JD.com continued to spin off, and JD Industries restarted its Hong Kong stock IPO

Image source: Visual China

Blue Whale News, October 12 (Reporter Wang Xiaonan) is keen on spin-off and listing of JD.com, and then pushes JD Industry to be listed in Hong Kong.

After a year and a half, JD Industry restarted the Hong Kong stock IPO on September 30. As the largest player in China's MRO procurement services market, JD Industries has become an independent business unit of JD Group since 2017, due to the rapid growth of the company's performance, as a member of JD Capital, JD Industries is also quite sought after by capital, raising a total of about 635 million US dollars in about three years.

The spin-off of JD Industry is only an important step for JD to build its capital territory. In recent years, JD.com has listed companies such as JD Group, JD Health, JD Logistics, and Dada Group, as well as JD Industrial Development and JD Technology.

JD Industries restarted its Hong Kong stock IPO

On September 30, JD Industry once again submitted a prospectus to the Hong Kong Stock Exchange to be listed on the main board, with Bank of America, Goldman Sachs and Haitong International as joint sponsors. As early as March 30, 2023, JD Industries submitted a prospectus to the Hong Kong Stock Exchange for the first time.

According to the prospectus, JD Industry is an industrial supply chain technology and service provider, providing customers with industrial product supply and comprehensive digital intelligence solutions and services through digital and intelligent industrial supply chain infrastructure. To put it simply, JD Industry provides connection services for both the supply side and the demand side, including commodity standardization, scientific inventory management, and procurement digitalization.

Since 2017, JD Industries, as an independent business unit of JD Group, has begun to focus on the supply chain technology and service business of MRO (usually referred to as industrial supplies that are not production raw materials) procurement services, and after years of development, JD Industries has become the largest player in China's MRO procurement services market.

According to CIC, JD Industries ranked first in the domestic MRO procurement service market in terms of transaction value in 2023 (twice the size of the second place), and is also the largest service provider in China's industrial supply chain technology and service market, with a share of about 4.1%.

At present, JD Industrial's revenue sources are divided into two categories: goods and services income. Among them, the revenue of goods is mainly the sales revenue of industrial products, including general MRO products, special MRO products and BOM products, which are the main source of income for JD Industry, accounting for more than ninety percent of revenue. In addition, the service revenue mainly collects commissions and platform usage fees from third-party merchants on the trading platform, advertising service fees from advertisers, and service fees from technical and other service customers.

From 2021 to 2023, JD Industrial's performance will grow rapidly, with the company's operating income of 10.345 billion yuan, 14.141 billion yuan and 17.346 billion yuan respectively, with a compound annual growth rate of 29.4%; The company's adjusted net profit was 441 million yuan, 766 million yuan and 0.9 billion yuan respectively, with a compound annual growth rate of 42.9%.

In the first half of this year, JD Industrial's operating income increased from 7.2 billion yuan in the same period of 2023 to 8.6 billion yuan, a year-on-year increase of 20.3%; The company's adjusted net profit also increased from 410 million yuan to 510 million yuan, a year-on-year increase of 24.6%.

However, a slight decline in gross profit margin is also a challenge for JD Industries. From 2021 to 2023, JD Industrial's gross profit margin will be 18.6%, 18%, and 16.1% respectively. In the first half of 2024, the company's gross margin was 16.9%, compared to 17.8% in the year-ago quarter. JD Industrial's gross profit margin is mainly affected by commodity revenue, which has only 11% in recent years, while the gross profit margin of service revenue in the same period is as high as 96%.

Backed by the JD system, JD Industry is quite sought after by capital, and has raised about $635 million in about three years.

In August 2020, JD Industries completed a Series A preferred share financing with GGV, Sequoia China and CPE, raising approximately US$230 million. Subsequently, in January 2021, JD Industries completed an A-1 round of preferred stock financing with companies such as Domking and GGV, raising about $105 million. In March 2023, JD Industries completed a Series B preferred stock financing with investors including Mubadala, 42XFund, M&G, BPEA EQT and Sequoia China, with a post-investment valuation of approximately US$6.7 billion, with a total transaction value of US$300 million.

The funds raised by JD Industries will be used to further enhance its industrial supply chain capabilities, expand its business across geographies, potential strategic investments or acquisitions, and for general corporate purposes and working capital needs.

JD.com's expanding territory

As an independent business of JD Group in 2017, the development of JD Industry is still inseparable from the support of JD.

From 2021 to 2023 and the first half of 2024, JD Industry's revenue from JD Group's platform (including service revenue and revenue from JD Hardware City) was RMB5.04 billion, RMB6.66 billion, RMB7.52 billion and RMB3.66 billion, respectively, accounting for 48.7%, 47.1%, 43.4% and 42.5% of the Group's revenue for the same period.

JD Industry also admitted in the prospectus that the company's business uses and works closely with JD Group's platform, including the wide range of services, technology and traffic support provided by JD Group to promote the online sales and marketing of the company's products and services.

In April 2023, the China Securities Regulatory Commission (CSRC) issued supplementary materials to JD Industry for its listing filing in Hong Kong for the first time last year, requiring it to explain its independence, agreement control structure, main operating entities, changes in shareholdings, and the use of raised capital.

According to the prospectus, before the IPO, JD Group held about 77.32% of the total issued share capital of JD Industry through its wholly-owned subsidiary; Liu Qiangdong, the founder of JD.com, holds 3.71% of the shares through MaxI &PLimited.

Liu Qiangdong, chairman of the board, has largely stepped aside, and the de facto head of JD Industries is Song Chunzheng, who currently serves as the company's executive director and CEO, who joined JD.com in 2013.

The spin-off and listing of JD Industry is a corner of JD Group's capital map. On the same day that JD Industry first disclosed its prospectus for listing in Hong Kong, JD Industrial Development, another company under JD Group, also submitted a prospectus to the Hong Kong Stock Exchange, but there has been no further progress.

According to the data, Jingdong Group officially set foot in the field of e-commerce in 2004. In May 2014, JD.com was officially listed on the United States NASDAQ Stock Exchange, which is China's first comprehensive e-commerce platform to be successfully listed in the United States. In June 2020, JD.com Group made a secondary listing on the Hong Kong Stock Exchange, raising funds to invest in key supply chain-based technology innovations to further enhance user experience and improve operational efficiency.

Starting in 2020, JD.com began to enter the IPO harvest period. In June 2020, Dada Group landed on the United States NASDAQ and became the "first stock of instant delivery", and at that time, as the largest shareholder of Dada Group and the cornerstone investor of the IPO, JD Group held 47.4% of the shares. At present, JD.com holds 63.24% of the equity of Dada Group.

In addition, in December 2020, JD Health was listed on the Hong Kong Stock Exchange, and then in May 2021, JD Logistics was also successfully listed in Hong Kong. At the same time, JD Digital also disclosed the IPO prospectus of the Science and Technology Innovation Board in September 2020, but withdrew its listing application the following year. Subsequently, JD announced the integration of cloud and AI business with JD Digital, and officially established JD Technology. At the end of January 2022, JD Technology submitted its first application for overseas listing, but there was no follow-up.