Wang Wei is pushing for another IPO, with Fengchao's revenue growing rapidly and achieving a turnaround this year.

The big shot in China's courier industry—Wang Wei has successfully taken several companies public in recent years, including $SF Holding(002352.SZ), $SF INTRA-CITY(09699.HK), $SF REIT(02191.HK), and $KLN(00636.HK), all of which are now listed in the capital market.

Less known is that Fengchao Technology (hereinafter referred to as "Fengchao"), the operator of community-wide courier locker services, is also part of Wang Wei's business empire and has recently made a push toward the capital market.

On August 30, Fengchao submitted its IPO prospectus to the Hong Kong Stock Exchange for the first time, aiming to list on the main board. If successful, Wang Wei will add a fifth listed company to his portfolio.

Giant in the Courier Locker Industry, Wang Wei as the Largest Shareholder

Fengchao was incubated by SF Express in Shenzhen in 2015, founded by Xu Yubin, a long-time SF employee who now serves as Fengchao's executive director, CEO, and chairman.

At its inception, Wang Wei provided Fengchao with seed funding and support through SF Express. Additionally, Fengchao received investments from several courier companies, including STO Express (002468.SZ), ZTO Express (02057.HK), Prologis, and YTO Express (002120.SZ) in its early years.

Between 2017 and 2018, Fengchao underwent significant changes in its shareholding structure. During this period, SF Express continued to increase its stake in Fengchao. However, after a public dispute between SF Express and Cainiao over "data interface" issues in June 2018, YTO, STO, and ZTO chose to divest all their shares in Fengchao.

As a result, Wang Wei gained absolute control over Fengchao.

According to the company's prospectus, as of August 20, 2024, approximately 48.45% of Fengchao's total issued share capital is controlled by Wang Wei, the founder of SF Express, and Mingde Holdings, which he effectively controls. Wang Wei is the company's controlling shareholder. Other notable shareholders include Chuannong Longmang (002312.SZ), China Post, and Feiliu Logistics (300240.SZ).

Despite tensions with the "two Tongs and one Da" (STO, ZTO, and YTO), Fengchao has achieved significant growth under the support of the SF Group, expanding its business from logistics and courier services to community services and advertising media. It has now become the leading player in China's smart locker industry.

Data shows that Fengchao is China's largest last-mile logistics solutions provider by 2023 revenue and the world's largest smart courier locker network operator by the number of lockers and parcels handled in 2023.

Currently, Fengchao's business covers 31 provinces in China and 209,000 communities, with 330,200 smart locker units serving 368 million consumers and 3.5 million couriers.

Rapid Revenue Growth, Turning a Profit in the First Five Months of This Year

Fengchao stated in its prospectus that its diversified services have attracted key stakeholders, including consumers, couriers, courier companies, e-commerce platforms, communities, and value-added service partners.

Despite fierce competition in China's e-commerce industry, the sector continues to grow, driven by new models like livestreaming and short-video commerce, leading to impressive parcel volume growth.

According to CIC data, China's last-mile logistics solutions market grew from 31.1 billion parcels in 2019 to 94.3 billion in 2023, with a CAGR of 32.0%, and is expected to reach 166.4 billion by 2028, with a CAGR of 12.0% from 2023 to 2028.

Against this backdrop, Fengchao has expanded its smart locker network, benefiting from market growth. In 2023, Fengchao's last-mile delivery service handled 6.463 billion parcels, while its consumer smart delivery service processed 233 million parcels.

As its scale expanded, Fengchao's revenue also grew significantly, with consumer smart delivery services showing the fastest growth.

From 2021 to 2023, Fengchao's revenue increased from RMB 2.526 billion to RMB 3.812 billion, and from RMB 1.425 billion in the first five months of 2023 to RMB 1.904 billion in the same period in 2024.

However, due to high costs (including depreciation of right-of-use assets, delivery costs, etc.), administrative expenses, and R&D expenses, Fengchao incurred cumulative losses of nearly RMB 3.8 billion from 2021 to 2023.

In the first five months of 2024, thanks to improved gross margins and cost control, Fengchao finally turned a profit, earning RMB 71.602 million.

Caijing Magazine believes Fengchao's turnaround is due to two factors: the positive impact of economies of scale and the efficiency gains from diversified business expansion.

Fengchao stated in its prospectus that its diversified services demonstrate strong cross-selling potential, reducing customer acquisition and retention costs.

Since 2021, Fengchao's operational efficiency has significantly improved, paving the way for profitability. From 2021 to the first five months of 2024, its sales and marketing expenses as a percentage of revenue dropped from 7.1% to 3.9%, while administrative expenses fell from 29.6% to 8.5%.

Additionally, Fengchao's cost of sales as a percentage of revenue declined, leading to improved gross margins. In the first five months of 2024, its gross margin was 26.1%, compared to a gross loss margin of -25.3% in 2021. However, as the proportion of low-margin reverse logistics in total last-mile deliveries increased, the gross margin of its consumer smart delivery service dropped from 31.1% in 2021 to 7.3% in the first five months of 2024.

Notably, as of May 31, 2024, Fengchao's cash and cash equivalents stood at only RMB 859 million, down sharply from RMB 2.049 billion at the end of the previous year.

Fengchao's strategic plan includes expanding its smart locker network, enhancing value-added services, and increasing innovation. However, its current cash reserves seem insufficient to support its ambitious growth plans. Therefore, a successful IPO in Hong Kong to secure funding is crucial for Fengchao's expansion.

Author: Yao Yuan