With a 57% surge in performance, what did the hidden champion in the digitalization track of automotive circulation, Changjiu Co., Ltd., do right?

Introduction: Born from the automotive industry chain, deeply rooted in the digital track, and expanding globally in the future, Changjiu Co., Ltd. will break through its growth ceiling.

Hidden in the bustling city, quietly making a fortune.

Hidden champions refer to those companies that are not well-known to the public but dominate a niche market with a unique business model that is hard to surpass or imitate. In today's trendy internet lingo, they are called "treasure" companies—the more you dig, the more surprises you find.

Although not as famous as industry giants like CATL, Kweichow Moutai, Tencent, or Alibaba, hidden champions have unique characteristics in their respective fields, especially when their value has not been fully tapped, making them potential investment opportunities.

Generally, hidden champion companies can be divided into two categories: those in niche markets with complex business models that create cognitive barriers, resulting in high gross margins; and those positioned in the mid-to-upper stream of the industrial chain, making them less visible to end consumers.

Changjiu Co., Ltd. (06959.HK), which went public in Hong Kong in January this year, is a small but beautiful company that combines both of these characteristics—a hidden treasure waiting to be discovered, quietly thriving and full of pleasant surprises upon closer inspection.

With 17 years of deep involvement in the midstream automotive circulation sector, Changjiu Co., Ltd.'s main businesses include pledged vehicle monitoring, automotive dealer operation management, and digital supply chain platform services. It is the largest pledged vehicle monitoring service provider in China's automotive circulation sector.

On March 28, Changjiu Co., Ltd. (06959.HK) disclosed its 2023 performance report, its first financial statement since going public.

The report shows that the company's revenue in 2023 reached 641 million yuan, a 17.1% increase from 2022; gross profit was 283 million yuan, up 25.6% year-on-year, with a gross margin of 44%, a 3-percentage-point increase from the previous year. Adjusted net profit was approximately 154 million yuan, a 57% surge compared to the 98 million yuan adjusted net profit in 2022.

Here’s an explanation of why adjusted net profit is used instead of net profit: Due to the company's IPO in 2023 and non-cash expenses like share-based payments, the net profit figure was distorted. Adding back one-time, non-operational expenses like listing costs provides a fairer reflection of the company's self-sustaining profitability.

2023 was a pivotal year for Changjiu Co., Ltd., marking its successful listing on the Hong Kong Stock Exchange and continued strong performance, thoroughly validating its profitability.

With such impressive growth, it’s worth delving deeper into what the company did right and the underlying drivers of its success.

01 The Most Automotive-Savvy Player in the Digital Track

The company’s focus on the digitalization of automotive circulation dates back to 2006 when it was a division of Jilin Changjiu Industrial Group—a "Top 500 Chinese Private Enterprise," Jilin’s second-largest private company, and a giant in the automotive value chain. Initially, it provided pledged vehicle monitoring services (also called intelligent risk management) for the group's internal automotive finance operations, later expanding into other digital automotive businesses like vehicle data and supply chain services.

As the saying goes, "During a gold rush, sell shovels." Surprisingly yet predictably, driven by China's automotive circulation industry's rapid development over the past two decades, Changjiu Co., Ltd.'s "good tool" evolved into a "good business," using digitalization to complete the grand automotive value chain of Changjiu Group, spanning manufacturing, sales, logistics, and finance.

With the group’s foresight in digital strategy—similar to Alibaba’s spin-off of six business units for separate listings—preparations began in 2022 to list this automotive finance and digital business segment. Changjiu Co., Ltd. became the second piece of the "Changjiu" capital empire after "Changjiu Logistics."

According to Frost & Sullivan data cited in its prospectus, by 2022 revenue standards, Changjiu Co., Ltd. held a 47.9% market share in pledged vehicle monitoring, surpassing the combined share of the next four competitors and leading the second-place player by over 20 percentage points, making it the absolute leader in this niche digital automotive circulation sector.

Undoubtedly, pledged vehicle monitoring is Changjiu Co., Ltd.'s core business. The 2023 performance report shows that this segment contributed 575 million yuan in revenue, accounting for nearly 90% of total revenue, with a gross margin exceeding 40%.

What exactly is pledged vehicle monitoring? To understand this, one must first grasp the automotive industry’s value chain.

The automotive value chain roughly consists of: upstream manufacturing → midstream circulation → downstream end-user demand.

Midstream participants include automotive dealers or trading companies (e.g., 4S stores), financial institutions, and third-party service providers.

In the midstream sales process, 4S stores typically "pledge vehicles" as part of a common "tripartite financing" arrangement.

Simply put, due to the high value of vehicles, most 4S stores borrow from financial institutions partnered with automakers to finance inventory, easing cash flow pressure. Naturally, the purchased vehicles must be pledged to banks. With vehicles stored at 4S stores, financial institutions’ risk control departments require third-party oversight to monitor the vehicles in real-time, ensuring comprehensive, lifecycle asset supervision to mitigate risks.

This is where Changjiu Co., Ltd.'s pledged monitoring services come into play. Using technologies like "intelligent platforms + IoT + big data," it monitors pledged vehicles, manages vehicle certificates and keys, and identifies, resolves, and alerts financial institutions to risks, offering a one-stop solution for tripartite financing among manufacturers, dealers, and banks.

