Rabbit Watch HKEX: Ranked first in Southeast Asia, team from OPPO, revenue of nearly 100 billion in the past 3 years, operating losses of 3.6 billion US dollars, largest customer of PDD.

On the evening of June 16th, Jitu Express officially submitted its IPO application in Hong Kong. Joint sponsors are Morgan Stanley, CICC, and Bank of America.

Earlier on the same day, it was reported that Jitu plans to submit a Hong Kong IPO application within the next few days, with plans to raise $500 million to $1 billion.

In the minds of many, Jitu's development can be described as "fierce", this express delivery company, which started in Southeast Asia and then relied on Pinduoduo, has become the biggest dark horse in the express delivery industry.

Industry insiders revealed that Jitu is expected to be officially listed for trading around "Double Eleven".

Ranked first in Southeast Asia, rapid growth in the Chinese market

Jitu Express is a global logistics service provider founded by Li Jie, former CEO of OPPO Indonesia, in 2015.

With the resources of the OPPO system, Jitu established a foothold in Southeast Asia in just two years and entered the Chinese express delivery market in 2020.

Currently, Jitu Express's express delivery network covers 13 countries including Indonesia, Vietnam, Malaysia, the Philippines, Thailand, Cambodia, Singapore, and China, including the fastest-growing emerging markets globally, and is constantly expanding to Latin America and the Middle East.

According to Frost & Sullivan's data, based on parcel volume in 2022, Jitu is the number one express delivery operator in Southeast Asia with a market share of 22.5%. In the Chinese express delivery market, based on parcel volume, Jitu's market share has reached 10.9%, with a geographic coverage rate of over 98% in China's counties and districts.

It is worth noting that although Jitu only started its network in China in 2020, its growth rate has been faster than expected.

According to the prospectus data, from 2020 to 2022, the revenue data divided by geographic segments shows that in 2020, revenue from China accounted for only 31.19%, while Southeast Asia accounted for 68.16%. However, in 2022, revenue from China accounted for 56.36%, becoming the market with the most internal revenue sources for Jitu.

According to industry insiders, a daily order volume of 20 million is the life and death line for the express delivery industry. It took ZTO 16 years, Yunda 19 years, YTO 18 years, and STO 25 years to cross this line, while Jitu only took 10 months. Currently, Jitu's daily order volume in China has exceeded 40 million.

Express "Roll King"

The domestic express delivery industry has been extremely "rolled", as can be seen from the so-called "Seven Powers of the Warring States" and the annual price wars.

However, Jitu Express has disrupted the domestic express delivery industry with its aggressive pricing strategy and has been called the "Roll King" of express delivery. In 2020, Jitu was once collectively "blocked" by its peers. On April 6, 2021, the Yiwu Postal Administration issued a warning letter to Jitu, pointing directly to its "low-price dumping" behavior.

Jitu is willing to burn money, and it has money to burn, which is related to the fact that its founder, Li Jie, is from the BBK Group. Jitu Express received investment from Duane Reade as soon as it was established. Li Jie not only has a close relationship with OPPO, but also is a capable assistant of Duane Reade Electronics' Duane Reade. With Duane Reade's relationship, Jitu Express entered the domestic market and received a lot of financial support from BBK, vivo, and OPPO.

Jitu also expanded its network through rapid mergers and acquisitions. In October 2021, Baishi and Jitu jointly announced their intention to form a strategic partnership, with Baishi Group transferring its domestic express delivery business to Jitu for about 6.8 billion yuan (about 1.1 billion US dollars). In May 2023, SF Holdings transferred its subsidiary Fengwang Holdings to Jitu for 1.183 billion yuan.

Recently, there have been market rumors that SF is in talks with Jitu about investing in Jitu Global by taking a 1%-2% stake. The specific investment amount and cooperation details are still under discussion. Although neither party has responded, industry insiders believe that the cooperation between the two parties is not surprising and is in line with market expectations.

Nearly 100 billion yuan in revenue in three years, with an operating loss of 3.6 billion US dollars

During the epidemic in the past three years, Jitu's revenue has skyrocketed, nearly quadrupling.

According to the prospectus data, Jitu's operating revenue was 1.535 billion US dollars in 2020, 4.852 billion US dollars in 2021, and 7.267 billion US dollars in 2022, with revenue of nearly 100 billion yuan in three years.

