of last year. Technological innovation has always been our priority, we maintain R&D expenses relatively stable as a percentage of our revenue. This allows us to explore the development and application of pioneering technologies to boost our core competencies, laying a solid foundation for alleviating our end-to-end operational efficiency, achieving refined operation, and empowering external customers with our accumulated technical expertise. On general and administrative expenses, they were RMB 780 million, accounting for 1.9% of the total revenue, a decrease of a 0.2% year-over-year. In terms of net profit, we recommend that you consider our non-IFRS measures, which we believe best reflect our operations, given that non-IFRS profit naturally excludes factors such as share-based payments, amortization of tangible, intangible assets resulting from acquisitions, and fair value changes in financial assets measured at fair value through profit or loss. In Q2 of 2023, our non-IFRS net profit was RMB 830 million, at a net profit margin of 2%, up 1.3% year-over-year. In the second, in the first half of 2023, our non-IFRS net profit was RMB 110 million, a turnaround from a net loss in the same period of last year. We also continued to monitor our cash reserves and cash flows to maintain healthy, sufficient capital to support business development and meet our operational needs. In the second quarter, our capital expenditures, both in absolute amount and as a percentage of revenue, increased year-over-year. We will steadily and effectively deploy capital according to our business deployment pace and needs to enhance our capacities in the medium to long term and achieve our goals of the cost reduction and efficiency enhancement. Before I conclude, I'd like to thank all the shareholders for their enduring support for JD Logistics. Going forward, we will firmly execute our core development strategy and continue to focus on enhancing our core competitiveness and advantages. We believe that as the macroeconomy continues to improve, we will maintain our steady growth momentum and realize high-quality, sustainable development. At the same time, through refined operations and increasing economies of scale, we will further improve our profitability, creating greater value for our shareholders. Thank you. That concludes my prepared remarks. Now we can start the Q&A session. Thank you, Mr. Wu Hao. This concludes our prepared remarks. We would like now to open the call to your questions. Operator, please start the Q&A session when ready. Thank you. As a reminder, we only accept questions in Chinese language line. To ask a question, please dial into the Chinese line and listen, and then press star on your telephone tone keypad, please. Now let's begin the question-and-answer session. Any questions, please press star one to ask a question. Thank you for your cooperation. Again, please be kindly noted, please press star and one to ask the questions. The first question comes from the CITIC Ren Gong. Mr. Gong, please wait for the question. Thank you for the presentation of the management. Good evening. I have a quick question to you. From my cooperation in terms of the structural organization, I saw your business performance. Which parts are being improved, and what kind of adjustment are you going to take? My question is to the management for the ISC, what's your take on that?... For the first 1P and 3P, when are you going to normalize the business and see the growth? Thank you. Thank you very much for the question. Ren, I want to share with you my comments. In this May, we completed the adjustment of the strategy, and you have already seen the results. We also have seen lots of fluctuations. The good news is we have completed the change of the structure with positive outcome. We also see that over the last few years, the service capacities are improving steadily, and we are also seeing that at different levels and links, both at the upstream and downstream, we are seeing the great improvement of the efficiency as well as the placement of the orders. This strategic adjustment is in line of JD Logistics philosophy, and it is also a great measure to improve our efficiency and reduce our cost. I believe that it is a great upgrade for the strategy. The organizational structure, the business units could improve comprehensively with better efficiency. I believe that the outcomes have already been released. Meanwhile, according to our analysis of the minimum business unit, as well as establishment of industrial parks, as well as establishment of the network of the warehousing, we will offer flat working conditions, releasing the vitality of the organization in terms of the sales. We are going to provide sustainable services to the sales customers to better be adaptive to market changes. We will offer better services to the customers to give them better services. On the new organizational structure, we see the granularity of the management are more clear compared to what we did previously, and we're also seeing better resource allocations. The management decision-making is being more efficient. It has efficiently improved our efficiency of the management. The positive outcomes are released steadily, but we still need more time to see better outcomes. We still need some time to get the full potential out. In Q4 of this year, we are looking forward to see better outcomes. In the long run, the improvement on our business can be felt and presented. We are going to improve the core business as well as the competitiveness of the product. We are also going to continue to move forward to optimize our strategy to offer better products to the customers. We are also going to attract more customers with great potential. That is how we are going to work with existing customers to offer better services. For express services and other business and ventures, we will be always there to offer them sustained growth, and we will expand our business as we planned. For the ISC services, we will deepen our partnership with our existing customers, and we will follow the characteristics of different business to offer them specialized and customized solutions. That is how we are going to embrace the customers to offer them tailored services. For the 1P, in the 1P, we are also felt the impact from the adjustment launched in the first half of 2022, and in the second half of this year, we are going to normalize and reduce those impact. JD Logistics comprises JD Retail, as well as the other business. We are going to follow the changes of the retail to upgrade our services accordingly. We will offer the high-quality services as we promised. Thank you. Thank you for the answer. The next question, from