In short, specialized tasks require specialized expertise.

How does it empower automotive circulation? Leveraging deep industry insights and technological advantages, Changjiu Co., Ltd. has developed digital tool-based solutions to enhance automotive circulation, assisting financial institutions in loan risk control, saving banks significant resources, improving monitoring efficiency, and facilitating smooth transactions among all parties.

This relatively specialized concept, coupled with limited exposure to end consumers, means Changjiu Co., Ltd. remains little-known despite serving over half of China's automotive circulation sector.

As of December 31, 2023, its clients included 225 financial institutions (covering all of China’s "Big Six" state-owned banks, 12 joint-stock banks, and 25 auto finance companies) and 17,362 auto dealers across 500+ cities in 31 provinces. Among China’s top 100 auto dealer groups, 92 use Changjiu Co., Ltd.'s pledged vehicle monitoring services.

Low sales expense ratios further reflect high customer loyalty. Prospectus and performance reports show that from 2020 to 2022, sales expenses remained around 1.1%, dropping further to 0.95% in 2023.

This indicates that Changjiu Co., Ltd.'s growth isn’t driven by sales but by its leading position and strong customer loyalty, reaching a self-sustaining stage where product quality speaks for itself.

Changjiu Co., Ltd.'s leadership in pledged vehicle monitoring stems from two core moats:

First, its strong R&D capabilities and solid technological foundation. Its systems include VFS, Jiuchetong APP, RFID tags, PDAs, OBD devices, safes, and data analytics. It also established industry standards for pledged vehicle monitoring and holds 21 copyrights and 11 patents in China, far exceeding peers.

As of December 20 last year, only two market players had established comprehensive pledged vehicle monitoring systems—Changjiu Co., Ltd. being one.

Second, after 17 years of 深耕， it boasts unparalleled 渠道 synergy, nationwide coverage, economies of scale, and high customer stickiness.

The automotive digitalization track is challenging, requiring more than just technology due to variables like people, vehicles, and logistics. Only seasoned players like Changjiu, with 17 years of experience, can maintain industry leadership while exploring new 业务 and clients—a feat impossible without deep expertise. Calling Changjiu the most automotive-savvy player in digitalization is no exaggeration.

Recently, Changjiu Co., Ltd. partnered with Metrobank, one of the Philippines’ largest banks, to explore overseas expansion of its flagship pledged vehicle monitoring 业务， replicating China’s mature tripartite financing model for domestic automakers, overseas banks, and dealers in Southeast Asia.

Currently, overseas demand for Chinese-style pledged monitoring is high, driven by Changjiu’s customer loyalty. Chinese automakers exporting vehicles rely on its services, naturally extending its 业务 to Southeast Asia as the first step toward global expansion.

Once this model succeeds in Southeast Asia, further expansion into markets like Europe and America could break domestic growth ceilings, unlocking significant new potential.

In summary, Changjiu Co., Ltd. is a company born from the automotive industry, deeply rooted in digitalization, poised to 突破 growth limits through global expansion.

02 The Second Growth Curve: "Data Elements x Automotive" Reshaping Circulation

Reviewing Changjiu Co., Ltd.'s business evolution, it has progressed through three stages: organic growth, organic + external growth, and comprehensive digital transformation.

2006–2016: Organic growth phase.

Then a risk management division under Changjiu Group, it primarily served internal dealers’ pledged monitoring needs, relying mostly on manual inspections—the starting point of China’s pledged vehicle monitoring industry.

2016–2022: Organic + external growth phase.

With IoT and big data 成熟， its predecessor, Changjiu Jinfu, developed a "smart platform + IoT + big data" digital risk management solution, shifting to tech-driven operations with minimal human intervention. During this phase, it began external 赋能， laying the groundwork for industry leadership.

2022–present: Comprehensive digital transformation phase.

Facing challenges like declining foot traffic, profitability, and liquidity 压力， auto dealers urgently need digital 全渠道 solutions—Changjiu’s specialty.

With 17 years of automotive circulation data, Changjiu combines industry insights with digital tools, launching dealer management software "Zhikexing" and supply chain platform "Jiucheng GO."

Its proprietary Polaris data warehouse enables real-time updates, leveraging exclusive data and modeling capabilities to empower dealers.

Per the 业绩公告， smart 业务 (data modeling) is now a priority, aligning with national "Data Elements X" initiatives.

This 独家 data is Changjiu’s unique asset, soon enabling it to sell not just software but data-driven modeling solutions. As data asset accounting policies mature, this "gold mine" will reveal its true value.

In other words, all preparations are complete—just awaiting commercialization.

03 Conclusion

Clearly, at each stage, Changjiu Co., Ltd. has focused on one goal while preparing for the next, methodically strengthening its capabilities. Alongside its automotive DNA, its technological 基因 has deepened over time.

This approach reflects a 商业模式 shift—from unsustainable project-based work to scalable software products and sticky data solutions, enhancing 收入 sustainability and customer loyalty.

Gold will eventually shine. Its Hong Kong listing has placed Changjiu Co., Ltd. under the capital market spotlight.

Don’t underestimate its data potential. The second curve, "Data Elements x Automotive," will reshape circulation, ensuring Changjiu is no longer "hidden."