Image source @ Visual China
The 100-billion-level instant delivery market is another share.
On December 14, SF Tongcheng was listed on the main board of the Hong Kong Stock Exchange with the stock code "09699". This time, SF Tongcheng issued about 131 million shares globally, priced at HK$16.42 per share, raising about HK$2.031 billion.
In the face of the aura of "third-party instant delivery of the first share", SF Tongcheng broke at the opening of the day, fell more than 11% intraday, and still fell 9.26% as of the close to 14.90 Hong Kong dollars / share, and the latest total market value was 13.91 billion Hong Kong dollars.
SF same city stock price trend
And that's not surprising. On the eve of the listing, SF Tongcheng already had signs of breaking. In the dark market trading on December 13, SF opened 2% lower in the same city, and then the decline quickly expanded to nearly 10%, after which the bulls counterattacked, the decline narrowed to about 4%, but it was never able to return to the issue price, and the dark market finally closed down 4%.
From 2016 as a business unit of SF Holdings involved in the same city instant delivery service, in 2019 officially operated as an independent entity and launched the SF same city express delivery brand, to now landing on the Hong Kong Stock Exchange, SF City has only taken 5 years. But can it borrow capital in the future to get rid of the current dilemma of its own development and release more advantages in competition?
Behind the growth of scale, the dependence on the parent company has deepened
Backed by the big tree of SF, the growth of SF in recent years is very eye-catching.
According to the prospectus, from 2018 to 2020, SF Tongcheng's revenue first increased from 993 million yuan to 2.107 billion yuan, and then further to 4.843 billion yuan, with a compound annual growth rate of 120.82%; in the first five months of 2021, its revenue reached 3.046 billion yuan, a year-on-year increase of 113%.
In terms of business scale, from 2018 to 2020, SF's order volume in the same city was 79.8 million, 210 million and 760 million, respectively, with a compound annual growth rate of 208.7%; in the first five months of 2021, its total number of orders reached 514 million, an increase of 151.2% year-on-year. As of May 31, 2021, the platform had more than 2.8 million registered riders, 530,000 registered merchants, and 126 million users.
At present, the service scenario of SF Tongcheng has expanded from mature scenarios (such as catering takeaway) to incremental scenarios (such as same-city retail, near-field e-commerce and near-field services). Among them, in the last-mile delivery service, SF Tongcheng can integrate its own transportation capacity with SF's express delivery business, helping the latter solve the problem of lack of capacity in the peak season while increasing its own order quantity and order density.
Prospectus from SF Tongcheng
It is worth noting that with the expansion of the business, the proportion of orders for food and beverage takeaway has gradually decreased, and instead it has become increasingly dependent on SF Holdings.
Relevant data show that in 2018, 2019, 2020 and the five months ended May 31, 2021, SF's revenue from SF Holdings accounted for 2.9%, 13.1%, 33.6% and 38.6% of the total revenue of the same period, accounting for an increasing proportion. In particular, since 2020, SF Holdings has become the largest customer of SF in the same city.
But this is not an isolated case. Competitors in SF's same city have also shown a similar trend. Meituan Distribution and Hungry Hummingbird rely on Meituan and Ele.me's takeaway business; Dada Group's JD.com business revenue accounts for 63.6%, and its dependence on JD.com is also further improving.
Labor costs account for more than 97%, and it is expected to lose another 3-5 years in the future
Although the revenue and order volume have grown rapidly for several consecutive years, the loss curse of SF in the same city has not been broken so far, and the loss amount is still increasing year by year.
According to the prospectus, from 2018 to 2020, SF Tongcheng's net profit attributable to the mother lost 328 million yuan, 470 million yuan and 758 million yuan respectively; in the first five months of 2021, it also lost 353 million yuan. In the past 3 and a half years, the cumulative loss of SF in the same city has exceeded 1.9 billion yuan.
The root cause of the loss is the high cost of labor. From 2018 to 2020, SF Tongcheng's manpower outsourcing costs and employee welfare expenses were 1.198 billion yuan, 2.377 billion yuan and 4.921 billion yuan respectively, accounting for 97.8%, 97.3% and 97.8% of the operating costs, respectively.
