New Stock Preview | The fifth industry cannot resist the worsening of profit end, and the new story of the overseas e-commerce operation of Meetodo is hard to predict?

With advanced production capabilities and diversified industrial clusters, Chinese cross-border e-commerce enterprises have demonstrated strong competitiveness in the international market. Coupled with the strong support of the Chinese government's policies for the development of the cross-border e-commerce industry, by 2024, the scale of China's cross-border e-commerce industry had reached $461.7 billion. As the cross-border e-commerce industry continues to grow, the demand for cross-border e-commerce marketing services in the market continues to strengthen. According to Zhaoshi Consulting data, by 2024, the market size of China's cross-border e-commerce marketing had reached $14.3 billion. One of the representative companies that have embarked on a new journey to list in Hong Kong is Midi Dodo, a rising star in the cross-border e-commerce marketing market. It is noted that Midi Dodo submitted its listing application to the Main Board of the Hong Kong Stock Exchange on December 9th, with Build Bank International as its sole sponsor. According to Zhaoshi Consulting data, based on 2024 revenue calculations, Midi Dodo is the fifth largest cross-border e-commerce marketing service provider in China, and it also provides the most comprehensive service portfolio with the largest number of customer services. However, in terms of performance, Midi Dodo is currently experiencing continuous losses. According to its prospectus, from 2022 to 2024, Midi Dodo's revenues were $65.17 million, $70.85 million, and $71.13 million respectively, with net profits during these periods amounting to $1.641 million, -$16.413 million, and -$163,000 respectively. In the first half of 2025, although Midi Dodo's revenue increased by 81.6% to $55.79 million, its net loss further expanded from a loss of $22,000 to a loss of $1.985 million. However, in comparison to the persistent losses, Midi Dodo may face even greater challenges. Highly dependent on overseas marketing services, declining gross profit margin is the main cause of losses The development history of Midi Dodo can be traced back to May 2014. Its development over a decade can be divided into three different stages. From 2014 to 2017, Midi Dodo was an intermediary in traditional cross-border trade and joined the Google Partner Program in 2015, laying the foundation for later becoming an elite partner. From 2018 to 2021, Midi Dodo transformed into a digital advertising agency, assisting international digital media platforms such as Google, TikTok, and Amazon in increasing their advertising client base related to Chinese cross-border e-commerce. Since 2021, with the continuous rise of the global "stay-at-home economy," cross-border e-commerce has experienced accelerated growth. Midi Dodo has seized the industry opportunities and gradually transformed into a provider of cross-border e-commerce marketing services, helping Chinese brands sell products to overseas consumers through international digital media platforms. In that year, Midi Dodo co-sponsored the first China Cross-Border E-Commerce Fair and launched digital exhibition services. According to the prospectus, while Midi Dodo is a Google Elite Partner, it became the official advertising agent for TikTok for Business in 2024 and for Amazon in 2025. Since 2022, Midi Dodo has successfully assisted more than 1,700 direct customers in promoting their brands, services, or products to over 20 countries in Europe, the Americas, Asia, and Oceania. Currently, Midi Dodo has three main business lines: overseas marketing services, overseas e-commerce operations, and digital exhibition services. Overseas marketing services refer to helping advertisers promote their brands, services, and products on international digital media platforms; digital exhibition services refer to jointly organizing the China Cross-Border Fair with Transnational International Exhibition and providing booth spaces to exhibitors; and overseas e-commerce operations involve Midi Dodo ordering and purchasing goods for brand partners and selling them directly to individual consumers overseas through international digital media platforms. It is worth noting that overseas e-commerce operations is a new business that Midi Dodo re-launched in May 2025. However, from a revenue structure perspective, Midi Dodo is currently highly dependent on its overseas marketing services. Data shows that from 2022 to 2024, the revenue from Midi Dodo's overseas marketing services accounted for 99%, 99.3%, and 99.3% respectively, while the revenue from digital exhibition services in 2023 and 2024 each accounted for less than 1%. Even in the first half of 2025, although overseas e-commerce operations have generated revenue, the proportion remains small, with overseas marketing services still accounting for 98.7% of revenue. Thanks to the steady development of overseas marketing services, Midi Dodo's revenues showed a slight increase from 2022 to 2024. However, its profitability continued to be in the red. Even when looking at adjusted net profits, it is clear that Midi Dodo's profitability has worsened. Its adjusted net profits from 2022 to 2024 were $1.641 million, $59,000, and -$87,000 respectively, while in the first half of 2025, it