China's express delivery firms tap capital market

BEIJING - Deppon Logistics has been given the green light for an Initial Public Offering (IPO) on the Shanghai Stock Exchange, joining a list of domestic express logistics giants that have gone public to upgrade the booming sector.

According to its IPO prospectus, the company will issue no more than 150 million shares to raise 2.98 billion yuan ($458 million) to build branches and buy new vehicles and equipment.

Deppon became the 7th private express logistics firms to go public, along with STO Express, YTO Express, ZTO Express, Shanghai Yunda Express,Best Inc and SF Express, which have already debuted on Chinese and overseas exchanges.

With the help of the capital market, private courier companies can upgrade, increase investment, widen their global networks and improve services, said Xu Yong, a senior consultant for the courier industry.

China has about 19,000 courier companies, most of which are vulnerable small businesses in a fragmented market. Capital inflow is revving up competition and forcing out players.

After going public, SF Express and YTO Express saw Q3 revenue increase 23.18 percent and 17.31 percent year-on-year, respectively, to 17.665 billion yuan and 4.656 billion yuan.

Express delivery companies still face many challenges, including weak profitability, said Xu Yong, noting that companies should have targeted development and build a standardization system.

China's express delivery services have experienced rapid growth in recent years on the back of the country's e-commerce boom.

A total of 35.86 billion parcels were delivered in the first 11 months of 2017, up 28.6 percent year-on-year. The sector generated 443.74 billion yuan in revenue during the period, up 25.2 percent year-on-year, according to the State Post Bureau.

By 2020, China expects to become the world's largest express delivery market with a business revenue of 800 billion yuan.