According to its prospectus, performance costs are the sum of the cost of outsourcing labor and employee benefits associated with the rider. It can be seen that from 2018 to 2020, the average performance cost per single contract in SF city is 15.0 yuan, 11.3 yuan and 6.5 yuan respectively. In the first five months of 2021, this figure continued to drop to $5.90. However, it is always higher than the revenue per ticket, from 2018 to the first five months of 2021, 12.44 yuan, 9.98 yuan, 6.36 yuan and 2.85 yuan, respectively.
However, thanks to the decline in average fulfillment costs, the gross profit margin of SF Tongcheng has improved. SF Tongcheng's gross profit from 2018 to 2020 was -231 million, -336 million and -189 million, respectively, and the corresponding gross profit margin was -23.29%, -15.96% and -3.89% respectively; as of the end of May this year, this figure has increased to -0.9%.
But turning a loss into a profit is probably not something that can be achieved in the short term. SF Tongcheng also said in the prospectus that the financial situation such as gross loss, net loss and operating cash outflow in the past period will continue for three to five years, and it is necessary to achieve profitability by expanding the customer base and order volume, controlling operating costs, and increasing operating leverage in the future.
Therefore, the proceeds of the listing financing will be mainly used in four major aspects, including research and development and technical basic design, and expand service coverage and capacity pool. In addition, SF Tongcheng also said that it may look for potential strategic acquisitions and investment in upstream and downstream businesses in the value chain of the industry. In addition, the funds will also be used for marketing and branding, working capital, etc.
The market competition is fierce, how to overtake in a corner?
After several years of rapid development, instant delivery has become an industry with an output value of more than 100 billion and a market size of trillions. According to the iResearch report, the annual order volume of the instant delivery service industry increased from 4.6 billion in 2016 to 21 billion in 2020, with a compound annual growth rate of 46.0%, and predicts that it will increase to 79.5 billion by 2025.
Among them, SF Tongcheng quoted iResearch data in its prospectus that in 2020, the twelve months ended March 31, 2021 and the three months ended March 31, 2021, its market share was 10.4%, 10.9% and 11.1% respectively in terms of order volume, and it has become the largest third-party instant delivery service platform in China.
It is worth noting that this statistic does not include players such as Meituan Delivery, Hummingbird, and Dada. According to SF Tongcheng, different from its positioning of "third-party real-time delivery service platform", Meituan Distribution, Hummingbird, Dada, etc. all belong to the real-time delivery service platform of the centralized platform.
If SF Tongcheng is put into the entire instant delivery industry, its order volume is still much different from the head player. According to Southwest Securities, in 2020, the average daily order number of Meituan delivery was 27.8 million, the average daily order number of hummingbirds reached 4.5 million, and the average daily order number reached 2.9 million, compared with the average daily orders of SF in the same city only exceeded 2.7 million.
In addition, with revenue as the statistical caliber, the scale of SF's same city is still very small. According to iResearch data, in China's instant delivery market in 2019, the market share of Meituan Delivery and Hummingbird reached 43.0% and 23.7%, respectively, ranking first and second; Dada's market share was 4.3%, ranking third; Flash Delivery and SF Tongcheng ranked fourth and fourth and fifth with market shares of 1.5% and 1.2% respectively.
In terms of coverage, SF's competitive advantage in the same city is not obvious. As of May 31, 2021, SF Tongcheng's service network covers more than 1,000 cities and counties in China, and Meituan Delivery, Hummingbird and Dada all have more than 2,000 counties and cities.
However, at present, the industry is in a period of expansion, the competitive landscape has not yet stabilized, in the four scenarios mentioned above, in addition to the mature catering takeaway is occupied by Meituan and Ele.me, the other three major service scenarios still have considerable room for growth, and SF is not without opportunities.
Based on its "third-party" positioning, SF Tongcheng currently has no traffic competition with supermarket home, fresh e-commerce, and community group buying platforms, and if it gives full play to this advantage and actively incubates other business scenarios, it may be able to overtake in the future.
(This article was first published on titanium media App, author | Liu Mengmeng)
Resources:
"Wang Wei another IPO, SF Tongcheng is about to go public, three and a half years loss of 1.9 billion", author: Yongyang, source: Fuji Research;
"Loss-making listing, can SF Tongcheng, which is backed by SF, "go downwind"? Source: Mantou Finance.