Product: Sina Finance listed Company Research Institute

Author: Leyla

The scale of China's cloud business services market is huge, and the growing mobile Internet penetration, the rapid development of online retail market and the strong spending power of Chinese residents are all driving the continuous growth of China's cloud business services market.

Youzan Technology, China's largest provider of cloud business services, recently submitted a prospectus to the Hong Kong Stock Exchange, hitting the motherboard IPO. The main purpose of this listing will be used to further develop and expand its SaaS business.

Youzan Technology provides SaaS products including Zanwei Mall, likes retail, Youzan chains, praise industries and likes Education. In the first half of this year, 75.9% of Youzan's revenue came from its SaaS business. In the past three years, the ARPU of Zai Tech subscription solutions and merchant solutions has been increasing continuously, which has contributed to the steady growth of the company's gross profit margin.

　　Focus on SaaS service

In recent years, with the rapid development of new channels such as short video and live e-commerce, enterprise business models are constantly changing, and various industries need more professional data services to cope with market and consumer changes, which promotes the continuous expansion of the SaaS industry market.

China's SaaS industry started relatively late and is in a stage of rapid growth, with a market growth rate of more than 30% in recent years. With the explosive growth in recent years, according to the estimation of Ai Media Consulting, the size of the SaaS market is expected to grow to 25.34 billion yuan in 2020 and more than 32 billion yuan in 2021.

Youzan Technology is China's largest cloud business service provider by 2020 revenue, with a market share of 6.9%, according to the prospectus. At present, the cloud service market is relatively scattered, Youzan technology is currently in a leading position in the industry, the future market integration is worth looking forward to.

In February this year, China Youzan, which has been listed in Hong Kong for a decade, announced that it would be privatized and delisted, and its subsidiary Youzan Technology would be listed. On August 30th, Youzan Technology submitted a prospectus to the Hong Kong Stock Exchange and listed on the Hong Kong stock main board IPO. Before IPO, China held a 51.9% stake in Youzan Technology.

Youzan Technology will not include the parent company's payment business. After simplifying the business structure, the company will focus on SaaS business. The main purpose of this listing will be used to further develop and expand its SaaS business.

In 2013, Youzan Technology launched its first SaaS product, which enables merchants to cover online store construction, product display and order fulfillment, multi-channel marketing, customer relationship management, membership program management and digital background for business analysis and reporting. In 2017, Zan Technology launched PaaS products and Zanyun. It can provide merchants with customized plug-ins, performance and functions of standardized SaaS products.

　　SaaS business contributes 70% of revenue

Currently, Zan Tech's main cloud business services include subscription solutions (SaaS business) and merchant solutions. In the first half of this year, 75.9% of Youzan Tech's revenue came from SaaS business.

In terms of revenue, Youzan Technology had revenue of 669 million yuan in the first half of 2021, compared with 712 million yuan in the same period in 2020, according to the prospectus, which it said was mainly due to a decline in revenue from merchant solutions. From 2018 to 2020, the company's revenue was 557 million yuan, 998 million yuan and 1.576 billion yuan respectively.

In the same period, the net losses of Youzan Technology were 714 million yuan, 500 million yuan and 333 million yuan respectively. Youzan Technology said that the net loss was mainly offset by sales expenses, equity settlement service payments of the ultimate holding company and other operating expenses.

Among them, subscription solutions are the core source of revenue for Youzai Technology. In the first half of 2021, the revenue of Youzang Technology subscription solution was 508 million yuan, accounting for 75.9% of the total revenue. From 2018 to 2020, Youzan Technology's revenue from subscription solutions was 315 million yuan, 594 million yuan and 1.048 billion yuan respectively, accounting for 56.6%, 59.5% and 66.5% of the total revenue, respectively.

　　The gross profit margin has increased steadily in the past three years.

As a vertical SaaS service provider in the industry, what contributes most of its revenue to Youzan is its private traffic operation established by the traffic giant ecosystem. Mainstream social platforms, including Wechat, Kuaishou Technology and Douyin, are the main customers of Youzan.

By the end of 2020, the penetration rate of online shopping in China was close to 80%, with a population of 780 million online shoppers, and the scale of the e-commerce marketing and sales management market reached its peak in recent years. The rapid development of private e-commerce has brought more development opportunities for e-commerce SaaS. "2021 China e-commerce SaaS industry research report" predicts that by 2022, the market size of e-commerce SaaS is expected to exceed 100 billion yuan.

As of June 30, 2021, Youzan Technology has more than 6 million registered merchants, 19000 new paying merchants in the first half of 2021, and currently 87000 paying merchants. In the first half of 2021, the GMV generated by merchants through their solutions reached 4.81 billion yuan, with an ARPU value of 7582.1 yuan, compared with the ARPU in the same period last year. From 2018 to 2020, Youzan Technology's GMV grew at a compound annual growth rate of 79.35%, with the annual compound growth rate of Youwei Mall among SaaS products reaching 72.55%.

Starting in July 2019, Youzan Technology began charging paying merchants for cloud services. In the past three years, the ARPU of like technology subscription solutions and merchant solutions has been increasing, from 9350.9 yuan in 2018 to 16076.3 yuan in 2020. Thanks to this, the company's gross profit margin is growing steadily. From 2018 to 2020, the company's gross profit margin was 40.20%, 54.99% and 66.43%, respectively. In the first half of this year, the company's gross profit margin was 69.3%, compared with 66.09% in the same period last year.

Youzan Technology, which is at the head of the SaaS industry, has a leading technology iteration and has accumulated a lot of customer resources. At present, Youzan has layout in many fields, such as new retail, education, beauty industry, and so on, looking for new growth points outside private e-commerce.