BEIJING – Shares in JD Logistics, the logistics arm of Chinese e-commerce giant JD.com, rose on Friday as the company debuted on the Hong Kong Stock Exchange.
Shares rose more than 18% at one point after opening at Hong Kong $ 46.05. Much of those gains were later scaled back, with the stock ending its first day of trading in Hong Kong 3.32% above its issue price.
JD Logistics has valued its initial public offering at Hong Kong $ 40.36 per share, the lower end of the expected range. The company raised $ 3.2 billion as part of its IPO.
The company plans to use the raised funds to invest in its logistics network and infrastructure, CEO Yu Yui told reporters on Friday.
He said the company not only continues to expand into less developed parts of China, but also intends to develop an international logistics business, with air freight development “breakthrough” soon.
The logistics department’s large network of warehouses and deliverers in China has given JD a competitive advantage over rival Alibaba as the Beijing-based company can deliver products to millions of customers the same or next day.
An employee inspects an order at a JD.com delivery station in Yizhuang, Beijing during the coronavirus outbreak.
Hilary Pan | CNBC
Logistics is “very important” as JD competes with competitors on quality of service, Ringo Choi, EY’s IPO chief in Asia Pacific, told CNBC’s “Squawk Box Asia” on Friday. This, along with the integration of artificial intelligence and robots, will affect the company’s “future competitiveness” vis-à-vis other e-commerce players.
“Logistics (es) are becoming more and more important and are becoming one of the (JD) weapons of killing in a highly competitive environment,” said Choi.
JD Logistics’ listing is the latest in a series for the parent company after JD.com went public in New York and subsequently completed a secondary listing in Hong Kong. The company’s health unit, JD Health, was also listed in Hong Kong in December.
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Outlook for JD Logistics
Another risk is the strong dependency on the state of the parent company JD.
JD Logistics has tried to sell its delivery services to third parties and has the US shoe company Skechers among its customers. So far, however, sales and business have been linked to JD, which accounted for more than 50% of the logistics unit’s sales last year.
When asked about these risks, Yu expects the revenue share from non-JD customers to increase. The CEO said the company has suffered losses from necessary investments and expects business to move in a “healthy” direction.
Future third party customers are likely to come from companies that sell consumer electronics, home appliances, furniture, automobiles and other consumer goods, Yu said in an interview with CNBC.
While express delivery will remain an integral part of JD Logistics’ business, Yu intends to sell the warehouse sorting and delivery management technology to customers to cover their entire supply chain.
End-to-end coverage is JD Logistics’ strategy to differentiate itself from competitors like SF Express, a giant in China’s express shipping industry. Local startups are already selling warehouse management software and equipment.
– CNBC’s Arjun Kharpal contributed to this report.