[Lianyun.com Beijing] report on July 2 (article / Lin Jing)

On June 29th, Quantification Technology Co., Ltd. (hereinafter referred to as "QP") submitted its listing application to the Hong Kong Stock Exchange, with China International Capital Corporation and CITIC as its co-sponsors.

Founded in 2014, Quantification previously provided situational digital solutions to financial institutions mainly under the BaaS business model. In 2017, the raging Internet finance is entering the year of IPO, and Quantification's Quantification Group also considered IPO in the United States, but finally decided to suspend its attempt to list in the United States in December 2017.

Under the stricter supervision of the online loan platform, the quantitative school has also carried out a number of new business explorations. Among the quantitative shareholders, Gao Rong, Fosun and Sunshine Insurance also appeared, holding 5.76%, 9.93% and 15.42% respectively.

The double influence of supervision and epidemic situation, the performance "roller coaster"

According to Frost Sullivan, Quantification ranked eighth among Chinese scene digital solution providers in 2021 and number one among performance-based scene digital solution providers.

However, the market for situational digital solutions in China remains fragmented, with the top 10 participants accounting for about 8.6% of the total market share in terms of revenue in 2021.

According to the prospectus, QF's operating income in 2019, 2020 and 2021 was 372 million yuan, 197 million yuan and 351 million yuan respectively, and the corresponding net profit was 62.648 million yuan, 22.334 million yuan and 54.006 million yuan respectively.

First of all, we can see that the revenue of the quantitative faction shows a "roller coaster" fluctuation. Its performance fell by nearly half in 2020 and rebounded in 2021, but it has not yet returned to its 2019 level.

The Quantification School said in its prospectus that the main reason is that the Office of the leading Group for the Special rectification of P2P Network Lending risk in Guizhou Province issued a notice on doing a good job in the benign withdrawal of online lending information intermediaries in Guizhou Province in 2019, raising the compliance requirements for providing online financial services and affecting the digital solution needs of a number of financial institutions.

In this context, the revenue of its largest customers has decreased. In addition, after completing the previous compensation arrangements, Quantification terminated its cooperation with the second largest customer in 2019.

In addition, the epidemic has greatly restricted its business development activities, and the trading volume of credit wallets and sheep Xiaoba has fallen as a whole.

Second, as can be seen from the prospectus, the Quantification Group is highly dependent on a small number of head customers.

From 2019 to 2021, the top five customers accounted for 94.2%, 93.5% and 74.0% of the total revenue respectively, and the company's sales to the largest customers in the same period were 200 million yuan, 85.4 million yuan and 133 million yuan respectively, accounting for 53.8%, 43.3% and 37.8% of the total revenue in the same period, respectively.

Due to the concentration of customers, one of the risks of quantitative revenue is to follow a small number of customers to show certain fluctuations.

Affected by the decline in income, in 2019-2021, the gross profit margin of the Quantification Group also gradually declined, to 82.8%, 76.9% and 75.9%, respectively. The gross profit was 308 million, 152 million and 266 million respectively.

According to the prospectus, as of the end of 2021, the quantitative distribution of cash and cash equivalents was 48.483 million yuan and current liabilities were 72.588 million yuan.

The Transformation of online loan platform after being regulated

As can be seen from the prospectus, Quantification Group mainly operates all kinds of digital scenarios (including volume enabling scenarios and commercial digital scenarios), thus providing accurate marketing and enabling digital transactions.

Since November 2016, Quantification has enabled partners to conduct transactions with their end users on credit wallets. After the tightening of Internet financial regulation, the 2020 Quantification Group upgraded its credit wallet to Sheep Xiaoba, enabling partners to sell goods and start e-commerce layout.

Sheep Xiaoba covers electronics, catering, household appliances, cosmetics, jewelry and clothing. As of December 31, 2021, Yang Xiaoba provides more than 110, 000 inventory units and has 44.5 million registered users.

In the second half of 2021, the Quantification Group began to build and operate local biosphere scenarios, seeking to empower local merchants and scene partners to sell goods. For example, the consumer map is a WeChat Mini Programs-style digital scene that brings together all the local biosphere scenes operated by the company.

During the reporting period, Quantification Group operated 11 local life circle scenes in Beijing, including Xingfuhui, Tonghuiduo, Mipinghui, Le platform, Dongdonghui, Changhui, Shunpinghui, Chaoyang and Yuefangshan, etc.

However, according to the prospectus, its top five customers are two commercial banks, a financial technology company and two consumer loan companies, meaning its e-commerce business is still struggling to carry the revenue banner.

In addition, there are currently 5543 complaints about Sheep Xiaoba on the black cat complaint platform, including violent collection, phone harassment, false delivery of purchased goods, slow delivery and disclosure of personal privacy.

At the same time, as the replacement of the credit wallet, Yang Xiaoba continues to provide accurate marketing for financial institutions in two ways: one is Yangxiaoba e-commerce scene loan (flower card), which is only used to purchase retail goods provided by scene partners on Sheep Xiaoba. The second is Yangxiaoba financial scenario loan (imprest), which is used for consumer loans for financial institutions.

Gao Rong, Fosun and Sunshine Insurance are shareholders

According to the prospectus, Quantification Group reorganized the company in order to distinguish the company's business from the business carried out by the Science and Technology Group before the IPO, and Beijing Xitui was registered in January 2022.

In March 2022, according to the agreement, Beijing was pleased to buy the entire stake in Quantum Digital. After the acquisition, a series of equity transfers were carried out between Beijing Xi Tui's initial shareholders and quantitative Kebang shareholders.

From the perspective of shareholder structure, as of the latest practicable date, Zhou Hao, the founder of Quantification Group, had the right to exercise a total of about 42.83% of the voting rights through his indirect shareholding and voting agency arrangement in Mars Legend, with Zhou Hao and Mars Legend as the controlling shareholders.

Among shareholders, Gao Rong, Fosun and Sunshine Insurance also appeared. Sunshine Life Insurance holds 15.42%; Yadong Star, owned by Fosun, holds 9.93% through East Asia Star Investment (BVI); Banyan Capital holds 5.76% through Gaorong QTG Holding

Zhou Hao, founder of Quantification School, is a post-80s entrepreneur with a dazzling resume before starting a business. In 2002, Zhou Hao graduated from the Department of Astrophysics of Peking University. In the same year, he went to study in the United States and studied for a doctorate in physics at Rice University. Since then, he has worked on Wall Street for more than a decade, from first Capital to Morgan Stanley to vice president of Barclays.

In 2011, Zhou Hao was lobbied to return home by Citic CEO Tang Ning. After a deep chat with a Chinese managing director of Morgan Stanley, Zhou Hao decided to return home to start a business. And received investment from a number of star organizations. According to Sky Eye check information, before the beginning of 2017, Quantification Group has received five rounds of financing.

When sharing startups in the past, Zhou Hao claimed to be an unprofessional PhD in physics and a believer in data. He said that although many people define QP as a financial technology company, but the company's data technology platform is not only data-driven finance, the future QP's business model has a lot of extensibility.

According to the prospectus, Quantification plans to use the amount raised to improve the company's R & D capability and technology infrastructure; build and expand the company's local ecosystem scene and promote the company's BaaS business model; for potential investments and acquisition opportunities; and for working capital.

In terms of differentiation competition, Quantification Group claims that its unique digital technology platform has formed a closed-loop BaaS model from operation digitization, customer acquisition, target customer analysis to customer activity. Through the five modules of operation, algorithm, goods and services, marketing and customer service, the enterprise operation process can be digitized, enabling enterprises to effectively manage their business processes, marketing tools, end users, and goods and services through a unified interface.