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JD Logistics shares surge as much as 18% in its Hong Kong debut

BEIJING — Shares of JD Logistics, the logistics arm of Chinese e-commerce giant, soared on Friday as the company debuted on the Hong Kong Stock Exchange.

Shares surged more than 18% at one point, after opening at 46.05 Hong Kong dollars.

JD Logistics priced its IPO at 40.36 Hong Kong dollars per share, the lower end of the expected range. The company raised $3.2 billion in its initial public offering.

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.

A worker inspects an order at a delivery station in Yizhuang, Beijing, amid the coronavirus outbreak.

Hilary Pan | CNBC

The unit’s public listing marks the latest in a series for the parent company, after 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.

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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