THE logistics arm of JD.com Inc. is looking to raise as much as HK$26.4 billion (US$3.4 billion) through an initial public offering (IPO), in the latest listing linked to China’s booming e-commerce market.

The IPO could value JD Logistics Inc. at up to US$34 billion, filings showed yesterday. It follows share sales in the city by JD.com and another of its subsidiaries last year, which in total raised nearly US$8.5 billion, according to Dealogic.

JD.com relies on the unit to store and deliver groceries, clothes, home appliances and electronic gadgets across China. Over the years the parent company has used speedy delivery via JD Logistics as a way to gain an edge in its battle for market share with Alibaba Group Holding Ltd.

Stephen Wong, a Hong Kong-based investment manager at Park Capital Group, said he didn’t plan to subscribe to the IPO. He said he would rather invest in companies directly involved in technology and e-commerce rather than an infrastructure operator.

“JD Logistics’ capital-intensive business model carries high overhead costs, making it less attractive than other high-growth and asset-light technology startups,” he said.

JD Logistics competes with businesses such as Shenzhen- listed S.F. Holding Co., ZTO Express Cayman Inc. and Alibaba’s logistics arm, Cainiao Network Technology Co.

JD.com turned the unit into a standalone business in 2017, which then began taking external customers. Clients include shoemaker Skechers USA Inc. At the end of 2020, JD Logistics had more than 900 warehouses, more than 190,000 delivery staff and over 190,000 corporate customers. JD.com accounted for nearly 54 percent of last year’s revenue.

Overall revenue at JD Logistics jumped 47 percent last year to 73.4 billion yuan (US$11.4 billion) and it made adjusted profit of 1.71 billion yuan. The profit figure excludes accounting charges related to the valuation of convertible stock and the costs of share-based compensation.

However, the company has been rapidly hiring and building out its logistics network, and won’t benefit from the same COVID-19-related support from the government that it received last year. It expects to report a significant adjusted loss this year.

JD Logistics is offering 609.16 million new shares at an indicative range of HK$39.36 to HK$43.36 each. (SD-Agencies)