The popularity of new stocks in Hong Kong seems to have risen.

On June 29, Zhitong Financial APP learned that Quantification Pai Technology Co., Ltd., a provider of scene-based digital solutions, submitted an application for listing on the main board of the Hong Kong Stock Exchange, with China International Capital Corporation and CITIC as its co-sponsors.

It is well known that Internet companies have always had high gross margins and high growth, but judging from its prospectus, this little-known Internet technology company does not seem to be the case.

Performance growth has been weak in recent years

Quantitative Technology is a leading provider of scene-based digital solutions in China, building and operating a variety of digital scenarios, connecting scene partners and their end users by promoting consumer spending, helping them maintain, expand and activate their end-user base.

According to the APP of Zhitong Finance, from 2019 to 2021, the company's income was 372 million yuan, 197 million yuan and 351 million yuan respectively, and the operating profit was 68.264 million yuan, 22.566 million yuan and 54.647 million yuan respectively. With the exception of a sharp decline in 2020, performance in 2019 and 2021 was roughly the same.

In 2020, in addition to the "black swan" of the COVID-19 epidemic, the company terminated cooperation with its second largest customer, and its performance declined significantly as Guizhou tackled the risk of online lending, reducing the income of customers from financial institutions. In the second half of 2020, due to the launch of new products, the number of scene partners and digital transactions both increased, and recovered after the superimposed epidemic, which led to a pick-up in 2021.

During the reporting period, the company's gross profit margin was 82.8%, 76.9% and 75.9% respectively, although affected by the decline in the number of customers of financial institutions, it was still at a high level.

Due to the expansion of new digital marketing and digital trading business, the cost of technology and outsourced services of the company increased by 225.6% in 2021, and the cost of salaries and benefits and data services also increased. The cost of sales increased from 63.805 million yuan in 2019 to 84.727 million yuan in 2021, accounting for about 24.14% of revenue.

During the reporting period, R & D expenses were 30.793 million yuan, 29.056 million yuan and 44.415 million yuan respectively, mainly due to the increase in the number of R & D personnel and the increase in the average salary of R & D personnel, which currently accounts for about 12.65% of revenue.

In terms of liquidity, the company's cash and cash equivalents were 48.483 million yuan and current liabilities were 72.588 million yuan at the end of 2021.

According to Zhitong Financial APP, the company has the risk of over-concentration of customers. During the reporting period, the top five customers accounted for 94.2%, 93.5% and 74.0% of the total revenue, respectively. The company's sales to its largest customers accounted for 53.8%, 43.3% and 37.8% of the total revenue in the same period, respectively.

Online loan platform transformation of e-commerce, the road ahead can be smooth?

According to the prospectus, the company's two main businesses are digital marketing and digital trading. In fact, to put it simply, it is to advertise online to attract users to use their own credit wallet "Sheep Xiaoba" loan and earn a share from it. In the second half of 2020, the company transformed "Sheep Xiaoba" into an e-commerce platform and began to sell goods.

However, at present, the company's e-commerce business does not seem to be doing very well. By 2021, the company's top five customers still account for more than 70% of revenue, and all five customers come from the financial industry: two commercial banks, one financial technology company and two consumer loan companies.

According to user data, the number of company scenario partners has increased from 80 in 2019 to 214 in 2021, with the latest figure of more than 600. By the end of 2021, the number of paying sheep Xiaoba users reached 645000. According to related news, the platform has 7500 + commodity brand coverage. However, there are currently 3763 complaints about Sheep Xiaoba on the black cat complaint platform, with netizens claiming that they were subjected to violent collection, phone harassment, false shipments of purchased goods and non-return after the loan.

According to Frost Sullivan, in terms of revenue, the company ranked eighth among Chinese scene digital solution providers in 2021 and first among performance-based scene digital solution providers, accounting for 7.2% of users.

According to the APP of Zhitong Finance, the transformation from online lending platform to e-commerce such as "Sheep Xiaoba" has been common since 2020. Not only because of the sudden epidemic, a large number of online loans are overdue, but also because in the environment of stricter supervision of online loans, it is more and more difficult for online loan platforms to obtain new users.

But can the transformation of e-commerce find new profit growth points? At a time when the e-commerce industry has become the Red Sea, it is difficult for new operators to break through in the encirclement of giants such as Taobao, Yunji Inc, JD.com, Pinduoduo, and so on. Although there are teams and users, how to promote and select products is still a difficult problem for mutual fund companies. For example, Hongling Venture Capital, which decided to transform its e-commerce platform in 2018, is still recruiting key positions such as "purchasing and marketing director, home purchasing and marketing manager, organic food purchasing and marketing manager" two years later.

Stricter protection of personal information in recent years is another factor that could hamper a company's growth. Since 2021, the data Security Law of the people's Republic of China, the personal Information Protection Law of the people's Republic of China and the measures for Network Security Review have come into effect one after another. for companies that need to use a lot of user data, such as digital advertising and e-commerce, the impact is greater than that of other Internet companies, and the increased compliance costs will be a further drag on corporate profits.

Compared with other Internet companies, the current business and revenue sources of Quantification Technology are relatively single, although the current performance does not show an obvious downward momentum, but in the long run, once the business transformation is trapped and the market expansion is unfavorable, and unable to find new profit growth points, then in the overall environment of Internet traffic dividends peaking and increasingly fierce competition, the company's performance prospects are hardly optimistic.