Author: Pan Yan
Producer: Global Finance
Recently, SF Express submitted a prospectus to the Hong Kong Stock Exchange again. Previously, SF Express had submitted the listing application for the first time in August 2023, but the listing application automatically lapsed due to its failure to pass the hearing or listing within the required time.
As early as February 2017, SF Holding achieved A-share listing through the backdoor of Dingtai New Materials, and if it can be successfully listed on the Hong Kong Stock Exchange, SF Holding will become the first express company in China to achieve "A+H" dual listing.
The founder Wang Wei once expressed disdain for landing in the capital market, but under the fierce competition in the industry, listing means adding a channel for financial support, which can provide more ammunition for the fierce price competition in the express delivery industry.
In addition to SF Holdings, Wang Wei now owns three Hong Kong-listed companies, namely SF City, SF REIT, and Kerry Logistics.
Behind SF Holdings' pursuit of listing in many places, it is the only way for express giants to accelerate the pace of internationalization when they enter the stock market competition in China, even if the scale of revenue far exceeds that of domestic counterparts, there is still a long way to go in the international market, which can be seen from the latest performance of UPS, the global express delivery giant.
The domestic market is constantly competitive
In the first half of 2024, China's express delivery business volume increased by 23.1% year-on-year to 80.16 billion pieces, according to monitoring data from the State Post Bureau. Behind the seemingly vigorous development, it is the embarrassing status quo of "volume increase and price decline" of major express companies. In the first half of 2024, China's express delivery revenue per ticket will be 8.15 yuan per piece, a year-on-year decrease of 12.46%.
According to the June 2024 logistics business briefings released by various express companies, the revenue of Yunda, Yuantong and Shentong in June was 2 yuan, 2.25 yuan and 2.01 yuan respectively, a year-on-year decrease of 13.79%, 4.85% and 9.05% respectively.
Even SF Express, which is mainly engaged in mid-to-high-end aging parts, has not been spared. In June, SF Holdings' single ticket revenue was 15.77 yuan, a year-on-year decrease of 3.96%, and this data was 17.00 yuan in January.
At the same time, the gross profit margin of SF Holdings is also declining, from 15.90% in 2020 to 12.60% in 2023. At the beginning of the A-share listing in 2017, its gross profit margin reached 20.07%. Public data shows that in 2023, the gross profit margins of Zhongtong, Yuantong, and Yunda will be 30.36%, 10.16%, and 9.66% respectively. It can be seen that SF's gross profit margin advantage is not obvious.
Some people believe that the low-price competition in the express delivery industry is more like a helpless move and is not sustainable. How to find their own advantages outside the price dimension will become the focus of competition for enterprises in the future.
In fact, in recent years, China's major express companies have sought more funds from various channels to seek differentiated competition while supporting price wars.
In 2021, Shentong Express issued a fixed increase plan to raise 3.5 billion yuan, but it expired after the deadline; YTO Express was more lucky, completing a private placement of 3.79 billion yuan in the same year, and in 2023, Yunda Co., Ltd. will publicly issue 2.45 billion yuan of convertible bonds.
Since its backdoor listing in 2017, SF Holdings has issued multiple rounds of private placement and convertible bonds, raising more than 33 billion yuan.
The most recent private placement took place in 2021, raising 20 billion yuan. The funds raised are mainly used to strengthen infrastructure construction, especially in the field of air transportation. Including aircraft purchase and aviation material purchase and maintenance, transit yard construction project, express equipment automation upgrade project, new Hubei Ezhou civil airport transfer center project, etc.
Among them, Ezhou Airport is the largest investment of SF Holdings, with a total investment of 32.063 billion yuan, aiming to build a route network that "covers the whole country, radiates Asia, and extends to Europe and the United States".
At present, SF Holding has the largest air cargo fleet in Asia, and as of the end of 2023, the fleet of SF Holding has reached 103, of which 86 are self-operated aircraft.
