On December 29, Changchang Co., Ltd. (06959), a leading automobile pledge vehicle monitoring service, officially launched its IPO.
According to the prospectus, the company plans to issue 50.54 million shares, of which 10% will be offered in Hong Kong and 90% will be offered internationally. The offer price is set at between HK$5.95 and HK$7.90 per share, with board lots of 500 shares and an admission fee of HK$3,989.84. The IPO will be held from December 29 to January 4 and is expected to be listed on January 9.
Changjiu Co., Ltd. provides pledged vehicle monitoring services and auto dealer operation management services in China. According to the data of CIC Consulting, Changjiu is the largest pledged vehicle monitoring service provider in the field of automobile circulation in mainland China, ranking first in terms of revenue scale and the number of car dealer users, and its leading position is stable.
From the performance point of view, Changchang shares have achieved continuous growth in the contrarian trend. In the past three years, although the recurrence of the epidemic has brought severe challenges to the company's operation, the revenue of Changjiu from 2020 to 2022 will be 431 million, 478 million and 548 million yuan respectively, with a three-year compound growth rate of 12.8%, highlighting the business resilience; By the first half of 2023, its revenue will be 309 million yuan, a year-on-year increase of 19.6%, and its growth will be further accelerated.
Zhitong Financial APP believes that after a multi-dimensional layout, the certainty and growth of the business territory of Changchang shares are clear enough. As a leader in the automotive pledge vehicle monitoring service industry, the company has successfully created a new growth curve of automobile dealer operation management services, and the trial operation of automotive supply chain services is expected to tap potential opportunities in the new energy vehicle industry. With the steady progress of various business lines, the continuous release of Changjiu's performance will continue to enhance the company's intrinsic value.
The well-established car pledge vehicle monitoring service is expected to continue to grow
Continental is the world's largest passenger car market, with more than 26 million cars sold in 2022, equivalent to more than 70,000 sold in a day. Behind the rapid circulation of automobiles, thanks to the establishment of an efficient circulation system in the mainland, inventory mortgage loans are a key part of the efficient circulation of automobiles.
Since the pre-purchase of a new car requires a large amount of capital, it is a common business practice in the industry for car dealers and general auto traders to take out inventory mortgages, which is also the main financing method, which can alleviate the financial pressure while improving the efficiency of asset turnover.
However, due to the limitations of personnel and resource conditions, financial institutions have many pain points in the supervision of pledged vehicles, such as heavy workload, low efficiency, lagging information collection and opacity, and real and efficient monitoring of mortgaged vehicles has become a rigid need for financial institutions.
Jiujiu, which has been deeply involved in the industry for more than ten years, has developed a pledged vehicle monitoring system with integrated supporting hardware including VFS system, Jiuchetong mobile application and RFID tags, PDA, OBD devices and safe deposit boxes to provide pledge vehicle monitoring services, that is, car pledge vehicle monitoring services. This service is based on the changing market demand to cover more service scenarios of pledged vehicle monitoring services, and enriches pledged vehicle monitoring services with more advanced technologies and monitoring models.
According to CIC, Changjiu is one of the first companies in China to launch a pledged vehicle monitoring service. As of September 30, 2023, Changjiu has launched pledged vehicle monitoring services in more than 500 cities in 31 provinces in mainland China. With excellent product performance and extensive service network, the number of customers of Changjiu Auto Pledge Vehicle Monitoring Service continues to increase. Among them, the number of customers of financial institutions increased from 211 in 2020 to 219 in 2022 and 223 in the first half of 2023; The number of car dealer customers increased from 8,316 in 2020 to 10,684 in 2022 and further to 11,152 in the first half of 2023.
Not only that, in addition to the continuous growth of the number of customers, a number of indicators of Changjiu's auto pledge vehicle monitoring service have also performed well. Among them, from 2020 to 2022, the net user expansion rates will be 6.8%, 10.4%, and 15.9% respectively, indicating that the company's customer expansion is gradually accelerating; In 2022, the retention rates of financial institutions and auto dealers increased to 92.4% and 84.9% respectively, indicating that customers' stickiness to Changjiu shares is increasing. At the same time, the number of service agreements signed also increased from 10,963 in 2020 to 14,503 in 2022, and further increased to 15,459 in the first half of 2023, an increase of 21.29% year-on-year.
