The logistics provider has filed for a Hong Kong IPO, aiming to become one of China’s top three delivery companies

Key Takeaways:

  • J&T Global Express has lost money for the last three years as it files to list in Hong Kong
  • The company is hoping to take its business to the next level by expanding rapidly both overseas and in China


By Yi Xi

Disruptor or merely a bothersome troublemaker?

J&T Global Express Ltd. hopes to become the former. The new kid on China’s lucrative but fiercely competitive parcel delivery block has applied to list in Hong Kong, in a deal that market watchers believe could raise about $1 billion. A successful listing would give the company, whose name means “uber rabbit” a major new cash infusion and platform for more fundraising to pursue its goal of shaking up the industry by taking on far more established players.

As its Chinese name suggests, J&T has grown as quickly as a rabbit on steroids. The company was founded just eight years ago in Indonesia, and has quickly become a leader in the Southeast Asian express delivery market.

Its founder, Li Jie, who also uses the English name Jet Li, was formerly head of the Indonesian operations for Oppo, one of China’s top smartphone brands. J&T’s initial Southeast Asian focus saw it quickly become a major presence in cities and lands from Indonesia, to Vietnam, Malaysia, the Philippines, Thailand, Cambodia and Singapore in very short order. Last year it handled more than 2.5 billion parcels in Southeast Asia alone.

But Southeast Asia was hardly enough to satisfy the ambitious Li. From there, J&T entered the Chinese market with its acquisition of Longbang Express in March 2020. A year later it spent 6.8 billion yuan ($941 million) to swallow up Best Group. With those two purchases under its seatbelt, it handled 12 billion parcels in China last year, accounting for nearly 11% of the country’s express delivery market.

In short order, J&T did what took more than a decade for China’s other express delivery giants to accomplish, securing a seat at the country’s express delivery table through its aggressive tactics. The company has raised $5 billion in nine financing rounds, and boasts a star-studded investor roster that includes Tencent, Boyu Capital, Hillhouse, Sequoia and CMB International, among others. It even found a fan among its rivals, winning over SF Express (002352.SZ) as one of its investors.

Years of loses

Such powerful backers have given J&T big bucks to spend on rapidly building up its business, even as it remains firmly in the red. According to its listing application filed earlier this month, the company’s revenue grew at “rabbit speed” from $1.54 billion in 2020 to $7.27 billion last year. But its operating costs were higher and grew equally fast, rising from $1.8 billion to $7.54 billion over that period. The result has been continual gross losses over that time.

The company posted losses of $560 million in 2021, ballooning to $6.05 billion in 2022. It drove into the black last year with a profit of $1.66 billion, but much of that was due to a $3 billion gain related to changes in the fair value of financial assets and liabilities.

In fact, J&T is a profit laggard compared with its five largest Chinese rivals. SF Express and YTO (600233.SH) both boasted gross profit margins of more than 10% last year, and ZTO Express (ZTO.US; 2057.HK) vastly outshined the others with a gross profit margin of 25.6%. Lacking any profits at all, J&T is still far behind its peers.

J&T also lags in terms of income per delivery. On that basis, YTO, Yunda (002120.SZ) and STO Express (002468.SZ) brought in average revenue of 2.55 to 2.69 yuan per delivery. ZTO’s income, excluding distribution fees, was a lower 1.4 yuan, but its cost per delivery was only 1.03 yuan. By comparison, J&T generated $0.34 per delivery in China, but at a cost of $0.40, meaning each delivery lost money.

Expansion outside China

In light of stiff competition in China, a differentiating factor for J&T could be an expansion of its non-Chinese and cross-border businesses. The company’s track record shows it has performed well in Southeast Asia and other markets, proving it can operate competitively in non-Chinese markets. Last year it further expanded into other developing markets, including Saudi Arabia, the UAE, Mexico, Brazil and Egypt.

Such markets are growing quickly. According to third-party data in J&T’s prospectus, those new markets handled a combined total of nearly 3.1 billion express parcels last year, and the figure is expected to grow to 7.14 billion parcels by 2027.

The cross-border e-commerce market in Southeast Asia and China is also growing rapidly, expected to reach $605.2 billion this year and climb to $1.26 billion in 2027, according to the prospectus. That boom is expected to fuel a concurrent boom in the cross-border logistics market, which is expected to grow from $456.1 billion this year to $680.7 billion in 2027.

All this shows that non-Chinese and cross-border express delivery services still hold huge potential, potentially providing an opening for J&T to make a great leap forward past its rivals.

Grabbing customers with ads, bargains

As for China, it’s probably safe to say that J&T won’t settle for a role as second fiddle to the market’s current leaders. The company has already shown it has the potential to shake things up in an established industry. We can probably expect to see some of its old tricks in the future, potentially setting off a new wave of cut-throat competition just as the market regained some stability following an earlier life-and-death struggle sparked by J&T shortly after its entry to China.

Let’s not forget that J&T is quite aggressive, especially with its relentless advertising and promotion. During last year’s World Cup in Qatar, it spent lavishly to hire Argentine football legend Lionel Messi as its brand spokesperson. It spent similarly big bucks to be named as official logistics industry sponsor for this year’s CCTV Spring Festival Gala, the world’s most-watched TV show broadcast on Lunar New Year’s Eve.

Such tactics helped J&T to go from zero to handling 20 million parcels per day in just 10 months after its entry to China, a feat that took 16 years for ZTO and 25 years for STO.

J&T’s aggressive tactics after entering China made the others sit up and take note as it sent shock waves through the industry by launching a brutal price war. In the end, the nation’s market regulator stepped in, leading J&T to tone down its aggression.

While the government’s intervention may have stolen some of J&T’s thunder, such disruptors are still disruptors, and may use alternate strategies to launch new offensives as they grow stronger. Let’s not forget that J&T founder Li Jie once sent a letter to his Chinese agent in 2020, saying his company would one day make history by becoming one of China’s top three express delivery companies. With that kind of attitude, how could J&T ever be satisfied with its current ranking as the nation’s sixth-largest courier?

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