Sacrificed his life for three years, Jitu Express waited for the listing "blood transfusion"
Introduction: How long will the franchisee behind it accompany the run?
Exhibitors丨数科社
Author丨Lin Mu
Fast rookie, SF one step, Jitu Express is about to become the first logistics company to be listed on the Hong Kong stock market this year.
On the 16th, J&T Express issued an announcement on the Hong Kong Stock Exchange that it intends to issue 326.55 million shares globally through the Hong Kong IPO at an offer price of HK $12.00 per share, which is expected to be officially listed on October 27.
As early as June this year, J&T submitted a listing application, and then entered the listing hearing stage. In August and September, SF and Cainiao also submitted applications for listing in Hong Kong, which means that the three logistics giants may gather in Hong Kong stocks as early as the end of the year.
Although it arrived at the door of the listing first, as a latecomer who broke into the domestic market for less than four years, Jitu also paid the price of sacrificing his life and running wildly.
In the past three years, it has relied on price wars to fight for a place in the highly competitive express delivery market, but behind the pressure is continuous performance "bleeding" and many franchisees are running.
After opening the door of the capital market this time, can Jitu continue to soar?
01丨The price of running wildly
In the prospectus submitted, the fatigue accumulated over the past three years of sacrificing his life was exposed, and it was also doomed to the fate of "bleeding" to go public in Hong Kong. According to the prospectus, under non-IFRS standards, from 2020 to the first half of 2023, Jitu adjusted net profit losses were US$476 million, US$1.178 billion, US$1.488 billion and US$264 million, respectively. In three and a half years, Jitu has accumulated losses of more than 3.4 billion US dollars, equivalent to about 24.8 billion yuan.
The China business is the main bleeding point that drags down the overall performance of Jitu. From 2020 to 2022, its adjusted EBITDA in the Chinese market was -US$620 million, -US$940 million and -US$330 million, respectively, and in the first half of this year, the Chinese market and the new market were still in the red.
As for the main reasons for the huge loss, J&T explained that the first is the expansion of market share through price wars in China, the second is the increase in costs caused by cross-border business and expansion to new markets in 2022, and the third is the increase in costs caused by the acquisition of Best Express.
As an intruder in the domestic logistics industry, it is understandable that J&T initially took advantage of the price war to quickly open the market, exchange price for market, and then seek scale effect has also been verified by many companies such as Luckin.
From the performance data, the gross profit margin of J&T in China in the past three years has narrowed from -120.4% in 2020 to -55.9% in 2021, and further reduced to -16.2% in 2022. It can be seen that the scale effect is further emerging.
But its asset-liability ratio, which is much higher than that of its peers, has once again brought it back to reality - from 2020 to the first half of 2023, the asset-liability ratio of Jitu reached 141%, 201%, 185% and 190% respectively, while the asset-liability ratio of YTO was 31% on average, and Shentong, Yunda and SF were roughly around 55%.
The high gearing ratio is clearly not a need for far ahead of the data. As of the first half of 2023, J&T Express has US$1.195 billion remaining in cash and cash equivalents, which is not rich compared to the continuous net outflow of operating cash flow of US$520 million last year.
According to the price war method of Jitu in the past, raising high and burning money subsidies and crazy expansion, ensuring that the reserve funds have sufficient food and grass is the premise that drives him to sacrifice his life and run wildly.
Since opening up the Chinese market in 2020, J&T's financing activities have become more frequent and huge, and it has completed five rounds of financing in the past three and a half years, with a cumulative amount of about 5.39 billion US dollars. This shows its dependence on external funds for "blood transfusion".
But since 2021, the net cash from J&T's financing activities has become less and less, which also means that it needs to find a new way of "blood transfusion" to support its growth to the day when it has its own hematopoietic ability.
Impact listing became its best choice.
02丨Bloody rabbit
The speed of the IPO is similar to the growth rate it has shown in the domestic and foreign markets in the past few years.
In 2015, Li Jie, former CEO of OPPO Indonesia, established J&TExpress, a courier company in Indonesia, swallowed the Indonesian express market in just two years, and achieved the status of the second largest in the Southeast Asian market.
In March 2020, J&T, which quietly entered the domestic market under the pseudonym of J&T, which quietly entered the domestic market through Longbang Express, officially launched the network, and it took only 8 months to approach the daily single volume of tens of millions.
The reason why Jitu was able to leverage the domestic express delivery market, which was almost monopolistic at that time, was completely relying on its simple and crude low-price strategy, and captured many e-commerce merchants represented by Pinduoduo.
In order to open up the market in the early stage of the business, Jitu once pressed the price of a single ticket to 2 yuan, and the receiving price of e-commerce orders was even as low as 1.5 yuan per order, which was about 30%-50% of the average market price.
The express delivery company must first have a network to run, and the newcomer Jitu directly chose to "rub the net" while opening the outlet. This series of practices has also completely aroused the anger of the "mastery department".
On the eve of Double 11 this year, a "ban on rabbit" prohibiting the agency of Jitu business spread throughout the Internet, and Jitu ushered in the joint "encirclement and suppression" of local players such as Yunda, Yuantong, and Shentong.
