According to the latest earnings report, Alibaba plans to spin off its logistics subsidiary, Cainiao, and it has successfully turned its losses into profits in the second quarter. As a result, it is expected that Alibaba's market value will reach 200 billion yuan.

With Cainiao submitting its IPO application, the company has become the first business group to officially enter the IPO process after Alibaba announced its "1+6+N" strategy.

More importantly, Cainiao is expected to become the leading logistics company in the Hong Kong stock market, with a current valuation of approximately 200 billion yuan, far surpassing JD Logistics.

The world's leading cross-border e-commerce logistics company

Based on parcel volume in 2022, Cainiao Logistics is the world's leading cross-border e-commerce logistics company, with a market share of approximately 8.1%, leading the second-place company by about 2.6 percentage points. It also has one of the largest logistics networks in terms of geographical coverage.

In the 2023 fiscal year, the total number of cross-border parcels exceeded 1.5 billion, serving over 100,000 merchants and brands.

Cainiao stated that the funds raised this time will be mainly used for developing international logistics services, expanding domestic logistics networks, and research and technological innovation.

Alibaba stated that the spin-off will better reflect the value of Cainiao Group itself and improve its operational and financial transparency, enabling investors to separately evaluate the performance and potential of Cainiao Group and Alibaba Group.

Cainiao turns losses into profits

According to the financial report, in the fiscal years 2021-2023, Cainiao's revenues were 52.733 billion yuan, 66.867 billion yuan, and 77.8 billion yuan, respectively, while the net losses for the same period were 2.015 billion yuan, 2.286 billion yuan, and 2.801 billion yuan.

As of June 30, 2023, in the three months, Cainiao's revenue was 23.164 billion yuan, and net profit was 288 million yuan, achieving a turnaround from losses to profits.

As one of the indicators measuring the efficiency of the logistics industry, Cainiao's fulfillment costs in the fiscal years 2021-2023 were 40.933 billion yuan, 51.747 billion yuan, and 59.719 billion yuan, accounting for 77.6%, 77.4%, and 76.8% of the current revenue, respectively.

In the fiscal years 2021, 2022, and 2023, as well as the three months ending on June 30, 2023, revenue from Alibaba Group, the largest customer, accounted for 29.2%, 30.8%, 28.2%, and 29.7% of the total revenue for each period, respectively.

Valuation of 200 billion?

What is the true value of Cainiao Logistics?

In 2019, Cainiao completed its most recent round of strategic financing, with Alibaba investing 23.3 billion yuan and acquiring a 12% stake. Based on the equity conversion, Cainiao was valued at approximately 200 billion yuan at that time.In addition, according to the 2023 Hurun Global Unicorn List, Cainiao has entered the top ten globally, with an estimated valuation of about 185 billion yuan.

Among the logistics companies that have already been listed in China, SF Holdings has a market value of 200 billion RMB, ZTO Express has a market value of over 150 billion Hong Kong dollars, and JD Logistics has a market value of only 64 billion Hong Kong dollars, a decrease of 80% from its initial listing.

In terms of equity ownership, Alibaba Group is the largest shareholder, holding approximately 10.7 billion shares. After the spin-off, Alibaba will continue to hold over 50% of Cainiao's shares, and Cainiao will remain a subsidiary of Alibaba.

The board of directors of Cainiao consists of eight directors, including two executive directors, three non-executive directors, and three independent non-executive directors. Among them, Alibaba's Cai Chongxin serves as the chairman of the board, and other members include Dai Shan, Jiang Fan, Wan Lin, and other Alibaba executives.