Chinese e-commerce giant JD.com’s offshoot JD Logistics has launched the process for its initial public offering on the Hong Kong stock exchange on Tuesday, becoming the third JD subsidiary to file for a listing. Boosted by the news, the stock of parent JD.com (NASDAQ: JD; HKSE: 9618) rose 4.15% to USD 103.43 in the US market and 7% to HKD 419 on Wednesday afternoon in Hong Kong.
Merrill Lynch, Goldman Sachs, and Haitong International are the joint sponsors of the proposed IPO. JD.com now controls 79.12% of JD Logistics which will remain a subsidiary after the spinoff leaving JD.com with a 50% stake.
The shipping unit of JD.com generated total revenue of RMB 49.5 billion (USD 7.66 billion) in the first nine months of 2020 with rapid annual growth of 43.2%, according to the company’s prospectus. Net losses narrowed to RMB 11.7 million (USD 1.77 million) in the same period, compared to RMB 2.8 billion in 2018 and RMB 2.2 billion in 2019, while gross margins improved to 10.9% in 2020.
SF Express, the courier giant that reportedly considers a secondary listing in Hong Kong, boasts revenues of RMB 109.6 billion (USD 16.97 billion) in the first nine months of 2020, with a 39% annual growth and RMB 5.6 billion in net income.
The prospectus further revealed that JD Logistics had 46,083 external integrated supply chain customers as of September 30, an increase from 32,465 at the end of 2018. The average revenue from these customers was RMB 241,622 (USD 37,411). The company operates over 800 warehouses, which cover an aggregated gross floor area of approximately 20 million square meters. It has a team of over 190,000 delivery personnel and also connects to an extensive crowd-sourced on-demand delivery network.
The market size of the integrated supply chain logistics services industry is expected to grow from RMB 2.023 trillion in 2020 to RMB 3.185 trillion (USD 493.15 billion) by 2025, representing a CAGR of 9.5%, which is approximately 1.8 times the growth of China’s logistics spending over the same period, JD Logistics said in the filing, citing a report from consulting firm CIC.
JD.com spun off its logistics unit into a standalone entity in 2017, before opening up its delivery and warehousing services to third parties. In 2018, JD Logistics raised USD 2.5 billion from a range of backers that include Hillhouse Capital, Sequoia China, China Merchants Group, and Tencent, reaching a valuation of around USD 13.5 billion. JD Logistics reportedly expects to raise between USD 2 billion and USD 3 billion in the IPO, according to sources.
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It’s not the first of JD’s powerful subsidiaries to go public. In December, JD Health debuted on the Hong Kong stock exchange securing USD 3.5 billion. The company’s fintech arm JD Digits is looking for a listing on Shanghai’s tech-focused STAR Market, although it is hitting regulatory hurdles after Beijing tightened rules on the country’s fintech sector.
The e-retailer JD.com generated RMB 174.2 billion (USD 25.7 billion) in the third quarter of 2020, indicating a year-on-year (YoY) growth of 29.2%. Its annual active customer accounts increased by 32.1% YoY to 441.6 million.