However, from the YoY growth rate of revenue, it is decreasing. The data shows that the YoY growth rates of revenue for the company in 2020, 2021, and 2022 are 357.7%, 216%, and 49.8%, respectively.

As for net profit, Gogovan has started to turn losses into gains. The net profits for 2020-2022 are -664 million USD, -6.192 billion USD, and 1.573 billion USD, respectively.

However, the operating profit, which truly measures Gogovan's operating ability, is not very optimistic. The data shows that its operating profit for 2020-2022 is -606 million USD, -1.647 billion USD, and -1.389 billion USD, which means a loss of 3.6 billion USD in three years.

The main reason for the loss is that Gogovan is still in the stage of "burning money" to grab market share in China.

The prospectus shows that in terms of the average revenue and cost of a single package, in 2021 and 2022, Gogovan's revenue per single package in the Southeast Asian market is 1.1 USD and 0.95 USD, respectively, and the cost is 0.79 USD and 0.76 USD, respectively. In the Chinese market, the revenue per single package is 0.26 USD and 0.34 USD, respectively, and the cost is 0.41 USD and 0.4 USD, respectively.

On the other hand, although multiple mergers and acquisitions help Gogovan to win more market share in China, they also have to bear huge losses behind them. For example, in 2022, Shunfeng Fengwang's revenue was 3.275 billion yuan, and the net loss was 747 million yuan; in the first quarter of 2023, the revenue was 691 million yuan, and the net loss was 143 million yuan.

Pinduoduo is the largest customer

Gogovan claims to provide comprehensive express delivery services for leading e-commerce platforms such as Shopee, Lazada, Tokopedia, Taobao, Tmall, Shein, Noon, as well as merchants and consumers on short video and live streaming platforms such as TikTok, Douyin, and Kuaishou. It provides express delivery solutions for leading e-commerce platforms to help them develop rapidly in the process of entering new markets.

In fact, behind Gogovan's rapid rise, Pinduoduo deserves credit. The data shows that in 2020, Pinduoduo's express delivery market share was 31%, and 90% of Gogovan's express delivery volume comes from Pinduoduo.

As Gogovan's largest customer, although Pinduoduo's revenue share remained at 35% in 2020 and 2021, it contributed 500 million USD and 1.7 billion USD in performance, respectively.

However, some analysts believe that in the future, Gogovan may face an awkward situation of being both defeated and supported by Pinduoduo, with the introduction of anti-monopoly regulations and the rise of new e-commerce forces.

Last year, in order to go public, Gogovan began to reduce the revenue share from Pinduoduo by half to 17%, but it still contributed 1.2 billion USD in revenue.

Tencent, Hillhouse, and Sequoia are all major shareholders

According to data, prior to its IPO, Kuaishou had received multiple rounds of equity financing, with investors including Tencent, Boyu, ATM, D1, Hillhouse, Sequoia, SF Express, Dahlia, SAIGrowth, and CMB International.

Looking at its historical financing, from its establishment in 2015 to 2018, Kuaishou completed two rounds of financing, raising nearly $200 million in total. In 2020, Kuaishou began to enter the Singapore and Chinese markets. In that year alone, Kuaishou completed two rounds of financing, totaling $1.3 billion. In 2021, Kuaishou continued to complete two rounds of financing, totaling $3.9 billion.

In addition, one month before submitting its prospectus on May 16, Kuaishou completed a Series D financing round, raising $200 million at $7.64 per share. If calculated based on a total share capital of 1.697 billion shares, Kuaishou's valuation in this round reached $13 billion.

In terms of equity structure, founder Li Jie is the largest shareholder, holding 11.54% of the shares; Tencent is the second largest shareholder, holding 6.32% of the shares; Boyu is the third largest shareholder, holding 6.1% of the shares; and ATM is the fourth largest shareholder, holding 5.49% of the shares. Hillhouse Capital holds 2% of the shares, and Sequoia holds 1.62% of the shares, ranking sixth and eighth among the largest shareholders, respectively.

Core Team

According to 36Kr, there are many OPPO veterans in Kuaishou's current management team, including the youngest executive, CEO Fan Suzhou, and former OPPO Jiangsu boss Zhang Yuan.

Fan Suzhou began following founder Li Jie in 2009, mainly responsible for sales at OPPO Jiangsu. At that time, Li Jie was the general manager of Jiangsu, and after working for 4 years, he began to act as the agent for OPPO in Indonesia.

