New stock preview | Fengchao Holdings, the world's largest operator of intelligent express cabinet networks: After three years of cumulative losses of 3.8 billion yuan, it achieved a turnaround.

After three years of losses totaling 3.8 billion yuan, this year's profit achieved a swift listing in Hong Kong. The world's largest operator of intelligent express lockers, Wang Wei's Fenchau Holdings, is going public? It is understood that Fenchau Holdings recently submitted an application for listing to the Hong Kong Stock Exchange, with Huatai International as the exclusive sponsor. According to disclosures, Fenchau Holdings is a leading provider of end-to-end logistics solutions in China and globally, with the largest market share in China at 6.1% by revenue in 2023. As measured by the number of lockers and parcel volumes, it is the largest operator of intelligent express lockers in the world. The controlling shareholder of Fenchau Holdings is Wang Wei, who holds nearly 40% of the shares through S.F. Holding (55.27%) and Mingde Holdings (99.9%). If the company successfully goes public, it will become the fifth S.F.-related listed company after S.F. Holding, SF REIT, KERRY LOG NET, and SF INTRA-CITY. In fact, the company's decision to go public in Hong Kong this year may be related to pressure from its shareholders. In January 2021, the company introduced Zhi Xin Capital, Sequoia China, All-star Investments, Asia Investment Capital, and Hongwei Capital as ordinary shareholders in the B-4 round of financing and signed a pre-listing agreement requiring shareholders to exercise the redemption right within one month after January 27, 2025, if the company does not meet the listing requirements at the end of the investment period. As a financial investor, listing the investment target is the quickest and highest-return way to exit. However, the Hong Kong stock market is a value investment market, and whether Fenchau Holdings can achieve a high premium depends on its fundamentals. Profit improvement, turning losses into profits in 2024 It is understood that Fenchau Holdings has a large network of intelligent express lockers, with 330,200 sets of Fenchau smart lockers and a total of 29.9 million compartments as of May this year, covering 31 provinces in China and Thailand. With the advantage of intelligent lockers layout, the company provides three major services: end delivery for courier, e-commerce platforms, consumers, and enterprise customers. In 2023, the company's revenue was 3.812 billion yuan, with a compound annual growth rate of 22.8% over the past three years. In the first five months of 2024, revenue reached 1.904 billion yuan, a year-on-year increase of 33.7%. While the company's revenue has maintained double-digit growth, its profit...Advertisers provide access to target audiences, dabble in the advertising industry, and as of May 2024, the company has served 6000 advertisers from 35 industries. The revenue from value-added services fluctuates, and profitability is also unstable.The consumer smart delivery service is specifically designed for consumers to have their packages delivered to our Fengchao smart lockers for courier pickup and delivery. It can be classified as e-commerce return and exchange services as well as personal single-item shipping services, with e-commerce return and exchange services being the core business and experiencing rapid growth. From 2021 to 2023, the company's parcel delivery volume increased from 19 million to 134 million, with a compound annual growth rate of 165.6%. The pickup rate for this business has exceeded 97% every year, reaching 99.7% in the first five months of 2024. The high service quality has led to a simultaneous increase in both quantity and price, with the average shipping revenue per package rising by 233.6% from 2021 to 2023, with a compound growth rate of 82.6%. In the first five months of 2024, the revenue per item increased to 6.1 RMB. However, as mentioned earlier, the gross profit margin for this business is on a downward trend primarily due to the continuous increase in distribution costs, which is expected to improve as the scale continues to grow. Industry growth is slowing down, with the possibility of companies going public for "exit demand." In terms of the industry, the Chinese express delivery industry market size has maintained a double-digit growth rate, with the market size reaching 1.441 billion parcels in 2023 and a compound annual growth rate of 20.5% over the past five years, with even higher growth in the end-to-end logistics solutions market. In 2023, the market size for end-to-end logistics solutions was 943 billion parcels, accounting for 65.4% of the market share, with a compound annual growth rate of 32% over the past five years, with end-to-end shipping experiencing a growth rate of 52.1%. The end-to-end logistics solutions market is highly fragmented, with the top five providers in terms of revenue in 2023 holding a total market share of 14.6%, with Fengchao Holdings having the highest market share at 6.1%, which is 2.1 percentage points higher than the second-place provider. Despite being a leader in the industry, the company's performance growth is significantly lower than the industry average. In terms of business, both express end shipping and value-added services fall below the industry average by 19.67 percentage points and 30.1 percentage points, respectively. According to Tencent data, the industry's growth rate is expected to significantly slow down in the next five years, with the compound annual growth rate in the end-to-end logistics solutions market dropping to 12% from 2023 to 2028, a decrease of 20 percentage points. Facing future growth pressure in the industry, it will be challenging for Fengchao Holdings to maintain steady growth in end-to-end shipping and value-added services, especially in end-to-end distribution where competition is fierce, delivery prices are trending downward, and growth is pessimistic. One of the main highlights for Fengchao Holdings is their consumer smart delivery services, but whether the trend of "quantity and price rise" can be sustained remains to be seen. This may result in business income not being able to maintain a high growth trend, and with high distribution costs, any decrease in factors will further weaken profits and reduce profitability. However, as a leader in the industry, with an absolute advantage in end facilities networks, the company may explore more revenue opportunities to support the sustainable development of its end-to-end logistics ecosystem. Overall, Fengchao Holdings is not short of funds, with a manageable debt ratio, low interest-bearing debt ratio, and sufficient cash reserves. The probability of this IPO being pressure for a bet agreement is high, but it is not unreasonable. Financial investors aim to go public for an exit strategy to achieve high returns. However, the company's fundamental expectations are relatively flat, with growth slowing in its two core businesses and visible scale bottlenecks. Although profitability was achieved in the first five months of 2024, there is still pressure to be profitable in the second half of the year. Hong Kong stock investors are mostly rational investors, and with the expectation of "going public for exit," the company may not achieve a satisfactory valuation level.