The good performance of various operating indicators eventually translated into the steady growth of the performance of automobile pledge vehicle monitoring services. According to the prospectus, the revenue of automobile pledged vehicle monitoring services increased from 430 million yuan in 2020 to 505 million yuan in 2022, with a compound annual growth rate of 8.30%, and in the first half of 2023, it recorded a revenue of 279 million yuan, a year-on-year increase of 13.55%. Obviously, the car pledge vehicle monitoring service, as the "ballast stone" of the long-term share business operation, has shown obvious stable attributes.
It is worth noting that Changjiu has become the largest pledged vehicle monitoring service provider in the field of automobile circulation in mainland China. In 2022, in terms of revenue, Changjiu Digital's market share will be 47.9%, with a market share of more than 20 percentage points ahead of the second place, and the number of car dealer users is nearly three times that of the second place. It can be seen that Changchang shares have obvious advantages in the field of pledged vehicle monitoring services, and the leading position is stable.
Zhitong Financial APP believes that the car pledge vehicle monitoring service of Changchang shares is expected to achieve sustainable growth in the future, which is mainly supported by two major logics, one of which is the steady growth of industry demand. According to data from CIC Consulting, by 2021, the market size of pledged vehicle monitoring services for mainland auto dealers has officially exceeded RMB 1 billion, and in the future, with the improvement of financial institutions' risk management capabilities, standardized operations and the penetration rate of pledged loans, the market size is expected to rise to RMB 1.452 billion in 2027, with a five-year compound growth rate of 6.6%.
Second, the market of pledged vehicle monitoring services in the field of automobile circulation is highly concentrated, the market share of the top five market players exceeds 90%, and Changchang shares as an industry leader have about half of the market share, and are significantly ahead of other players in technology, customer relations, economies of scale and other aspects.
The rapid development of auto dealership operation management services has become a new growth curve
In April 2022, Changjiu Co., Ltd. took the lead in providing one-stop management solutions to auto dealers in the industry, becoming a pioneer in the field of automobile circulation in China.
The reason for expanding the operation management services of auto dealerships is that the pain points currently faced by the industry are very prominent. According to the China Automobile Dealers Association (CADA), there were about 30,000 car dealers in mainland China in 2022, but about 70% of them were in a state of continuous loss. The reason why these dealers are not profitable is that they lack professional management and services in the face of increasing competition, which makes it difficult to reduce costs and inefficient operations.
According to the data of CIC Consulting, with the elimination of the impact of the epidemic and the gradual recovery of market demand, the willingness of auto dealers to improve their marketing and management capabilities through digitalization and other professional services has increased significantly, especially dealers who are still in the quagmire of losses, and urgently need to achieve profitability through third-party professional services, and Changjiu can carry out its operation and management services for all auto dealers. According to CIC, based on the calculation of auto dealer service fees in 2021, if the needs of auto dealers are fully met, the potential size of the mainland auto dealer operation and management service market will be as high as 20.8 billion.
From the perspective of market structure, only a small number of market participants have entered the field of operation and management services of the auto dealership, but these market participants are still in the stage of analyzing customer needs and service scope, and have not yet actually provided such services or generated objective revenue, and the market penetration rate is less than 0.5%, and a stable competitive landscape has not yet been formed. In such an industry background, the first-mover advantage is particularly important, who can quickly roll out the market, can continue to grow with the growth of the industry.
Changjiu Co., Ltd. has been deeply involved in the field of automobile circulation for 17 years, the company has accumulated profound industry expertise, and always grasps the latest trends in the industry, and has the ability to expand its business to the field of automobile dealer operation and management services. In response to the pain points of automobile dealer operation, Changjiu Co., Ltd. has launched the automobile dealer operation management system "Zhikexing".
"Zhikexing" covers CRM SaaS and ERP systems, which can provide systematic, standardized and process-based management services including marketing, sales, after-sales maintenance and customer relations, as well as back-end operations, including human resources, finance and taxation and inventory management.
According to data from CIC Consulting, as of 2022, the average gross profit margin of auto dealers using Changjiu's auto dealer operation and management services is 7.2%, which is higher than the average performance of auto dealers with similar size, brand status and geographical layout, which proves the effectiveness of the company's "Zhikexing" system in empowering auto dealers.
As of June 30, 2023, Changjiu has carried out auto dealer operation and management services in 31 cities in 14 provinces across the country, managing a total of 75 auto dealers. In mid-2022, the revenue of Changjiu's auto dealer operation and management services will be 42.818 million yuan, accounting for 7.8% of the total revenue; By the first half of 2023, the revenue of this service recorded 30.364 million yuan, a year-on-year increase of 135.53%.
