Wen 丨 Joy
Source 丨Tou China Network
On December 14, 2021, after 6 months of waiting, SF Tongcheng successfully landed on the Hong Kong stock market as the "first share of instant logistics". The issue price is HK$16.42 per share, which falls below the lower limit of the previously announced issue price range, and the net proceeds are expected to be HK$2,031 million, with an additional proceed of HK$313 million if the over-allotment option is exercised. As of press time, the share price was HK$14.8 per share and the market value was HK$13.8 billion.
Established as a business unit of SF Holdings in 2016, to spin off and become independent in 2019, and then to complete the IPO in 2021, SF Tongcheng spent five years to bring Wang Wei the fourth IPO in his life after SF Holdings, SF Real Trust and Kerry Logistics.
But compared to 2016, when it was born, today's business trends are very different. The biggest question is that the O2O tide has faded, platform-based enterprises are no longer hot, and whether the capital market can still recognize the story of same-city delivery?
The annual revenue is 3 billion yuan, and 1.07 billion orders are sent
There is a sentence in SF Tongcheng's prospectus that is very meaningful: "The instant delivery service platform under the centralized platform mainly serves the merchants registered on the centralized platform to help the consumers of the centralized platform deliver, while the third-party instant delivery service platform undertakes orders for the non-related system." According to iResearch, we have rapidly grown into the largest third-party instant delivery service platform in China. ”
The translation is that SF Tongcheng has drawn a line between itself and the instant delivery platforms such as Dada, Hummingbird, and Meituan Special Delivery. Dada backs jd.com, hummingbird backs Alibaba, Meituan delivery itself is an inseparable part of Meituan, and SF Tongcheng shouts "We are not the same."
According to the financial report data released by SF Tongcheng, during the period from 2018 to May 2021, the company's operating income was 993 million yuan, 2.108 billion yuan, 4.845 billion yuan and 3.046 billion yuan, with a year-on-year increase of 112% and 129% in 2019 and 2020, and the corresponding annual order volume from 2018 to May 2021 was 79.8 million, 211 million, 761 million and 1.070 billion, respectively, with a compound annual growth rate of 208%.
On the books, this is a high-growth young enterprise, which belongs to the story that the capital market likes. But if you look closely at the prospectus, you will find some clues.
For example, according to the prospectus data, as of now, SF Tongcheng has not achieved profitability. In 2018, 2019, 2020 and the first five months of 2021, the net losses of SF Tongcheng were 328 million yuan, 470 million yuan and 758 million yuan and 353 million yuan, respectively, and the corresponding gross profit margins were -23.3%, -16.0%, -3.9% and -0.9%, respectively.
At the same time, in the five months ended May 31, 2018, 2019 and 2020, SF Tongcheng accounted for 67.8%, 67.1%, 61.2% and 61.1% of the total revenue of the same period, respectively, and in 2018, 2019, 2020 and the five months ended May 31, 2021, the revenue from SF Holdings accounted for 2.9%, 13.1%, 33.6% and 38.6% of the total revenue of the same period, respectively.
That is to say, since 2020, the biggest customer of SF Tongcheng has always been its largest shareholder, SF Group. Although it is not backed by business flows, if there is no order support from major shareholders, its revenue growth rate will be greatly reduced.
According to the average revenue per order, the single order of SF in the same city is only 2.85 yuan, while the revenue per order of the competitor Dada Group for the whole year last year has reached 5.19 yuan. The attribute of "decentralization" does not seem to allow SF to obtain better bargaining power.
5 rounds of financing in 2 years, Alibaba as the cornerstone investor
The good news is that the "decentralized" attribute of SF Tongcheng is still rising channels.
In the 12 months ended May 2021, the platform's revenue was 3.046 billion yuan, with a total of 1.07 billion orders, corresponding to 220,000 active merchants and 7.5 million active consumers. On average, each active merchant corresponds to 4863.6 orders, and each active consumer corresponds to 142.7 orders. In 2018, the two figures were 61384.6 and 1946.3, respectively. It can be seen that the source of orders and downstream demand in SF's same city are rapidly dispersing. Perhaps in the future, the "decentralized" attribute can bring better profitability to the platform.
According to Tianyan, SF Has completed a total of five rounds of financing in the same city, and there are many star shareholders such as SAIFU Investment, BAI Capital, CITIC Capital, Himalaya Investment, Trusttrust Capital, and Legend Capital. But the most notable of these is undoubtedly its cornerstone investor, Alibaba.
