New Stock Outlook | Gan Yuan Weike: Coal Intelligent Logistics New Model, Financial Situation Shows "Red Light"

Our country's coal industry landscape has shifted to "dominance in the central and western regions, focusing on the Shanxi, Shaanxi, and Inner Mongolia regions." Some original production areas have become net coal importing provinces, with a large amount of coal relying on inter-provincial transportation, leading to increasing conflicts in the transportation process. "At the high demand stage, railway capacity cannot meet all needs." China Electricity Council predicts that with nearly half of coal relying on inter-provincial transportation, there will be bottlenecks in peak transportation capacity. It is recommended to optimize relevant mechanisms, focus on solving issues such as misalignment of transportation flow, and strengthen transportation coordination and performance supervision. Against the backdrop of increasing demand for transportation capacity, one Chinese comprehensive coal logistics service provider committed to providing modern, intelligent, and environmentally friendly services, Ganyuan Weike Holdings Co., Ltd. (hereinafter referred to as Ganyuan Weike), submitted an application to the Hong Kong Stock Exchange's main board market on December 13, with CCB International as its exclusive sponsor. According to ZHUOSHI Consultancy's data, Ganyuan Weike is a major non-medium-term coal comprehensive logistics service provider in China, with revenue scale in 2023 ranking first in Shaanxi Province and second in the northwest region of China. Through the Ganyuan Weike prospectus, on one hand, it provides us with a window to observe the coal logistics industry; on the other hand, through the deep application of digital platforms, Ganyuan Weike may provide a transformation example for the industry's intelligentization. Financial roller coaster Red flags in financial condition The prospectus shows that Ganyuan Weike was established in 2015 as a coal logistics comprehensive service provider committed to providing modern, intelligent, and environmentally friendly coal logistics services for participants in the coal industry. As of June 30, 2024, Ganyuan Weike has four collection and transportation stations, including its own Hongdong Haoqiang collection and transportation station, the leased Shiyao Dian collection and transportation station, and two collection and transportation stations that flexibly use resources through agreements with operators of related collection and transportation stations: Shanxi Coal Intelligent Logistics Park and Inner Mongolia Wuziwan collection and transportation station. Through these collection and transportation stations, Ganyuan Weike effectively covers more than 30 coal mines. For the fiscal year 2021, 2022, 2023, and the six months ended June 30, 2024 (hereinafter referred to as the reporting period), Ganyuan Weike's revenue was approximately RMB 2.721 billion, RMB 4.524 billion, RMB 3.738 billion, and RMB 1.795 billion respectively. During the same period, the company's annual net profits were approximately RMB 32.331 million, RMB 165 million, RMB 47.003 million, and RMB 18.773 million. In short, the company's revenue and profit trends showed an initial increase followed by a decrease, resembling a roller coaster. In terms of profitability, the company's gross profit margin for the period was 3.5%, 7.5%, 3.6%, and 3.9%, respectively, while the net profit margin was 1.2%, 3.7%, 1.3%, and 1.0%. Overall, the company's profit margins are thin and unstable, making it difficult to make a decent profit. From a business perspective, Ganyuan Weike's revenue mainly comes from three major business segments: comprehensive coal logistics services, specialized coal logistics services, and value-added coal logistics services. Among them, comprehensive coal logistics services are the company's main business, with revenues of RMB 2.257 billion, RMB 3.727 billion, RMB 3.043 billion, and RMB 1.343 billion during the period, accounting for 82.9%, 82.4%, 81.4%, and 75% of total revenue, respectively, showing that this business segment contributes about 80% of revenue. However, due to a net profit margin of only 1%, the total net profit was only RMB 0.32 billion, RMB 1.65 billion, RMB 0.47 billion, and RMB 0.19 billion. It is worth noting that Ganyuan Weike is heavily dependent on its main customers. During the period, the top five customers contributed 71.8%, 57.9%, 80.7%, and 71.7% of total revenue for the same year/period, respectively. In addition, during each period of past records, the single largest customer of the year/period contributed 23.7%, 23.0%, 50.4%, and 32.1% of total revenue. About 80% of revenue comes from the top five customers, and even in 2023, half of the revenue comes from a single customer. This weakens the company's bargaining power and leads to an increase in trade receivables. During the period, the company's trade and bills receivable were RMB 0.471 billion, RMB 0.436 