On March 30, SF Tongcheng (HK:9699) released its first annual performance report after listing. According to the data, benefiting from the growth of non-meal scene delivery, the coverage of multiple categories in all scenarios, and the expansion of network coverage, SF Tongcheng's revenue in 2021 was 8.17 billion yuan, an increase of 68.8% year-on-year, and the gross profit and gross profit margin were 94.8 million yuan and 1.2% respectively, achieving a year-on-year change from negative to positive. However, the company as a whole is still in a state of loss: the net loss and net loss ratio for the year 2021 were 899 million yuan and 11.0% respectively, and the net loss increased year-on-year due to the increase in share-based compensation expense and the expansion of business scale, but the net loss ratio improved year-on-year.
Positive gross profit compounded by improved marginal effects and confidence in profitability
Originally an independent business unit of SF Holding Group, SF Tongcheng has been operating independently and corporatized since 2019 and has developed rapidly within 2 years. In December 2021, SF Tongcheng officially landed on the Hong Kong Stock Exchange and became the "first share of third-party instant delivery". The opening price of the day was HK$15.2 per share, and the market value was HK$13.8 billion. According to the information disclosed in the prospectus, the company has not been able to make a profit in the case of rapid growth in revenue and order volume from 2018 to 2020, with net losses of 328 million yuan, 470 million yuan and 758 million yuan respectively.
In 2021, SF Tongcheng recorded a net loss of RMB899 million and a net loss ratio of 11.0% respectively. According to the interpretation of the financial report, the net loss widened year-on-year, mainly due to the increase in share-based compensation expense and the expansion of business scale, "share-based compensation expense" reached 231 million, and if the impact is excluded, the adjusted net loss was 667 million yuan, an increase of more than 62 million yuan year-on-year, mainly due to new listing expenses and related costs. At the same time, the average gross margin increased from -0.9% in the previous 5 months to 2.4% in the next 7 months; the net loss ratio decreased from 15.6% at the end of 2020 to 11.0% at the end of 2021.
In the eyes of SF Tongcheng's executives, these reflect that the company's profitability has entered an improvement channel. Zeng Hailin, chief financial officer of SF Tongcheng, said in response to the question of "loss reduction" that the exclusion of share payments, coupled with the leverage effect in all aspects, the increase in scale effect, and sufficient cash flow and financial interest will help the company reduce rates and reduce losses.
"We are very confident in the company's net profitability." Sun Haijin, executive director and CEO of SF Tongcheng, explained at the performance conference call: First of all, the cost-oriented business of express delivery can make money, and it is easier to make money for express delivery and distribution, because its threshold for service is much higher than the threshold of cost, and most of the pricing is dynamic bargaining, which can drive net income improvement through refined control; secondly, in terms of rider organization management, we will continue to reduce costs through technical capabilities; third, after the gross profit is normalized, our marginal benefits will become stronger and stronger. Profits will quickly return to positive. ”
As of now, SF Tongcheng's share price is HK$6.98 per share, with a market value of HK$6.516 billion, which has shrunk to half of the time it was listed last year. Sun Haijin said frankly, "The current market value performance of the company has not reached our expectations, but we are maintaining a growth higher than the industry, if we can make a profit in a short period of time, coupled with the company's current sufficient cash reserves, we are confident in the company's long-term market value growth." ”
The proportion of food and beverage revenue fell below 40%, which will strengthen the growth of all categories
SF Tongcheng mainly earns revenue by providing merchants and consumers with third-party same-city instant delivery services and "last mile" express collection services. According to statistics, by the end of 2021, the number of active merchants in SF's same city increased by 54.5% from about 167,000 in 2020 to more than 258,000 in 2021. In terms of the same-city distribution business, according to the financial report data, the revenue of the same-city distribution service provided by it in 2021 increased by 58.1% year-on-year to 5.09 billion yuan, accounting for 62.4% of the total revenue.
Nandu reporter paid attention to the fact that the revenue of non-meal delivery scenarios (that is, local consumption scenarios other than catering takeaway scenes, mainly including same-city retail, near-field e-commerce and near-field services) increased by 105% year-on-year to 1.87 billion yuan year-on-year, accounting for 37% of the same-city delivery revenue, becoming the main force driving revenue growth.
Sun Haijin pointed out, "The entire instant logistics industry has shown two changes: First, the growth of non-catering categories is getting higher and higher. The base of catering takeaway is large, the penetration rate is high, and the growth rate is relatively low, but other categories are growing very fast. Second, the penetration rate of third-party merchants continues to increase, mainly from the contributions of new categories and new players, such as the rise of e-commerce in new categories such as live broadcasts, Mini Programs, and private domains. ”
Based on the above industry background, "all category growth" has become a major business highlight of the company in 2021. In terms of providing delivery business for merchants, compared with 2020, the distribution revenue of SF Tongcheng's merchants in the fields of medicine, clothing and digital 3C increased by more than 165% year-on-year, and the revenue from near-field e-commerce and the same-city retail scene (covering supermarket fresh, flowers and plants, desserts and other daily necessities) merchants increased by more than 95% year-on-year. The earnings report mentioned, "In 2021, the renewal rate of our Top 100 major customers has reached 86%. ”
For the performance, Sun Haijin added at the performance conference call, "The proportion of the entire company's catering revenue has dropped below 40%, and this proportion is still 98% in 2019." In two years, other categories have risen very quickly. He stressed that because SF Tongcheng is an independent and open third-party platform, it can enjoy the dividends of industry increments to the greatest extent, "The reduction of the proportion of catering, thanks to the growth of other emerging categories, makes the company's overall risk resistance stronger, which is the core differentiated advantage that distinguishes it from its peers." Based on the strategy of multi-scene category integration, SF Tongcheng executives expect that the proportion of catering delivery will remain in the range of 30% to 50% in the future, and "the rider will assign his work more calmly."
