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Focus Analysis|JD Logistics is striving to make money for JD, not relying on JD to support a family

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JD Logistics, which helped build up its core competitiveness and then spin-off operations, finally went public.

In the evening of February 16,JD Logistics submitted a prospectus on the Hong Kong Stock Exchange and officially launched an IPO, becoming the third subsidiary of to conduct an IPO.According to the prospectus, JD Logistics’ joint sponsors for this IPO include Bank of America, Goldman Sachs, Haitong International, etc. Earlier reports stated that the valuation of JD Logistics may reach around US$40 billion.

At present, among the major domestic express companies, SF Express and the “Three Links and One Express”, except for the market value of the leading company SF Holdings exceeding 500 billion, the market value of the other four is below 50 billion. Jingdong Logistics expects that the 40 billion US dollars will be Sit firmly in second place.

At the same time as the prospectus was released, JD Group announced that it intends to spin-off JD Logistics through the independent listing of JD Logistics shares on the main board of the Hong Kong Stock Exchange. However, the details of the spin-off plan have not yet been finalized, including the scale and structure of the global issuance. After completing the proposed spin-off, JD will continue to indirectly hold more than 50% of JD Logistics.

The income scale is less than half of SF Express, and the third-party income accounts for nearly 50%

In terms of revenue, the revenue of JD Logistics in the first three quarters of 2020 reached 49.5 billion yuan, a year-on-year increase of 43.2%. This figure was 37.9 billion yuan and 49.8 billion yuan in 2018 and 2019 respectively.In contrast, SF Express’s revenues were 90.942 billion, 112.193 billion and 109.593 billion in the same period, and the income gap of JD Logistics was still obvious.

At the gross profit level, the gross profit of JD Logistics in 2018, 2019, and the first nine months of 2020 was 1.08 billion yuan, 3.432 billion yuan, and 5.418 billion yuan, respectively. The gross profit margin increased from 2.9% in 2018 to the first nine months of 2020. The gross profit margin was 8.5% in the same period last year.

After years of losses, JD Logistics has seen a positive trend in stopping losses. In 2018, 2019 and the first nine months of 2020, JD Logistics lost 2.8 billion yuan, 2.2 billion yuan and 11.7 million yuan respectively. However, we also mentioned earlier that in the past three quarters, JD Logistics has actually continued to expand recruitment, and strengthened the coverage of the sinking market and the investment in the C-side package business. New logistics-based business (logistics , Health, Overseas, Cloud, etc.) lost more than 700 million yuan, with a loss rate of 6%.

The reason why JD Logistics can stop its loss to 17.7 million yuan in the third quarter of 2020 is due to a fair value loss of 1.556 billion yuan. If this part is added, JD Logistics still has a loss of nearly 1.6 billion yuan in the third quarter of last year. The loss during the same period last year was 996 million yuan.

JD Logistics Revenue Source: JD Logistics Prospectus

Thanks to the full opening in 2017,The proportion of JD Logistics’ revenue from external customers has continued to increase, from 29.9% in 2018 and 38.4% in 2019 to 43.4% in the first nine months of 2020.Over-reliance on e-commerce customers is weakening.

In terms of splits, JD Logistics’ revenue types are mainly divided into two parts: revenue from integrated supply chain customers and revenue from other customers. The classification standard is whether customers use the warehouse and distribution services provided by JD.

Taking JD’s POP platform business as an example, JD Logistics mainly provides four types of warehousing and distribution services: SOP, FBP, LBP and Sopl, and charges different fees according to different warehousing services.

Four warehouse distribution models under JD POP platform

The prospectus shows that in 2018, 2019, and the first nine months of 2020, JD Logistics’ revenue from integrated supply chain customers was 34.15 billion, 41.837 billion and 39.141 billion, accounting for 90.2% and 83.9 of total revenue respectively. % And 79.1%. The number of integrated supply chain customers increased from 32,465 at the end of 2018 to 46,083 as of September 30, 2020, an increase of 42%.

JD Logistics Revenue Type Source: JD Logistics Prospectus

The biggest cost of JD Logistics comes from employee benefits. This cost has increased from 17.071 billion in 2018 to 17.889 billion in the first three quarters of 2020, and its proportion has fallen from 45.1% to 36.1%. In contrast, the proportion of outsourcing costs has risen from 27.7% to 32.8%. It seems that JD is also increasing its reliance on third-party warehouse distribution teams. As of the end of 2020, JD Logistics has more than 250,000 employees, including more than 240,000 front-line employees such as warehousing, express delivery, and customer service.

JD Logistics Operating Cost Source: JD Logistics Prospectus

In addition, in the past three years, JD Logistics has continued to increase its investment in technology research and development.In the 11 quarters from 2018 to the third quarter of 2020, JD Logistics’ cumulative technology investment reached 4.6 billion, showing a continuous growth trend.In these 11 quarters, Jingdong’s logistics technology investment accounted for an average of 3.4% of revenue in the same period, leading the industry.

Jingdong holds nearly 80% of the shares and successfully completed the bet

Since its independent operation in 2017, JD Logistics’s only financing record was released. In February 2018, investors with US$2.5 billion included Hillhouse Capital, Sequoia China, China Merchants Group, Tencent, China Life, and China Life. Open fund of funds and many other institutions.

After the completion of this round of financing, Jingdong Group holds 81.4% of Jingdong Logistics, valued at $13.5 billion. The listing and gambling agreement behind this financing also requires to complete the listing within three years, with a deadline of March 2021. It now appears that JD Logistics is likely to successfully complete the bet.

According to the prospectus, before the IPO, JD Group held 79.12% of JD Logistics, Tencent’s Image Architecture Investment (Hong Kong) Co., Ltd. held 0.24%, and Hillhouse’s HHJL Holdings Limited held 2.9%.If listed at a valuation of 40 billion U.S. dollars, JD Logistics will bring investment income to JD Group at least 20 billion U.S. dollars.

Since the beginning of last year, the logistics industry has been surging. After Jitu has messed up the situation with its dark horse, many express companies have reported financing or secondary listings, which also brought pressure on JD Logistics.

At the end of May last year, the ABS of Suning Tesco’s warehousing and logistics facility was approved by the Shenzhen Stock Exchange, and the proposed bond issuance amounted to 2.654 billion yuan. In the following August, Yunda Holding Investment Limited (“YDHI”), an overseas wholly-owned subsidiary of Yunda, completed the issuance of US$500 million in bonds overseas. At the end of November, through Alibaba’s fixed increase plan, YTO received 3.8 billion yuan from Alibaba. Even SF Express reported in November that it would IPO its express delivery business in Hong Kong, realizing a second listing of US$5 billion.

At present, the service products of JD Logistics mainly include warehouse distribution, express express, bulky, cold chain, cross-border, etc. After acquiring Leap Express at RMB 3 billion in August last year, JD Logistics has made up for its own time-limited express delivery. Short board.

However, constant price wars have intensified financial pressures, especially when the grocery shopping war is in full swing, JD Logistics needs to be listed for blood transfusion to prepare for the construction of logistics facilities in the sinking market.

During this year’s epidemic, JD Logistics has built a good reputation with years of infrastructure construction. However, in order to build another JD in competition with rivals such as SF Express, more efforts are needed to increase its market share and scale, especially To explore more markets outside of its own e-commerce parts, these are new stories that JD Logistics needs to hand over to the capital market after its listing.



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