Chinese e-commerce giant JD.com is set to list its delivery arm in Hong Kong on Friday

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  • JD Logistics is set to raise $3.2 billion in its initial public offering after pricing its shares at 40.36 Hong Kong dollars each, at the lower end of the expected range.
  • While JD Logistics has boosted warehouse efficiency with robots and automation, the final delivery leg depends heavily on more than 200,000 human couriers.

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  • 9618-HK

BEIJING — Chinese e-commerce giant JD.com is set to list its logistics arm in a Hong Kong public offering on Friday.

The unit's vast network of warehouses and delivery workers in China have given JD a competitive edge against its rival Alibaba, as the Beijing-based company can deliver products to millions of customers within the same day, or the next.

JD Logistics is set to raise $3.2 billion in its initial public offering after pricing its shares at 40.36 Hong Kong dollars each, at the lower end of the expected range.

The unit's public listing marks the latest in a series for the parent company, after JD.com itself 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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Dada, a grocery delivery company that counts JD and Walmart as strategic investors, went public in New York in June 2020. JD announced in March it was investing $800 million in Dada, for an ultimate majority stake of 51%.

Earlier this year, JD withdrew an application for listing its fintech arm on the Shanghai Star board.

Outlook for JD Logistics

JD Logistics earned 73.4 billion yuan ($11.4 billion) in revenue in 2020. But it expects to "record a significant adjusted loss" in 2021. The company disclosed net losses of 4 billion yuan in 2020, greater than the 2.2 billion yuan in 2019.

While JD Logistics has boosted warehouse efficiency with robots and automation, the final delivery leg depends heavily on more than 200,000 human couriers. As a result, the company said labor costs have accounted for more than 40% of total operating expenses and revenue costs for the last three years.

"Any failure to retain stable and dedicated labor by us may lead to disruptions to or delays in our services," the company warned, noting overall tightening in the labor market and rising wages.

Another risk is heavy reliance on the state of the parent company JD.

JD Logistics has been trying to sell its delivery services to third parties. But so far its revenue and business have been tied JD, which accounted for more than 50% of the logistics unit's revenue last year.

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