In a notable move that reflects the ambitious spirit of JD Group, the industrial arm of JD.com has recently renewed its efforts to go public in the Hong Kong stock marketThis new IPO endeavor comes after a hiatus of 18 months, signaling JD Industrial's intention to capitalize on its robust performance and the growing demand for industrial procurement services in China.

JD Industrial, officially established as an independent business unit of the JD Group in 2017, has rapidly ascended to become a leading player in China's maintenance, repair, and operations (MRO) procurement services sectorThe company has drawn significant investor interest, successfully raising around $635 million over the last three years, thanks in large part to its impressive growth trajectory.

As described in their recently updated prospectus, JD Industrial positions itself as a technology and service provider within the industrial supply chain landscape

By leveraging smart industrial supply chain infrastructure, the firm connects suppliers and customers through various services such as standardizing products, managing inventory efficiently, and enabling digital procurement processes.

With the global trend of digital transformation sweeping across industries, JD Industrial's focus on MRO products—non-production industrial supplies—has placed it at the forefront of China's industrial supply chain technology marketAccording to findings from a consulting firm, JD Industrial dominated the domestic MRO procurement market in 2023, boasting a transaction volume that was double that of its nearest competitor and capturing approximately 4.1% of the entire Chinese industrial supply chain technology and service market.

In terms of its revenue breakdown, JD Industrial's income largely derives from product sales, which comprise over ninety percent of its total earnings

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This includes general MRO items, specialized MRO products, and bill of materials (BOM) productsIn contrast, service income is generated through fees from third-party merchants on its trading platform, advertising services, and technologies provided to clients.

Between 2021 and 2023, JD Industrial experienced remarkable growth, with its revenue escalating from approximately 10.3 billion yuan ($1.5 billion) in 2021 to around 17.3 billion yuan ($2.4 billion) in 2023. During the same period, its adjusted net income also surged, achieving a compound annual growth rate (CAGR) of 42.9%. Early indicators from the first half of 2024 suggested continued growth, with a 20.3% year-on-year increase in revenue.

However, as JD Industrial endeavors to strengthen its market position, some challenges loomThe company’s gross profit margin has seen a slight decline, dropping from 18.6% in 2021 to around 16.9% in the first half of 2024. This decrease can be attributed to the low gross margin of product sales, which hovers around 11%, in stark contrast to the impressive 96% margin from service revenue.

Backed by the vast resources of JD Group, JD Industrial's financial backing has attracted significant capital inflows, which support its growth and expansion initiatives

The company has seen several rounds of funding, including a notable $230 million Series A financing in August 2020, followed by additional fundraising rounds that cumulatively reinforced its financial standing.

The newly proposed IPO aims to gather additional capital to further enhance its capabilities within the industrial supply chain, facilitate geographic expansion, explore strategic investments and acquisitions, and address general corporate purposes including operational needs.

As JD Industrial moves forward, it remains intrinsically tied to the overarching ecosystem of JD Group, from which it receives vital support in achieving its business objectivesThe revenue derived from JD Group continues to represent a significant portion of JD Industrial’s income, highlighting the collaborative synergy between the two entitiesFor example, in the recent fiscal period, revenue linked to JD Group accounted for nearly half of JD Industrial’s total income.

After launching its IPO application, JD Industrial faced scrutiny regarding its independence, control structures, and capital allocation strategies

Before this IPO, JD Group maintained a controlling stake of approximately 77.32%, with the Group's founder, Liu Qiangdong, holding a minority interest through a subsidiary.

As part of JD Industrial's management transition, Liu Qiangdong has taken a step back from daily operations, delegating leadership responsibilities to Song Chunzheng, who has been with JD Group since 2013 and currently serves as CEO, steering the firm towards new horizons.

This public offering does not exist in isolation; it forms part of JD Group’s broader portfolio strategyOn the same day that JD Industrial initiated its prospectus, JD Digits, another subsidiary, also submitted its application for public listing, although progress on that front remains to be seenJD Group's initial foray into the market dating back to 2004, culminating in its U.SNASDAQ listing in 2014 and subsequent dual listing in Hong Kong in 2020, showcases a long-term vision that has been realized through careful planning and execution