Obviously, the strong growth potential of auto dealer operation management services has become the second growth curve of Changjiu shares, and from the scale of the auto dealer operation management service market in 2022 and the revenue of Changjiu auto dealer operation management services, Changjiu shares have gained a large market share in this market and have an obvious first-mover advantage.
At the same time, Changjiu's auto pledged vehicle monitoring business services have accumulated more than 11,000 auto dealers, and these customer resources are potential users, with obvious synergistic effects, and can be quickly transformed into customers of auto dealer operation and management services in a short period of time. According to the prospectus, as of December 8, 2023, Changjiu has signed letters of intent with 144 auto dealers on operation and management services, and these auto dealers are owned by independent third parties, which shows that Changjiu's operation and management services have been widely recognized by the market.
As the auto dealer operation management service continues to be introduced to existing customer resources, the auto dealer operation and management service of Changjiu will maintain strong growth, thus becoming a new driving force for the growth of Changjiu's performance. From a long-term perspective, in the potential market of more than 20 billion yuan, it is also possible for Changjiu to recreate a "Changchang Shares" with the operation and management services of automobile dealers.
Launched automotive supply chain services to build a comprehensive ecological platform
If the automobile pledge vehicle monitoring service is the "ballast stone" of the business development of Changjiu Shares, and the operation and management services of automobile dealers are the new growth momentum of Changjiu Shares in the medium-term dimension, then the launch of automobile supply chain services is an important "starting point" for Changjiu Shares to promote the fission of the company's value in the long-term dimension.
According to CIC, the consumption potential of the mainland passenger car market (especially in lower-tier cities) will be gradually released, and the sales growth rate of new energy vehicles in lower-tier cities will be higher than that of gasoline-powered vehicles in the next five years. However, most NEV manufacturers do not have extensive sales channels in China's lower-tier cities, and face many challenges in vehicle sales, repair and maintenance, and the market demand for related services in lower-tier cities is on the rise.
Based on the potential opportunities brought about by the "sinking" of new energy vehicles, Changjiu Co., Ltd. conforms to the industry trend, closely follows the national strategy of "cars to the countryside", and wants to rely on the company's existing resources to help new energy vehicle manufacturers expand their business scope in lower-tier cities, so the company has launched an automotive supply chain service mobile application to promote the sales, delivery and other supply chain services of new energy vehicles. Since April 2023, the app has been officially in trial operation.
Specifically, Changjiu's automotive supply chain service application will link automobile manufacturers, dealers, integrated traders, financial institutions and third-party service providers, covering all links in the field of automobile circulation, so as to build a dynamic and comprehensive ecosystem, so that auto dealers can directly use third-party services including insurance services, financing services, parts supply, logistics services and marketing services on the system, and stimulate the potential value of the entire system.
It is not difficult to see that the launch of the automotive supply chain service application is the integration and extension of the resources accumulated by Changjiu for 17 years, expanding the service ecosystem by building an ecosystem, and enhancing the stickiness and attractiveness of the company's products and services to players in the entire automotive industry chain with the power of ecology, so as to obtain more new users.
The increase in users will also make the ecosystem more perfect, so that the system will have a self-reinforcing "flywheel effect" and promote the prosperity of the platform ecology. And the construction and prosperity of the ecosystem will provide a solid foundation for Changjiu shares to achieve more efficient commercialization, and the company's future growth space will also be opened.
On the whole, after a multi-dimensional forward-looking layout, the investment value of Changchang shares is worthy of the market's attention. While ensuring the certainty of the company's performance growth, the second largest growth curve, the automobile dealer operation and management service has become a new driving force to promote the company's performance growth, which will make the performance growth of Changjiu shares more flexible, and the automotive supply chain service will lay a solid foundation for the future value fission of Changjiu shares. Under the coordinated development of the three major businesses, the future development of Changchang shares is reverie.
The listing is expected to become a new starting point for the high growth of Changjiu shares, because the listing can enhance the brand influence of Changjiu shares, which is conducive to the expansion of the company's business, and the investment of the raised funds can promote the accelerated development of the company's various businesses. With the continuous release of long-term stock performance, the company's intrinsic value will continue to increase, which is expected to push up the stock price and bring excess returns to investors. Based on this, it may be a high probability event that Changchang shares will be grabbed by the market at the IPO stage.