From a geographical point of view, the revenue generated by SF Tongcheng in the sinking cities and counties of the third tier or below in 2021 increased by 89% year-on-year to 1.674 billion yuan, reflecting the strong demand for instant delivery in the sinking market. According to the financial report, efforts will be made to further expand the service network from first- and second-tier cities to sinking cities and counties with huge growth potential for customer demand and rider resources.
"The growth rate we have achieved in the sinking market is higher than that of the industry market." Sun Haijin said in response to a question from a Nandu reporter that on the one hand, the sinking market is a newly opened market, bringing increments; on the second hand, the sinking market is actually weaker in terms of rider acquisition and merchant stickiness, and the control of the platform is actually weaker, the larger the place, the more high-quality supply needs to be based on brand effects, and vice versa. Therefore, different from the first and second markets, the sinking market will focus more on distribution demand rather than traffic demand. Therefore, SF Tongcheng will do more marketing investment in first- and second-tier cities to occupy the minds of users, while in the sinking market, it will focus more on the improvement of network coverage and improve products and services.
Labor outsourcing costs increased by more than 60%, accounting for 98% of operating costs
In terms of delivery services for consumers, Nandu reporters combed and found that its same-city distribution revenue has achieved a year-on-year increase of more than 150% for three consecutive years. The number of active consumers on the platform increased from about 5.1 million in 2020 to about 10.6 million in 2021, doubling the size of consumers year-on-year. In addition, during the reporting period, SF Tongcheng helped logistics enterprises complete the "last mile" parcel delivery, and the service revenue increased by 89.3% year-on-year to 3.07 billion yuan. By the end of 2021, the number of cities and counties covered by SF's service will expand to more than 1,900.
SF riders in the same city include both full-time and crowdsourced. According to the financial report, during the reporting period, the number of active riders of the company increased by 32% year-on-year to more than 606,000, and the number of cities covered by the night (24-hour) delivery network was 693. In terms of delivery performance, the average delivery time of SF's catering takeaway scene with high timeliness requirements in the same city has been shortened from 30 minutes last year to 26 minutes. At the same time, the proportion of orders for medium and long distances of more than 3 kilometers has been increasing. According to the financial report, in order to meet the needs of high-timeliness and real-time long-distance same-city distribution or large-scale cargo distribution, a four-wheel transportation network in the same city has been launched and developed.
The operating costs of SF Tongcheng mainly include outsourcing costs and employee benefit expenses related to the riders employed by the company. Due to the continuous expansion of the capacity pool, in 2021, SF's operating costs in the same city increased by 61% to 8.079 billion yuan, of which the cost of labor outsourcing reached 7.918 billion yuan, an increase of 62.9% year-on-year, accounting for 98% of operating costs; employee welfare expenses of 32.55 million yuan, down 46.9% year-on-year. In addition, marketing, R&D, administrative and other expenses increased significantly year-on-year. Due to scale effects, order structure optimization and order portfolio improvement, rider management and structure optimization, the average cost of performance per order decreased, and the gross profit margin reached 1.2% (the gross loss rate in the previous year was 3.9%).
Judging from last year's performance, the synergy between SF and SF is becoming more and more obvious. The financial report disclosed, "In 2021, the monthly customers we served with SF Holding Group brought in incremental revenue of 97.8 million yuan." Chen Fei, chairman of the board of directors of SF Tongcheng, once told Nandu reporters that in terms of terminal business collaboration, SF Tongcheng will also provide assistance for SF's terminal delivery, buffering the demand for resources during the peak period of a large number of business distribution, and the development of SF Tongcheng will drive the overall valuation of SF Group.
Third-party penetration in the instant delivery market will increase, and traffic decentralization is the trend
Referring to the impact of the current epidemic on the business, Sun Haijin responded at the performance conference call, "When the epidemic occurred, the distribution of personal business such as corporate offices increased sharply, but it hit the catering more severely. However, we are confident that we can control the outbreak and minimize the impact of the epidemic. ”
"Despite the impact of COVID-19, our business has not faced any major disruption or suspension, nor have we experienced any major capacity shortages." SF Tongcheng also mentioned in its earnings report that "the epidemic has led to changes in consumption habits, such as the growing trend of local online shopping, which may lead to a growing demand for our real-time delivery services." However, shifts in consumption patterns associated with COVID-19 may not be frequent or sustainable. ”
Looking forward to the future, Sun Haijin combined with the forecast data of third-party institutions, saying, "By 2025, the order volume of the entire ready-to-match industry will be close to the order volume of China's express delivery industry, and the market is very worth looking forward to; secondly, the trend of traffic decentralization will become more and more obvious; as the third-party penetration rate continues to increase, the share of the platform with business flow will decline, and the non-catering penetration rate will become higher and higher." ”
Nandu reporter learned from SF Tongcheng that in the future, the company's strategy will focus on four major scenarios of local catering, same-city retail, near-field e-commerce, and near-field services, strengthening network coverage, refined operation management, and deepening brand awareness. In terms of cost control, we will improve gross profit margin and narrow net loss ratio by introducing more high-value customers through lower-cost promotions and innovations, and reducing the number of low-value customers. It will also explore delivery service scenarios, expand geographical coverage and customer base, and strengthen rider and employee management, with a view to achieving greater economies of scale and network effects, and achieving profitability as soon as possible.
Written by: Nandu reporter Fu Xiaoling