billion, RMB 0.517 billion, and RMB 0.598 billion. More worrying is that the company's operating cash flow has been negative and sharply declining. During the period, it was RMB 8.791 million, -RMB 41.512 million, -RMB 4.876 million, and -RMB 32.124 million; the ending cash and cash equivalents were RMB 1.01 billion, RMB 1.38 billion, RMB 1.24 billion, and RMB 37.67 million. If cash flow continues to be negative, the company's cash and cash equivalents may become unsustainable, especially in the case of a sharp increase in trade receivables. Of concern is Ganyuan Weike's long-term debt repayment ability. During the period, the company's asset-liability ratio was 82.8%, 71.4%, 67.7%, and 68.8%, which, although declining, still remains at a high level. Ganyuan Weike's current liabilities reached RMB 0.309 billion in the first six months of 2024, while its non-current liabilities totaled RMB 0.668 billion, bringing the total debt to nearly RMB 1 billion. Of these, interest-bearing bank and other borrowings in non-current liabilities amounted to as high as RMB 0.574 billion. With cash and cash equivalents of less than RMB 40 million, Ganyuan Weike's liquidity has raised red flags, making the desire for IPO financing more urgent. Coal logistics "shifting to rail" Intelligentization empowerment may become a new focus An important means of reshaping the coal logistics landscape is the shift to rail, or more precisely, multimodal transport. Coal logistics is an industry with inherent multimodal transportation attributes, and multimodal transport is an important means of solving cost and efficiency issues and a threshold that cannot be bypassed by coal logistics. In the future, the comprehensive transportation network layout will "focus on railways" as the main backbone, which will undoubtedly further promote the adjustment of transportation structure. The coal logistics system based on railway transportation as the core, multimodal transport as the link, and water and land transport as the two wings will be formed. As the coal industry increasingly uses railways for external coal transportation, the dependence on railway collection and transportation stations is growing. Therefore, coal logistics companies that can access these resources have significant growth potential. From an industry perspective, the market size of non-long-term coal logistics services has increased from RMB 709.4 billion in 2018 to 2023.The RMB 928.7 billion, with a compound annual growth rate of 5.5%. With the stable growth of downstream market demand and the continuous improvement of the value of non-long-term coal logistics services, it is expected that the market size will reach RMB 1.21 trillion by 2028, with a compound annual growth rate of 5.4%.Participants in the non-long-term coal logistics service industry are mainly privately owned enterprises. Companies with state-owned backgrounds benefit from stable upstream coal supply or downstream customer resources, giving them unique business conditions compared to private enterprises. The company ranked second in revenue among non-long-term coal logistics service companies in the northwest region in 2023, indicating that the company still has a certain scale advantage. The scale advantage is inseparable from the company's digital platform. During the period, Qianyuan Weike developed digital management tools such as "Coal Boss Network" and "Wanka Zhiyun" to create a smart logistics system integrating coal procurement, transportation, and sales. In fact, coal transportation involves long distances and large areas, requiring freight companies to use the Internet + to build a logistics information platform in order to facilitate effective communication among all parties. By using big data to connect various nodes in logistics, efficient data exchange, efficient allocation of logistics resources, efficient service response, and efficient capital and bill circulation can be achieved. Some articles suggest that intelligent coal logistics is a new blue ocean with a trillion-dollar market size, currently a new focus in the logistics industry. Currently, Qianyuan Weike is empowering various sectors in the coal circulation field and connecting all major participants in the industry chain upstream and downstream through a connected digital platform, aiming to improve the efficiency of coal logistics services and promote digital and smart innovation in the industry. Its business direction is in line with the industry's development trend, and the growth potential is worth looking forward to. In conclusion, Qianyuan Weike's business development aligns with the trend of intelligence in the coal logistics industry, with promising growth prospects. However, focusing on finances, its sharp decrease in cash flow, sharp increase in accounts receivable, and debt repayment pressure are weaknesses that cannot be ignored. Whether it can improve its business layout on the basis of easing financial pressure after going public remains to be seen.