Shares of JD.com’s logistics unit jump after $ 3.1 billion in Hong Kong IPO

Shares in the supply chain and delivery unit of the Chinese trading group JD.com rose 14 percent in the first time the company raised $ 3.1 billion this year in one of Hong Kong’s largest stock offerings.

JD Logistics is a spin-off similar to the US tech group Amazon. The company delivers 90 percent of the packages on the same day or the next day to parent company JD.com, its largest customer, but is increasingly offering delivery and logistics services to third-party customers.

The initial public offering is from the Chinese government increases the study the country’s technology sector. The market capitalization of Beijing-based JD Logistics reached about $ 36 billion after trading began in Hong Kong on Friday.

Although the Covid-19 pandemic has seen a beneficial rise in the online shopping unit, its IPO has fallen short of expectations, compared to when the company introduced the material on its list a few months ago.

“Capital markets were hot at the time,” Yu Yui, CEO of JD Logistics, told FT. “For JD Logistics, our IPO is just a time point, not an end point.. [price] it’s in a fair range, I think it’s okay. ”

Analysts say the decline is due to a fall in the share price of rival SF Holdings and an increase in losses in JD Logistics and a significant investment in infrastructure.

The group has added about 200 warehouses in the last six months. Its operating loss reached Rmb1.5bn ($ 235.3 million) in the first quarter, with annual revenues rising 64 per cent to Rmb22.4bn.

“In the last brochure, they said they would lose a lot of money in 2021, so the calculations went down,” said a Hong Kong analyst.

IPO is JD.com’s second major spin-off as its healthcare unit raises $ 3.5 billion in a Hong Kong IPO in December. JD.com’s fintech arm took out the proposed IPO in the Shanghai Star market last month amid regulatory crackdowns.

Last year, JD Logistics earned about half of its revenue from transporting packages to JD.com. But the part of the business aimed at external customers is growing faster, recording a three-digit growth rate in the first quarter.

Providing service to JD Logistics external customers “was when we decided to invest in our thesis in 2018,” said Colin Guok, a partner at Sequoia Capital China. “If they could do JD’s own logistics, the growth rate would be tied to JD – so investors and management were targeting more external customers.”

The company had 190,000 external corporate customers in December.

“JD Logistics is a leading third-party logistics vendor. They are efficient and cost effective. There are a lot of opportunities for logistics in China, ”said Anderson Peng, vice president of the Skechers China shoe brand supply chain.

Yu said another growth path for JD Logistics is called live video e-commerce in video applications, such as Douyin by ByteDance, the Chinese version of TikTok and Kuaishou, as well as selling goods on Tencent’s WeChat platform. also merchants with. “We can provide services to all of them,” he said.

JD Logistics ’190,000 couriers have also begun delivering packages to individuals. Sending a 1kg bag of apples from Beijing to Shanghai costs about Rmb16, said a 28-year-old woman named Yang. “More and more people are familiar with our messaging services and have started using us,” he added.

Analysts at the Bernstein research group JD Logistics ’courier service reported 14 percent of revenue for individuals last year, noting that China’s logistics industry is highly competitive with prices falling about 10 percent annually over the past decade.

They added that JD Logistics ’low prices and marketing costs will put pressure on profitability in the near future.