Shares in the supply chain and delivery unit of Chinese trading group JD.com have risen 14 percent since their debut after the company raised $ 3.1 billion in one of the most big Hong Kong stock exchange deals this year.
JD Logistics is a spin-off similar to the American technology group of Amazon’s logistics arm. The company provides 90 percent of packages the same day or later to parent JD.com, its largest customer, but is increasingly focusing on providing delivery and logistics services to third-party customers.
The initial public offering comes as the Chinese government does intensify the poll of the country’s technology sector. The market capitalization of Beijing-based JD Logistics reached about $ 36 billion after trading in Hong Kong on Friday.
While the unit benefited from a boom in online shopping during the Covid-19 pandemic, its IPO fell short of expectations compared to when the company first unveiled its listing materials several months ago.
“Capital markets were hot at the time,” Yu Yui, chief executive of JD Logistics, told FT. “For JD Logistics, our IPO is just one point in time, not the end point. . . if u [price] it’s in a reasonable range, I think that’s fine. “
Analysts said the fall was due to a drop in the share price of rival SF Holdings and growing losses in JD Logistics which invests heavily in infrastructure.
The group has added about 200 stores in the last six months. Its operating loss widened to Rmb1.5bn ($ 235.3m) in the first quarter as revenue increased 64 per cent year-on-year to Rmb22.4bn.
“In the final prospect, they said they are going to lose a lot of money in 2021, so estimates are down,” said a Hong Kong analyst.
The IPO is also the second major spin-off for JD.com, whose health unit raised $ 3.5 billion in a Hong Kong IPO of December. JD.com’s fintech arm pulled its proposed IPO into the Shanghai Star market last month amid regulatory crackdown.
Last year, JD Logistics earned about half of its revenues from parcel shipping to its parent JD.com. But the share of activity aimed at external customers grew rapidly, recording a triple-digit growth in the first quarter.
JD Logistics serving external customers “was our thesis when we decided to invest in 2018,” said Colin Guo, a partner at Sequoia Capital China. “If they had only done JD’s own logistics, their growth rate would have been tied to JD’s – so investors and management had the goal for them to bring in more external customers.”
The company had 190,000 external corporate customers in December.
“JD Logistics is one of our leading third-party logistics vendors. They’re efficient and cost-effective – in China there are a lot of options for logistics, ”said Anderson Peng, vice president of supply chain for China shoe brand Skechers.
Yu said another growth journey for JD Logistics was the so-called ecommerce livestreaming in video apps like ByteDance’s Douyin, the Chinese version of TikTok, and Kuaishou, as well as merchants selling well on Tencent’s WeChat platform. “We can provide services to everyone,” he said.
JD Logistics ’190,000 couriers have also begun providing packages for individuals. Sending a 1-pound bag of honey from Beijing to Shanghai costs about Rmb16, said a 28-year-old distributor named Yang. “More and more people know about our courier services and have started using us,” he added.
While analysts at the Bernstein research group estimated that JD Logistics ’courier service for individuals contributed 14 percent of revenues last year, they noted that China’s logistics industry is highly competitive with prices have fallen about 10 percent annually in the last decade.
They added that JD Logistics ’low prices and marketing expenses would put pressure on profitability in the near future.