Thanks to the well-established air transportation network, SF Holding has created a strong moat in the field of "timeliness express". In 2023, SF's "time-sensitive express" business has a market share of 63.9% in China, occupying an absolute advantage.
However, in recent years, other express companies have also begun to upgrade the timeliness. As early as 2017, in the ranking of timeliness indicators, SF lost to EMS for the first time in terms of "transportation time". Since then, the three links and one da have also launched their own aging products, directly hitting the hinterland of SF. In addition, YTO and JD.com have also successively won cargo aviation licenses to form fleets.
All this means that in terms of timeliness service, SF Holdings' trump card has gradually faded, and it is being pressed by its peers step by step.
It is imperative to expand overseas
At present, the domestic express delivery market has entered the era of stock, and expanding overseas has become an industry consensus. Express delivery companies such as SF Express, JD.com, Cainiao, and "Three Links and One Reach" are vying to accelerate the layout of overseas warehouses and the construction of overseas terminal distribution networks.
Wang Wei, CEO of SF Holdings, has made it clear that SF's listing in Hong Kong is due to international considerations.
"Many enterprises are operating fluidly, and SF Express should seize the opportunity in internationalization and not go slower than its competitors. If we get the opportunity, we will have good development, otherwise our pace of development will definitely be slower than that of other friends."
In the prospectus, SF Holding stated the reason for listing as "further promoting the internationalization strategy, building an international capital operation platform, enhancing the international brand image, and improving the comprehensive competitiveness". At the same time, one of the purposes of the fundraising is to "strengthen the international and cross-border logistics capabilities of SF Holdings".
To expand the global market, SF Holding first chose to focus on the Southeast Asian market.
According to the prospectus, the "China-Southeast Asia Trade Chain", as one of the largest and fastest-growing trade chains in Asia, accounted for 26.6% of cross-border logistics spending in Asia in 2023, and is expected to grow at a CAGR of 8.8% from 2023 to 2028.
In September 2021, after SF Holding acquired a 51.5% stake in Southeast Asian express delivery giant Kerry Logistics, the following month it renamed its supply chain business as Supply Chain and International Business, which mainly includes the company's supply chain, international business segments, and Kerry Logistics segment.
As a result, SF Holding has embarked on the fast track of "going global", and its supply chain and international business revenue has increased from RMB13.416 billion in 2020 to RMB89.917 billion in 2022. Especially in 2022, the revenue growth of supply chain and international business will reach 124.91%, which will become the biggest variable driving the revenue of SF Holdings.
However, this high growth trend came to an abrupt end in 2023, and the supply chain and international services business became the only business segment with negative growth in 2023, with revenue decreasing by 31.74% year-on-year to 59.979 billion yuan.
The explanation given by SF Holding is that the demand and freight rates for international air and sea transportation have dropped sharply from the historical high in the first half of 2022 to the normalized level of the market three years ago, which will affect the company's international freight and agency business revenue in 2023.
The decline in the supply chain and international business directly caused the first negative revenue growth since the backdoor listing of SF Holdings, and the operating income of SF Holdings in 2023 decreased by 3.11% year-on-year to 258.705 billion yuan.
In addition, in the process of continuously increasing infrastructure construction and mergers and acquisitions, the pressure on the debt side of SF Holdings cannot be ignored.
According to the latest quarterly report data released by SF Holdings, as of the end of March 2024, SF Holdings' monetary funds reached 41.823 billion yuan and trading financial assets reached 11.677 billion yuan. However, at the same time, the total liabilities of SF Holdings reached 122.915 billion yuan, nearly five times that of its initial listing in 2017.
Among them, short-term borrowings increased rapidly from 18.222 billion yuan to 24.603 billion yuan in three months, non-current liabilities due within one year were 9.309 billion yuan, long-term borrowings were 11.897 billion yuan, and bonds payable were 19.259 billion yuan. In addition, SF Holdings has a total of 22.999 billion yuan of notes payable and accounts payable.