Thomas of Jefferies. Now please raise the question. Good evening. Thank you for accepting my question. My question is on the external customers, ISC, about the number. In following quarters, what will be the trend, and what will be your response? In your predictions, when you are going to see the growth? That's my first question. For the second question, at the different vertical industries, at which area you are going to strengthen your efforts, or are you going to penetrate into new industries to expand your footprint? Thank you, Thomas, for the question. They are great questions. For the external customers, ISC development, what will be the future deployments, and what are our strategies ahead? Therefore, we will concentrate on the service provision to the ISC external customers. We will work with the core industries and offer them better solutions.... Through our continued improvement of the services and different tools, we will help our customers to address their difficulties as well as the challenges ahead. We will empower our customers to build up efficient solutions. All in all, we are going to create greater value to our customers. In terms of the customer growth, we will follow the characteristics of the industries of the customers. We will offer the high quality ISC as we always did, such as the networking of the warehousing and other tools and weapons will be launched one after another to meet all their demands. The networking of the warehousing will be one of the most important step to attribute to the entire sector and industry. In the long run, we will also bring cost optimization as well as our advantages on that sector. For the major customers, including the tourism customers, we will never stop our service provision. Additionally, we will also optimize the product portfolio in the long run to drive the growth of our business. For the retail customers, as well as the industrial characteristics, we will provide the distributed warehouses. Again, again, we will work with different cities, especially the first-tier cities, to follow the characteristics of the geography, to work with the transportation, the networking of the warehouses to improve efficiency in general. In terms of industrial deployments, we'll focus on the core industries as well as our capacity building. We'll first understand the demands of the customers, as well as those two business deployments for the warehousing capacities. We are also working with the industrial partners. Right now, we also see the big fruits. In the future, we'll also work with the auto industry. The auto sale markets, in terms of ISC service provision, will never be stopped. We will also work with the auto sale parts to increase our advantages, advantageous strengthening. For the brands in China, as well as in the other world, the new energy auto brands will be our potential customers. The spare parts, as well as the standardized operational model, will be set up for the upcoming years and months. That is how we are going to deepen our innovation as well as create the new models to serve our customers. JD Logistics will be serving the auto industry to create benchmark cases as we promised. That is how we could help our customers to improve the overall operational efficiency, and that is how we could create a world for the sustainable development. Thank you very much for the questions. The next question come from Chunying Fan of Bank of America. Please share with us your question. Thank you very much for having me here. Thank you, Mr. Hu, and thank you for accepting my question. My question is about your cost management. As you have already shared with us about the cost structure as well as all the changes accordingly, you have always talking about the tools, your methods of cost management. Over the last two years, you are always saying about the outcome out of the cost of control, but in the upcoming years and in the long-term future, in terms of the cost management and reduction, what is your take on that? Do you have any specific methods to control the cost, such as the cost of the cash flow? What are the major areas you can go to further decrease your cost? Thank you. Thank you very much for the question, Fan. At present, on the macroeconomic situations, cost control and cost reduction is one of the must from JD Logistics, and it is also requirement from our customers. Some of the customers complain that the logistics companies are having too high costs. That is why we are going to go forward and to make something substantially different. JD Logistics will save the resources, optimize our procurement price, and to optimize the structure in a general network to control the cost. That is how we could improve our operational efficiency in the long run. First of all, we could consistently improve our operational efficiency, starting from the first step of resource saving and price control. For instance, we have a streamlined operational business model in the warehouses. We will evaluate efficiency to save the cost in the supply chain, as well as in automation systems. We are also seeing the great improvement on the operational efficiency. Apart from that, at present, we will also maximize our strengths as well as our scales of economy. When we are having the bargaining power to deal with the procurement, we are also gaining advantages in having a preferred bargaining power in working with our R&D team. We could smartly adjust and deploy our resources as well as our operational front-line staff to improve their general working conditions. The optimization of the first front-line vehicles as well as operational staff, is also one of the components for us to improve the cost control. Furthermore, we are also working with our collaborators in the big network. The network infusion or the integration of the network together with our collaborators, that also offers opportunities for us to improve our resource optimization efficiency. That is also a key step for us to optimize our efficiency of resource optimization as well as our service capacities. I have already shared with you, we are still in the process of adjusting and optimizing the customer mix to ensure that all the customers are at a healthy level. We are certain that high quality services and up-sale services will help the customers to grow and to ensure of a long-term and healthy growth. Thank you for your question again. Thank you for your answer. Very clear. Due to time's sake, now we are going to conclude our question-and-answer session. Now, I'm going to turn the conference back to Jun for additional remarks. Thank you once again for joining us. If you have any further questions, please contact our IR team directly. Thank you.