reported a net loss of $22,000. The key reason for Midi Dodo's deteriorating profitability is a significant decline in its gross profit margin compared to 2022. Data shows that its gross profit margin was 8% in 2022, but dropped to 4.1% in 2023 and 4.4% in 2024, almost halving. The increase in gross profit margin to 4.8% in the first half of 2025 was due to the introduction of high-margin overseas e-commerce operations, which helped optimize profit levels to some extent. Looking closer, the factors that led to the sharp decline in Midi Dodo's gross profit margin compared to 2022 were different. In 2023, the main reason for the drop in gross profit margin was the increase in media costs, which rose from 98.6% to 99.3%, suppressing the release of profits. Although media costs decreased in 2024, other costs, including expenses related to organizing the China Cross-Border Fair, costs of goods sold under overseas e-commerce operations, taxes, and additional charges, increased significantly, partially offsetting the benefits of the decrease in media costs, resulting in a slight increase in gross profit margin to 4.4%. Analyzing Midi Dodo's three expense structures in 2022 and 2024, its marketing, administrative, and research and development expenses together accounted for about 4% of total revenue. This data indicates that when the company's gross profit margin falls to around 4%, it becomes a critical threshold as any increase in expenses or other outflows may directly squeeze profit margins and increase the likelihood of the company falling into a loss. The "fragility" of overseas marketing services and the "weakness" of the new growth curve In fact, cross-border e-commerce marketing services are not a good business, as the business model of this industry is easily squeezed by both cost and demand factors. Taking Midi Dodo as an example, its heavy reliance on overseas marketing services, especially on the cost side, media costs are the major expense. Once downstream demand is strong, media platforms may raise traffic costs opportunistically, affecting the release of gross profits. This is evident in 2023 when Midi Dodo's gross profit margin was nearly halved due to the media cost rising to 99.3%. However, when media costs decrease, does this mean that Midi Dodo's situation will improve? The answer is most likely no. The logic behind this is that a decrease in media costs is often due to a decrease in downstream demand, meaning that clients' desire to advertise is relatively low. During such periods, clients may not only reduce their ad spend but also exert pressure on pricing. According to the prospectus, in 2024, Midi Dodo had a high number of clients, reaching 1,075, which was nearly three times the 362 clients in 2023. However, Midi Dodo's total spending on media platforms suppliers was only $63.82 million, lower than the $69.59 million in 2023. The significant increase in client numbers coupled with a decrease in total spending indicates two possibilities: either clients significantly reduced their spending or there was a loss of major clients. It can be seen that Midi Dodo's business model for overseas marketing services has significant "fragility", and the core reason for this fragility lies in the fact that this business is essentially a "traffic intermediary". However, traffic is highly concentrated on a few international digital media platforms, causing Midi Dodo to lose bargaining power and leading to narrow profit margins. In an attempt to reduce its reliance on a single marketing service, Midi Dodo has been trying to expand its digital exhibition services in recent years, but progress has been slow, with the revenue share of this business not exceeding 1% from 2022 to now. In light of this, Midi Dodo newly expanded into overseas e-commerce operations in May this year in an effort to tell a new growth story to the capital markets. From a synergistic perspective, building on the accumulation of overseas marketing services, Midi Dodo expanding into overseas e-commerce operations does have obvious synergies. However, e-commerce operations require the integration of supply chains, logistics, and after-sales services, high costs, and long cycles, making it difficult to achieve economies of scale in the short term. Additionally, the competition in the cross-border e-commerce market is fierce, with platforms like SHEIN and TEMU already occupying a large market share. As a new entrant, Midi Dodo faces challenges in customer acquisition and brand recognition. Due to the high initial investment required for overseas e-commerce operations, this will continue to impact Midi Dodo's profitability performance. This has already been reflected in the 2024 financial report, where a significant increase in costs other than sales costs is related to the expansion of overseas e-commerce operations. In summary, based on Midi Dodo's current heavy reliance on a business model that is vulnerable in overseas marketing services, as well as the tired and weak new growth curve, it is difficult for the company to obtain high valuations in the capital markets. The key to changing the market's perception of Midi Dodo lies in whether the new growth curve can be successfully constructed, but this may not yield results in the short term, and may even have the potential to drag down profitability. Therefore, Midi Dodo may enter a period of "growing pains".