In the era of digital bills, the majority of small, medium and micro enterprises have thousands of business scenarios, which has also evolved a variety of billing needs, and the digitalization of finance and taxation has ushered in development opportunities. According to the Frost & Sullivan report, the size of China's digital finance and tax-related transactions increased from 3.7 billion yuan in 2018 to 5.9 billion yuan in 2022, with a compound annual growth rate of 12.4%. It is expected to reach $19.3 billion in 2027, growing at a CAGR of 26.7% from 2022 to 2027.
Under the development of the industry, as the leader of the digital track of finance and taxation, Baiwang passed the listing hearing on the main board of the Hong Kong Stock Exchange on June 26, with Haitong International as its sole sponsor.
Tianyancha shows that before listing, Baiwang shares have experienced six rounds of financing, and the disclosed transaction amount has accumulated more than 1.517 billion yuan. The investors behind it include Jiuzhao Fund, Shanghai Volkswagen, Fosun Group, Fosun Yuan Innovation Capital, Shenzhen Capital Group, Oriental Fuhai, Guozhong Capital, Alibaba, Watertek Information and many other well-known institutions.
According to the prospectus, as of the latest practicable date, Chen Jie, the founder of Baiwang shares, held 27.10% of the shares, and he held 16.12% of the shares through the interests of the controlled corporation. The company's second largest shareholder, Alibaba, holds 11.87% of the shares, and Alibaba Group Holding Limited holds 11.87% of the shares through the controlled corporate interest.
According to Zhitong Financial APP, although as an industry leader, Baiwang shares are still struggling in the quagmire of losses, why is this? This article will answer this question by breaking down the prospectus.
The cumulative loss in three years is about 1 billion yuan
According to the prospectus, since its establishment in 2015, Baiwang Cloud has always focused on providing digital solutions for enterprises, and through its unique Baiwang Cloud platform, it has brought SaaS financial and tax digitalization and data-driven intelligent services to enterprises. It is worth mentioning that Baiwang Cloud cooperated with Taobao in 2016 to jointly create the "Ali Invoice Platform". In 2023, the two parties will further deepen their cooperation, and Taobao will grant Baiwang Cloud the right to the online invoice platform under the "Ali Invoice Platform" brand, making it a tax service provider on the platform.
In terms of revenue, it ranked first in China's cloud-based digital market for financial and tax-related transactions with a market share of 7.1% in 2023 and ranked second in China's digital market for financial and tax-related transactions in terms of revenue with a market share of 4.9% in 2023.
In 2023, through the company's cloud-based solutions, Baiwang Co., Ltd. completed approximately 700 million invoice processing requests, ranking first among digital solution providers for finance and tax-related transactions in China, issuing approximately 2.6 billion VAT invoices, ranking second among digital solution providers for finance and tax-related transactions in China, and in addition, the company ranked second in China's transaction-related big data analytics market for financing small and micro enterprises in terms of revenue, with a market share of 6.4%.
The advantage of business scale, reflected in the financials, is the gradual growth of revenue. From 2021 to 2023 (hereinafter referred to as the reporting period), the company's total revenue will be about 454 million yuan, 526 million yuan and 713 million yuan respectively. Despite the good revenue figures, the company's earning power is not as good as it could be. During the same period, the company continued to lose money, about 448 million yuan, 156 million yuan and 359 million yuan respectively, with a cumulative loss of 963 million yuan in three years.
The referral fee is nearly 200 million yuan a year
In terms of business, the company can be divided into four parts: cloud-based financial and tax digital solutions, data-driven analysis services, local financial and tax digital solutions, and others. During the period, the revenue of cloud-based financial and tax digital solutions was RMB157 million, RMB158 million and RMB220 million respectively, accounting for 34.5%, 30.1% and 30.8% of the total revenue respectively. data-driven analytics services amounted to RMB179 million, RMB264 million and RMB352 million respectively, accounting for 39.4%, 50.1% and 49.4% of total revenue, respectively. The local deployment of financial and tax digital solutions was approximately RMB111 million, RMB93.491 million and RMB138 million respectively, accounting for 24.3%, 17.8% and 19.4% of total revenue, respectively. Others account for a smaller proportion of revenue, accounting for about 0.4% by the end of 2023.
In short, the proportion of data-driven analytics services revenue continues to rise, becoming the largest business of Baiwang shares. The business includes digital precision marketing services and risk management services. Among them, digital precision marketing services are to help financial institutions promote credit products related to the financing of small and micro enterprises; The risk management business is based on its own invoice and financial data assets to provide licensed financial institutions with small and micro enterprise business reporting services, user analysis services, risk analysis services, etc., and provide risk control decision-making basis for financial institutions to lend.
In other words, this part of Baiwangyun's business is actually a loan for small and micro enterprises. Benefiting from the regulatory requirements of banks and other financial institutions in the past few years to move from virtual to real and practice inclusive finance, the credit of small and micro enterprises has ushered in a wave of rapid growth driven by policies. It is not surprising that nearly 60% of Baiwangyun's revenue comes from small and micro enterprise loan income.
According to data recently released by the People's Bank of China, the balance of inclusive small and micro loans in mainland China at the end of 2023 was 29.4 trillion yuan, a year-on-year increase of 23.5%. This is beneficial for Internet platforms with small and micro customer groups. For banks that want to expand their small and micro businesses, relying on self-operation to expand customers is costly and long, while financial and tax platforms such as Baiwang, Kingdee, and Chanjet have mature customer bases, which can help banks achieve accurate customer acquisition.
However, the problem is that the platform mainly conducts business through agents, and the traffic is not in their own hands. Under the fierce market competition, Baiwang had to continue to increase the rate of marketing agents to continue to deepen the cooperation with marketing agents.
As a result, despite the continued growth of Baiwang Cloud's business, referral fees remained high, resulting in overwhelmed profitability.
During the period, the Company's gross profit margin was 47.6%, 40.8% and 39.6% respectively, which continued to decline. Specifically, the decline in the gross profit margin of the data-driven analytics services business, from 50.9% in 2021 to 35.4% in 2023, dragged down the company's overall gross margin performance.
According to the company, this is mainly due to the large referral fees incurred by the company to expand the business scale of digital precision marketing services and continue to engage marketing agents. During the reporting period, the company's referral fees were 64.2 million yuan, 154 million yuan and 193 million yuan respectively, accounting for 26.9%, 49.4% and 39.1% of the total cost of sales in the same period.
The gross profit margin of Baiwang's largest business has declined seriously, resulting in the continuous deterioration of the company's profitability. The business model leads to high transfer fees, and its earning power has been slow to improve.
Not only that, but the cash flow of Baiwang shares is also becoming more and more tight. During the reporting period, the company's net cash generated by operating activities was -13.989 million yuan, -64.276 million yuan and -99.330 million yuan respectively, with continuous net outflow of cash flow and insufficient "hematopoietic" ability. At the same time, the company's cash holdings are also gradually shrinking, and the company's cash and cash equivalents at the end of the same period were 273 million yuan, 505 million yuan and 237 million yuan respectively. To make matters worse, the company still has $1.545 billion in current liabilities to repay.
It can be seen that the primary task facing Baiwang shares is to turn losses into profits and improve the dilemma of insufficient cash flow. If it continues to lose money, capital tends to "vote with its feet".