Although, SF Holdings said in the prospectus that it "has passed the peak period of capital expenditure", which seems to be deliberately diluting the intention of "listing to make money". However, if SF Holding wants to let go of its international layout in the future, it will inevitably need to replenish ammunition through the secondary market.
How to become an international giant?
In the process of promoting the internationalization of SF Holdings, the e-commerce parts business is still a key step.
According to the "Global Express Development Report (2023)" released by the State Post Bureau, the Asia-Pacific market demand is strong and the largest scale. Affected by the strong pull of traditional e-commerce and the rapid development of new e-commerce, the express delivery business in the Asia-Pacific region has developed rapidly. Among them, the Southeast Asian market, one of the world's most potential emerging markets, will have a parcel business volume of more than 10 billion pieces in 2022 and a business revenue of about 80 billion yuan.
It can be seen that SF Holding wants to gain a foothold in the overseas market, but it still can't avoid the field of e-commerce express delivery, but SF Holding has planted a lot of heels in the field of e-commerce parts, which focuses on cost performance.
As early as April 2020, SF Holding founded "Fengwang Express" to enter the field of e-commerce parts with a franchise model. However, it turns out that SF Express, which is intensively cultivating in the mid-to-high-end field, does not seem to be good at pursuing cost-effective e-commerce parts. At the 2020 financial report meeting, Wang Wei said that in 2021, the average daily order volume of Fengwang will reach 8 million, but the average daily volume of Fengwang in 2022 will only be about 3 million.
As a result, in May 2023, "Fengwang Express" was sold to J&T Express for 1.183 billion yuan.
Regarding the sale of "Fengwang", SF Holding said in the sale announcement that it can focus more on the development of core businesses such as domestic mid-to-high-end express delivery, international express delivery, global supply chain services, and digital supply chain services.
However, this does not mean that SF Holding has given up on the e-commerce parts market. SF Express said that it will continue to build e-commerce express products, and the main "e-brand fast" products will grow steadily, which can meet the diversified needs of customers in the mid-to-high-end economic express delivery market.
On the other hand, e-commerce platforms have their own pawns in cross-border e-commerce logistics.
Taking Ali as an example, in March 2024, Cainiao announced that it would achieve cross-border acceleration in 25 countries around the world. For the five countries in the Middle East, the new consolidation service has been launched, and local consumers can receive cross-border parcels within 7-13 days. According to Alibaba's financial report information, in the field of international logistics, the average daily cross-border parcel volume of rookies has exceeded 5 million.
In addition, in Southeast Asia, where SF Holding focuses on development, it has gradually embarked on the road of "involution".
Taking J&T, which originated in Southeast Asia, as an example, with the e-commerce platform Shopee's self-built logistics Shopee Express, Lazada choosing to cooperate with Cainiao, the price war in the Indonesian express delivery market is becoming more and more intense, resulting in a decline in J&T's single-ticket revenue in Southeast Asia, the "base camp", in 2023.
In fact, for SF Holdings, which is conquering the international market, in addition to domestic express giants, the target or competitors also include United Parcel Service (UPS), Germany Post DHL, FedEx and other international logistics giants that have been in the rivers and lakes for many years.
From the perspective of international express business, nearly 9 percent of the international express market business has been monopolized by the "international big three", and domestic express delivery companies have no right to speak in the international market. Whether it is scale, diversified services, or market value, there is a certain gap. At present, even if Wall Street is not optimistic about UPS, its market value still exceeds 100 billion US dollars, equivalent to more than 700 billion yuan, while the market value of SF Holdings is about 170 billion yuan.
It can be seen that SF Holdings needs to successfully land on the Hong Kong Stock Exchange, but even if it achieves dual listing, the road for domestic giants to go international is still very long, and the challenges they will face in the future will only increase.
Readers are advised that this article is based on public information or relevant content provided by interviewees, and the author of Global Finance and the author of the article do not guarantee the completeness and accuracy of the relevant information. In any event, the content of this article does not constitute investment advice. The market is risky, and investment needs to be cautious! It may not be reproduced or plagiarized without permission.