According to the announcement, Taobao China Holdings Limited subscribed for HK$851 million, at a minimum offer price of HK$16.42, corresponding to a number of shares of 5.1844 million shares, assuming that the over-allotment option is not exercised, which accounts for approximately 5.55% of the issued share capital. Hello Travel, which is also an Ali family, also subscribed for HK$38.79 million, corresponding to 2.36 million shares.
In addition, Wang Wei controls a total of about 64.54% of the shares of SF Tongcheng through SF Tyson and other companies.
On the same day as the completion of the investment, Halo Travel also announced that it has reached a strategic cooperation with SF Tongcheng to jointly build a two-wheel electric vehicle power exchange "new infrastructure" to continuously improve the city's convenient service capabilities. Yang Lei, CEO of Hello Travel, said publicly that the company is currently vigorously developing innovative business in the field of local life based on the traffic chassis of the travel business, and through this cornerstone investment, the two sides will reach closer cooperation in the fields of power exchange infrastructure, intelligent hardware, and local life.
Hello Travel is committed to building China's largest two-wheeled electric vehicle basic energy network, and SF Tongcheng's main business is inseparable from electric vehicles, and the two sides seem to be a match made in heaven. But this can't help but make people wonder, is the "third-party distribution" mentioned in the prospectus a true proposition or a false proposition? Of course, Ali, which already has hummingbird delivery and point-and-click delivery, will also be a big question about whether there will be a commercial tilt in SF in the same city.
Is it a good business to do a loss- and instant delivery?
The business model of the instant delivery business is actually very fragile.
Looking only at the data of SF Tongcheng, from 2018 to 2020, the labor outsourcing costs of SF Tongcheng and the welfare expenses of employees of SF Tongcheng were 1.198 billion yuan, 2.377 billion yuan and 4.921 billion yuan respectively, compared with the revenue of 993 million yuan, 2.108 billion yuan and 4.845 billion yuan in the same period, and the proportion of labor costs to operating costs was 97.8%, 97.3% and 97.8% respectively.
That is to say, the scale effect of the current business model of SF Tongcheng is quite low. After all, the rider's salary is settled on a single basis, and the expansion of the scale and amount of the order does not significantly reduce the cost of hiring a rider. Rival Dada faces the same problem, with the company failing to turn a profit since 2017.
Platform companies also have a story of network effects to tell - more single volumes can attract more riders, thereby improving the operational efficiency of the entire platform. However, from the perspective of the overall pattern of the industry, the instant delivery platform with business flow has an absolute advantage in terms of business volume.
According to iResearch's 2019 data, Meituan's distribution market share is the first, Hummingbird + point I reach the second, Meituan's distribution market share is 47.2%, Hummingbird + point I da market share is 20.7%, Xindada market share is 4.1%, and SF's same city share is only 1.2%. At this point, SF does not seem to have an advantage in the same city.
The good news is that in the anti-monopoly environment, head players dare not easily seize market share through mergers and acquisitions, subsidies and other means, in an attempt to achieve absolute monopoly position, which also gives small and medium-sized players such as SF Tongcheng and Dada the space to increase their market share. Coupled with the rapid growth of catering takeaway and new retail demand, the ceiling of SF's same city seems to have not yet arrived.
The question is, can the increase in revenue translate into an increase in profitability? If instant delivery is destined to be an unprofitable business, why are the giants still scrambling to enter the game?
An investor focusing on the logistics industry told China Investment Network: "To understand the business of instant delivery, we must not only look at the profitability point of view, but also from the strategic level. In terms of profitability, a simple single amount stacking cannot improve the profitability of the platform, but when the single volume is dense enough and the rider's full load rate increases, the bargaining power of the platform for the rider will continue to increase, and eventually reduce its own cost without reducing or even increasing the rider's unit time income. More important is the strategic value of the immediate distribution business. For super platform companies such as Meituan, that is, equipped with such high-frequency services is the infrastructure to ensure the traffic of their platforms, even if they lose money, they must do it. With the ability to distribute, you can not only hit competitors in vertical fields, but also facilitate your own cultivation of new business. For integrated third-party logistics enterprises such as SF, terminal distribution is also an indispensable link. For third-party logistics companies, the most important thing is to accumulate end-of-line consumer data through ready-to-deliver business, feed back their own middle-office systems, and then better serve B-end customers. ”
In this way, it seems that the matching is a business that does not see profitability in a short period of time. SF Tongcheng also bluntly said in the prospectus that the loss may continue for 3 to 5 years. Giants are of course willing to spend thousands of dollars on their strategic demands, but whether investors are willing to pay for it or not is verified by the market.