Without hesitation, Fan Suzhou followed Li Jie to Indonesia. When Li Jie was the CEO of Indonesia, Fan Suzhou became the general manager of the West Java region in Indonesia. Interestingly, Fan Suzhou graduated from a very ordinary undergraduate school, Henan Normal University. But 14 years of persistence has led to today's achievements.

Zhang Yuan, 54 years old this year, was once the general manager of Zhongshan Xiaobawang Company and later founded OPPO Jiangsu, becoming Li Jie's early leader. In other words, it was Zhang Yuan who recruited Li Jie to OPPO Jiangsu. Today, Li Jie has not forgotten his old leader.

In addition, there are many NetEase-related personnel in Kuaishou's board of directors. For example, Yang Zhaoxuan, who is only 39 years old, is already the CFO of NetEase.

Kuaishou's CFO is Zheng Shiqiang, who joined the company in 2021 and came from PwC. For a company, this kind of executive change is to prepare for going public, so Kuaishou had already decided to IPO no later than 2021. Zheng Shiqiang was once the co-CFO of Hello TransTech, but his three years of hard work ultimately failed to help the company go public. Prior to Hello TransTech, Zheng Shiqiang was also the CFO of WeDoctor, but the company has yet to go public.

Behind the capital operation of Gogovan is a big shot named Liu Erfei, who spent 20 years on Wall Street and managed the IPOs of China Telecom, China Mobile, and other companies. Recently, it is worth noting that the joint sponsor of Wang Shi's Deep Rock SPAC company (Hong Kong stock) is Liu Erfei, the founder of Asia Investment Capital, who also serves as a director and CEO.

In the end, it all comes back to founder Li Jie:

Li Jie, 48, worked at OPPO for 15 years, starting as a salesperson for electronic audio and video products in Jiangsu, and gradually becoming the general manager of Jiangsu and Anhui at the age of 33.

Li Jie was highly regarded by Duan Yongping's disciple Chen Mingyong at OPPO, and the company even established the "Li Jie Award" to reward top salespeople in its global sales organization for Li Jie's outstanding sales ability.

Even during the COVID-19 pandemic when Gogovan needed money, OPPO lent Gogovan $120 million.

In 2013, when Li Jie was 38 years old, he began serving as the founder of OPPO's first overseas exclusive sales agency. Two years later, he left OPPO and founded Gogovan.

It is worth noting that Chen Mingyong currently holds 4.4% of Gogovan's shares through Team Spirit Group Limited, making him the largest individual shareholder other than Li Jie. The prospectus also shows that Chen Mingyong served as a director of Gogovan's board for a year during the pandemic.

Overall, both former leaders and subordinates can get along harmoniously, proving that Li Jie does have some outstanding qualities.

Success in going public is uncertain, Gogovan Overseas Edition may be a new opportunity

Although Gogovan had gone through multiple rounds of financing before this, its cash on hand has still decreased significantly due to continuous expansion and losses.

As of the end of December 2022, Gogovan's cash on hand was $1.5 billion, a decrease of $600 million from the same period last year. On April 30, 2023, its cash on hand further decreased to $1.236 billion. At the same time, in 2022, Gogovan's adjusted loss was nearly $800 million.

This also means that if Gogovan wants to continue to expand and engage in price wars, it needs more financing.

However, the current Hong Kong stock market lacks confidence, and it is uncertain whether Gogovan can successfully go public while still incurring losses.

At the same time, analysts believe that although the market is vast, Gogovan's usual low-price strategy is clearly unsustainable. In March of this year, whether on a YoY or MoM basis, the average ticket revenue of SF Express, Yunda, YTO Express, and Shentong Express all declined. Some securities analysts pointed out that the competition in the express delivery industry has exceeded expectations, and the uncertainty of corporate profitability has increased under the background of intensified price wars. A company's strong profitability, abundant cash flow, and low financial risk are the confidence for a new round of price wars.

It is worth noting that in 2022, JiTu began to enter Saudi Arabia, the United Arab Emirates, and Egypt in the Middle East, and also expanded to Brazil and Mexico in Latin America. Some analysts believe that if Pinduoduo's overseas version can really take off, it may bring great help to JiTu, and JiTu can also tell a new story because of this.