[IPO Frontline] Flash Express sprints toward US stock market, faces market test behind dazzling financial report
The U.S. stock market may welcome a new Chinese instant delivery concept stock.
Recently, China's well-known on-demand delivery service provider Flash Express filed its IPO prospectus with the U.S. SEC, planning to list on the Nasdaq under the ticker "FLX". If successful, Flash Express would become the second Chinese instant delivery company to go public in the U.S., following $JD.com(JD.US) $JD-SW(09618.HK) 's subsidiary $Dada Nexus(DADA.US).
Even before this IPO attempt, Flash Express was already a "darling of capital". Qichacha data shows that from 2014 to 2021, Flash Express completed 10 rounds of financing, with investors including prominent institutions like Shunwei Capital, CDH Investments, Tiantu Capital, Wuyue Capital, and SIG Asia Investments.
Additionally, Wang Sicheng's Pusi Capital also invested in Flash Express.
According to the 2024 Hurun Global Unicorn Index, Flash Express ranked 1118th with a valuation of 7.1 billion yuan, though its valuation reached 10 billion yuan in 2022.
Annual Rider Costs Near 4 Billion, Profitability Continues to Strengthen
Flash Express is a one-to-one urgent delivery platform in the intra-city instant delivery industry, providing services to individuals and businesses for items like cakes, flowers, documents, and computers.
According to iResearch, Flash Express is China's largest one-to-one dedicated delivery service provider, holding about 33.9% of the independent on-demand delivery market in 2023. As of June 30, 2024, its services covered 295 Chinese cities, with approximately 2.7 million registered riders and 88.9 million registered customers.
In its prospectus, Flash Express highlights its delivery service's unparalleled time certainty, safety, and differentiated service quality, which customers are willing to pay a premium for. Operational data from recent years shows Flash Express has benefited from the one-to-one instant delivery market boom. Completed orders grew from 159 million in 2021 to 271 million in 2023, and from 125 million in H1 2023 to 138 million in H1 2024.
Order growth has driven revenue expansion, rising from 3.04 billion yuan in 2021 to 4.529 billion yuan in 2023, with H1 2024 revenue at 2.284 billion yuan, up 7.6% YoY.
In terms of profitability, while Dada Group was still deep in losses, Flash Express turned profitable. It achieved a net profit of 110 million yuan in 2023 and 124 million yuan in H1 2024, surging nearly 200% YoY.
For instant delivery companies, profitability is challenging due to high operational costs like rider compensation and marketing. Flash Express's turnaround since 2023 stems mainly from cost optimization through scale effects.
Rider costs remain high, with payments and incentives totaling 3.975 billion yuan in 2023, accounting for 87.8% of total revenue. However, thanks to scale effects and operational efficiency, rider costs as a percentage of revenue have declined yearly, dropping to 85.4% in H1 2024. Efficiency is reflected in the average daily orders per active rider, which increased from 7.2 in 2021 to 9.3 in H1 2024.
Intensifying Competition, Declining Average Revenue Per Order
The instant delivery market is no longer a blue ocean but a fiercely competitive red ocean.
Flash Express faces two types of competitors: established players like Dada, UU Paotui, Fengniao Instant Delivery, and SF Intra-City, and newcomers like JD.com's (09618.HK) "JD Instant Delivery," Alibaba (09988.HK), and Douyin expanding into instant delivery. Additionally, logistics players like Huolala and Didi are entering the intra-city delivery market.
Notably, Flash Express's order and revenue growth slowed in H1 2024, likely due to intensified industry competition.
Amid price wars, even Flash Express, which claims "strong pricing power," has had to lower prices. Its prospectus shows an average revenue per order of 16.5 yuan in H1 2024. Calculated by revenue divided by orders, the average revenue per order was 19.2 yuan in 2021, 18.8 yuan in 2022, and 16.7 yuan in 2023, showing a yearly decline.
Since 2021, Flash Express has controlled operating expense growth, with sales, marketing, administrative, and R&D expenses as a percentage of revenue declining, boosting profitability. However, in today's competitive landscape, its low and declining operating expense ratio may negatively impact operations.
With low barriers and shallow moats in the instant delivery industry, Flash Express's business model lacks significant advantages. Competitors like Dada and Fengniao have strong upstream platform ties, giving them resource advantages. Surviving adversity, maintaining growth, and sustaining profitability will be key challenges for Flash Express.
Author: Yao Yuan
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