But Jitu did not show weakness, but launched a counterattack through the increasingly fierce price war, and once shouted the slogan of "8 hairs nationwide" in Yiwu. Although this move was later curbed by the Postal Service, after this battle, the average daily order volume of Jitu soared, exceeding the 20 million mark in 2021.
In September 2021, Jitu successfully acquired Best Connect for 6.8 billion yuan after entering the Chinese market for only about 500 days, completely breaking the long-standing pattern of "four links and one delivery" in the domestic express delivery industry. What shocked the industry was that only half a year later, Jitu swallowed SF's Fengwang for 1.18 billion yuan.
Today, no one dares to underestimate this "Indonesian rabbit".
According to public information, in 2022, J&T has firmly occupied the throne of Southeast Asian express operators, and its total domestic parcels have grown to 12 billion, ranking 6th among the top express operators, with a market share of about 10.9%. The magnitude has reached the level of Tongda, which has been operating for decades, and the old express delivery giant.
But looking closely at its internal organs, Jitu's simple and rude breakthrough play by throwing money to open the way is not without drawbacks.
The data shows that in 2022, the revenue of Jitu Express domestic express single ticket will be about 2.12 yuan / piece, far lower than Shentong's 2.55 yuan / piece, Yuantong's 2.63 yuan / piece and Yunda's 2.69 yuan / piece. On the contrary, its unit cost is slightly higher than that of its domestic counterparts.
Jitu has rapidly expanded the latter's network resources and express delivery team with two big mergers and acquisitions, but it also takes time to digest. The process of integrating Best Express is not smooth sailing, and Fengwang, which was just taken over last year, was established less than two years ago, and lost 750 million yuan in 2022, which is itself a "hot potato".
Despite the bloody battle, the rabbit with serious internal damage is still struggling in the profit dilemma.
03丨The shuffled market
At the end of June, Cainiao announced the launch of self-operated express, marking that the ten-year-old logistics aggregation platform has entered the express delivery market with one foot.
Since the beginning of this year, a series of actions of rookies have been paving the way for admission. It is reported that Tmall Supermarket and Cainiao began to prepare for half-day delivery at the end of 2022, and until the beginning of May, the service has been launched simultaneously in Hangzhou, Shanghai, Chengdu, Guangzhou, Shenzhen and other cities.
In May, Cainiao and Shentong Express launched the Smart Warehouse with next-day delivery service. Early the next month, Cainiao planned to spend 3.878 billion yuan to acquire a 25% stake in Alibaba's De'e Industrial, becoming Shentong's second largest shareholder. It is not difficult to see that Cainiao further promotes the intention of synergy with the Tongda Department and enhance the chips.
Almost at these two points in time, SF and Jitu completed a deeper handshake. Shortly after J&T swallowed Fengwang, SF's Tianhai Investment appeared in the shareholder team of J&T's prospectus with 1.54% equity.
With the frequent actions of the giants, the domestic express delivery market has made waves again. Just as the intrusion of the polar rabbit three years ago broke the pattern of "four links and one reach", and now the entry of the rookie behemoth may stir the market to reshuffle.
In the current situation that it is difficult for the e-commerce cake to continue to grow, the intensity of this "cake redistribution" battle can be imagined. After the "bloody market", there is not much time left for the polar rabbit to breathe.
The "brute force" of price wars that Jitu relied on in the past will be difficult to sustain after the promulgation of the "Provisions on Administrative Penalties for Price Violations" and "Measures for the Administration of the Express Delivery Market (Revised Draft)". Not long ago, the State Post Bureau held a guidance meeting for five express delivery companies, including Jitu, at which it was once again emphasized to participate in market competition fairly.
This means that the price war of the express delivery industry "hurting the enemy by a thousand and self-inflicting eight hundred" will be doomed to be gone forever.
In the pattern of obvious differentiation between franchise and direct operation in the domestic express delivery market, Jitu has embarked on a "direct + franchise" own road through the regional agency model, which can be described as a different way. However, under the pressure of long-term price wars in the past, many franchisees are "losing money". According to previous media reports, in the middle of last year, a Jitu Express franchise outlet in Changzhou, Jiangsu Province, was exposed to a "strike to demand wages".
In addition, franchisees have also expressed dissatisfaction with the management of Jitu. In February this year, a Jitu Express first-class outlet franchisee in Nanjing said that within 55 days after joining in 2021, various fines totaled more than one million yuan, for which the two sides went to court. There is also no shortage of franchisees complaining that the frequency and intensity of the fine of Jitu are too crazy.
However, this method of "escrow with fines" has not been exchanged for the improvement of the service reputation of Jitu Express. In the express delivery satisfaction survey of the State Post Bureau in 2021-2022, Jitu ranked low several times; On the black cat complaint platform, the cumulative number of complaints of J&T Express has exceeded 27,000, of which a large number of users complain that J&T has problems such as slow delivery, low customer service efficiency, and lost express delivery.
Compared with the wounds revealed in the financial statements, these increasingly prominent problems may be the hidden pain after the listing of Jitu.