IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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<p><a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> is the largest player in China’s integrated supply chain logistics services market, with a 2.7% revenue market share in 2020, according to CIC. JD Logistics was founded with the formation of <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>’s in-house logistics department in 2007. JD Group is the controlling shareholder with a 79.12% stake. JD Logistics has won approval for an HKEx IPO to raise $3-4 billion, according to press reports. </p><p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-initiation-the-flow-of-things" target="_blank" data-smartkarma-citation="insights:48279" rel="noopener">JD Logistics IPO Initiation: The Flow of Things</a>, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand for faster and more flexible supply chain logistics services. </p><p>In this note, we look at the PHIP which discloses the 2020 results and recent developments. The results underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. </p><div class="content-highlight"><p>The Chinese logistics market is highly price-competitive, and scale is crucial to sustained profitable growth. In a consolidating market, the eventual winners will be companies that can invest in infrastructure and capacity to gain market share and economies of scale benefits. We think that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. </p></div>

JD Logistics (JDL HK) is the largest player in China’s integrated supply chain logistics services market, with a 2.7% revenue market share in 2020, according to CIC. JD Logistics was founded with the formation of JD.com Inc (ADR) (JD US)’s in-house logistics department in 2007. JD Group is the controlling shareholder with a 79.12% stake. JD Logistics has won approval for an HKEx IPO to raise $3-4 billion, according to press reports. In JD Logistics IPO Initiation: The Flow of Things, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand for faster and more flexible supply chain logistics services. In this note, we look at the PHIP which discloses the 2020 results and recent developments. The results underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. The Chinese logistics market is highly price-competitive, and scale is crucial to sustained profitable growth. In a consolidating market, the eventual winners will be companies that can invest in infrastructure and capacity to gain market share and economies of scale benefits. We think that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. 

JD Logistics IPO: Prioritizing Market Share Gains over Margins

China

Xiamen Xiangyu Co Ltd provides supply chain and circulation services. The Company offers its clients the capability to purchase raw materials and semi-manufactured products and to distribute finished goods worldwide.

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JD Logistics IPO: Prioritizing Market Share Gains over Margins

JD Logistics has won approval for an HKEx IPO to raise $3-4 bn. JD Logistics has the right ingredients to ride out the industry’s price-competitive...

Arun George