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Shares in the supply chain and delivery division of Chinese e-commerce group JD.com rose 14% after its debut, after the company raised $3.1 billion in one of the largest stock offerings in Hong Kong this year.
JD Logistics is a spin-off company similar to the Amazon logistics division of the American technology group. The company provides 90% of parcels delivered on the same day or the next day for its largest customer parent company JD.com, but it is increasingly focusing on providing delivery and logistics services to third-party customers.
The IPO coincides with the Chinese government Strengthen review The country’s technology industry. After starting trading in Hong Kong on Friday, the market value of Beijing-based JD Logistics reached approximately US$36 billion.
Although the department benefited from the boom in online shopping during the Covid-19 pandemic, its IPO fell short of expectations compared to when the company first submitted its listing materials a few months ago.
“The capital market was very hot at the time,” Yu Yu, CEO of JD Logistics, told the Financial Times. “For JD Logistics, our IPO is just a point in time, not an end… If [price] It’s still within a reasonable range, I think it’s okay. “
Analysts said that the decline was due to the decline in the share price of rival SF Holdings and the growing losses of JD Logistics’ massive investment in infrastructure.
The group has added approximately 200 warehouses in the past six months. As revenue increased by 64% year-on-year to RMB 22.4 billion, its operating loss expanded to RMB 1.5 billion (US$235.3 million) in the first quarter.
“In the final prospectus, they said that they will lose a lot of money in 2021, so expectations have fallen,” said a Hong Kong-based analyst.
This IPO is also JD’s second major spin-off, and its health department raised US$3.5 billion in the Hong Kong IPO In december. JD.com’s financial technology department last month cancelled its initial public offering plan on the Shanghai Science and Technology Innovation Board due to regulatory crackdowns.
Yu Yu, CEO of JD Logistics, said he is confident that the company’s external business will continue to grow rapidly © Ryan McMorrow
Last year, about half of JD Logistics’ revenue came from delivering packages to its parent company JD.com. But the business for external customers grew faster, with a triple-digit growth rate recorded in the first quarter.
JD Logistics’ service to external customers “was our theme when we decided to invest in 2018,” said Guo Kelin, partner of Sequoia Capital China. “If they only do JD’s own logistics, their growth rate will be linked to JD.com-so the goal of investors and management is to get them to bring in more external customers.”
As of December, the company had 190,000 external corporate customers.
“JD Logistics is one of our core third-party logistics providers. They are efficient and cost-effective-there are many logistics options in China,” said Peng Ande, vice president of China’s supply chain for footwear brand Skechers.
Yu said that another growth path for JD Logistics is to conduct so-called live e-commerce on video applications such as ByteDance’s Douyin, the Chinese version of TikTok and Kuaishou, as well as merchants selling goods on Tencent’s WeChat platform. “We can provide services for everyone,” he said.
The 190,000 couriers of JD Logistics have also begun to deliver packages for individuals. A 28-year-old deliveryman surnamed Yang said that it takes about RMB 16 to send a bag of apples from Beijing to Shanghai. “More and more people know about our courier service and start to use us,” he added.
Although analysts at the research group Bernstein estimated that JD Logistics’ personal express services contributed 14% of revenue last year, they pointed out that China’s logistics industry is highly competitive and prices have fallen by about 10% every year over the past decade.
They added that JD Logistics’ low prices and marketing expenditures will put pressure on profitability in the near future.
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