Shares in the supply chain and delivery unit of Chinese ecommerce group JD.com rose 14 per cent on their debut after the company raised $3.1bn in one of Hong Kong’s largest stock offerings this year.

JD Logistics is a spin-off similar to US tech group Amazon’s logistics arm. The company delivers 90 per cent of packages on the same or next day for parent JD.com, its largest customer, but it is increasingly focusing on providing delivery and logistics services to third-party customers.

The initial public offering comes as the Chinese government steps up scrutiny of the country’s tech sector. Beijing-based JD Logistics’ market capitalisation reached about $36bn after trading began in Hong Kong on Friday.

While the unit has benefited from a 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 several months ago.

“The capital markets were hot at the time,” Yu Yui, chief executive of JD Logistics, told the FT. “For JD Logistics, our IPO is just a point in time, it’s not the end point . . . if the [price] is in a reasonable range, I think it’s OK.”

Analysts said the fall stemmed from a decline in the share price of rival SF Holdings and mounting losses at JD Logistics as it invests heavily in infrastructure.

The group has added about 200 warehouses in the past six months. Its operating loss widened to Rmb1.5bn ($235.3m) in the first quarter as revenue rose 64 per cent year on year to Rmb22.4bn.

“In the final prospectus, they said they were going to lose a bunch of money in 2021, so estimates went down,” said one Hong Kong-based analyst.

The IPO is also the second big spin-off for JD.com, whose health unit raised $3.5bn in a Hong Kong IPO in December. JD.com’s fintech arm pulled its proposed IPO on Shanghai’s Star market last month amid the regulatory crackdown.

Yu Yui, chief executive of JD Logistics, said he is confident the company’s external business would continue its rapid rise © Ryan McMorrow

Last year, JD Logistics earned about half of its revenue from ferrying packages for its parent JD.com. But the part of the business targeting external customers is growing faster, recording a triple digit growth rate 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 only did JD’s own logistics, their growth rate would be linked to JD’s — so investors and management had the goal for them to bring in more outside customers.”

The company had 190,000 external corporate customers as of December.

“JD Logistics is one of our core third-party logistics vendors. They are efficient and the right cost — in China there are a lot of options for logistics,” said Anderson Peng, vice-president of supply chain for shoe brand Skechers China.

Yu said another avenue of growth for JD Logistics was so-called livestreaming ecommerce on video apps such as ByteDance’s Douyin, China’s version of TikTok, and Kuaishou, as well as merchants selling goods on Tencent’s WeChat platform. “We can provide services to all of them,” he said.

JD Logistics’ 190,000 couriers have also begun delivering parcels for individuals. Sending a 1kg bag of apples from Beijing to Shanghai costs about Rmb16, said a 28-year-old deliveryman surnamed Yang. “More and more people know about our courier services and have begun using us,” he added.

While analysts at research group Bernstein estimated JD Logistics’ courier service for individuals contributed 14 per cent of revenue last year, they noted that China’s logistics industry is fiercely competitive with prices falling about 10 per cent annually over the past decade.

They added that JD Logistics’ low prices and marketing spend would pressure profitability in the near future.



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