On the evening of September 28, as Cargo Lala (listed entity is Lala Technology) updated its prospectus to the Hong Kong Stock Exchange, its latest financial situation for the first half of 2023 also surfaced.
Both revenue and profit grew, and the positive trend continued in the first half of 2023
According to the prospectus, in the first half of 2023, Cargo Lala's global freight GTV reached US$3.93 billion, up 32% year on year, platform revenue reached 600 million US dollars, up 24.8% year on year, adjusted profit was 150 million US dollars, and gross margin was 61%. Furthermore, Cargo Lala was profitable for the full year of 2022 and the first half of 2023. According to Frost & Sullivan, in the first half of 2023, Cargo Lala was the largest logistics trading platform for closed-loop freight GTV in the world.
Judging from the latest data above, whether it is core business indicators such as GTV and order volume, or key financial indicators such as revenue, profit, and gross margin, etc., Cargo Lala still maintained a good momentum of rapid growth in the first half of this year.
The author believes that there are two main reasons for this: on the one hand, it has benefited from the return to normal operation of the domestic economic order and the gradual recovery of the logistics and freight market since this year. According to official statistics, the total amount of social logistics in the country in the first half of the year was 160.6 trillion yuan, an increase of 4.8% over the previous year. On the other hand, digital intelligent logistics was developed based on a freight forwarding platform to achieve accurate matching of “people, vehicles, goods, and roads”, and the network effect continued to increase. Data show that in the first half of 2023, the average number of monthly active merchants and average monthly active drivers on the platform continued to rise, reaching 12.2 million and 1.14 million.
At the same time, as the scale of business continues to expand, the scale effect continues to be realized, profitability continues to increase, gross margin continues to rise, and net profit continues to improve, which is strong evidence.
In view of the above, as a leader in the freight market in the same city, Cargo Lala has now completed self-certification of its business model, and its operations are gradually improving. From a long-term perspective, in the context of reducing logistics costs and increasing efficiency, the digital upgrading of freight is already the general trend. Cargo Lala is expected to continue to realize the investment value of leading digital freight leaders through factors such as leading market cards, unique closed-loop transaction models, and diversified monetization strategies.
The three levels reveal what is the investment value of Cargo Lala?
1) The closed-loop trading model is absolutely dominant, and the market size is leading in the world
Looking back at the ten-year development history of Cargo Lala, we can see a typical enterprise growth path — founded in Hong Kong in the early days, then emerged in the Greater Bay Area, expanded its business to mainland China, and at the same time expanded to emerging markets such as Southeast Asia and Latin America, and eventually went global.
In the process, Cargo Lala has continuously improved its position in the same-city freight market on a global scale, and has gradually expanded its business reach to other segments of the logistics industry, such as cross-city freight, integrated enterprise services, moving services, LTL, and vehicle rental and sales.
Therefore, today's cargo handling has successfully achieved diversified operations. Its main business covers three major segments, namely freight platform services (including same-city/cross-city), diversified logistics services (including integrated enterprise services, moving services, LTL, etc.), and value-added services (such as car rental and sales).
According to the latest data from the prospectus, in the first half of this year, Cargo Lala's revenue from all three businesses showed a growing trend. Among them, in the Chinese domestic market, freight platform service revenue was US$353 million, up 58.8% year on year; diversified logistics service revenue was US$154 million; year-on-year increase of 25.6%; and value-added service revenue was US$40.22 million, up 6.7% year on year.
Judging from the current development trend of mainstream platforms in the industry, it has become a consensus to build a logistics ecosystem including cargo owners, carriers, service providers, etc. using the vehicle and cargo matching scenario as an entry point, and create a closed loop of transactions. In this regard, it can be said that Cargo Lala has a lot of experience.
According to the prospectus, the company serves merchants and drivers through a platform model, and has realized closed-loop transactions from online order placement to intelligent order matching, automatic broadcasting, and after-sales service. However, the traditional platform is essentially an information publishing platform. Apart from order matching, all other processes such as pricing and payment are basically completed offline. According to prospectus data, in 2022, more than 90% of the transactions completed by the Cargo Lala platform were closed-loop transactions, which is far higher than the industry average.
The benefits of establishing a closed loop of transactions are imaginable. Currently, the mainstream opinion favors these points: first, it is conducive to settling users and enhancing the stickiness of platform users, thereby unleashing greater commercial value; second, it helps develop full-life cycle services for users, achieve diversified management, and at the same time deposit more data to fully explore user value.
Thus, in a nutshell, the ability to monetize is maximized.
Furthermore, due to participation in the whole process and grasping of more complete data, it will also make the closed loop business model more stable than the single value chain model.
According to Frost & Sullivan, according to closed-loop freight GTV for the first half of 2023, Cargo Lala is not only the largest logistics trading platform for closed-loop freight GTV in the world, but also the largest logistics trading platform for closed-loop freight GTV in the world.At the same time, based on orders completed in the first half of 2023, Cargo Lala is also the world's largest logistics trading platform.
According to prospectus data, Cargo Lala has created a large number of “local networks” of merchants and drivers in more than 400 cities around the world. Obviously, these are all continuously accumulated along with the expansion of the scale of the platform business. Obviously, it was not an overnight success; it has also become an important barrier to competition. Also, according to the prospectus, since many of the platform's drivers travel to and from different cities to take transportation orders, this also helps Cargo Lala to continuously strengthen the network effect of cross-city freight services.
2) Global layout+diversified management to seize opportunities to increase the digital penetration rate of road freight
As for future growth space, Cargo Lala is also quite imaginative. Currently, some highly definitive directions and core logics are as follows:
First, road freight is a trillion-level race track, and the global road freight market is still growing steadily, yet the digital penetration rate of the entire industry is still low.
According to Frost & Sullivan, only 1.9% of road freight GTV in 2021 will be promoted through digital platforms, and the online penetration rate is expected to jump to 2.7% over the next six years. Among them, the online penetration rate of China's same-city freight market will rise from 4.0% in 2021 to 7.3% in 2027, and the corresponding market size will increase by more than 3 times in 6 years.
It can be seen from this that the ceiling of the digital road freight market is extremely high, and cargo handling still has great potential.
In addition to vigorously developing the Chinese market, Cargo Lala has also continued to expand its Southeast Asian market in recent years, and has gradually expanded to emerging market countries such as Brazil and Bangladesh, thus further seizing growth opportunities and is expected to contribute additional volume to the continued growth of its future performance.
Take the Southeast Asian and Latin American markets, where Cargo Lala is currently focused, as an example. According to Frost & Sullivan, in 2022, the size of the last-mile express delivery and real-time delivery market in the same city in Southeast Asia and Latin America will reach 18 billion US dollars, and is expected to grow at a compound annual growth rate of 9.0% to 27.7 billion US dollars in 2027.
Although the share of Cargo Lala's overseas business is currently not high, it is still showing a continuous growth trend. As the overseas market layout of Cargo Lala expands further, there may be a possibility of rapid expansion in the future.
According to data from the prospectus, the gross margin of Cargo Lala's main overseas business increased from 40.3% in 2020 to 50.2% in 2022, mainly due to the company's focus on customers with high potential for monetization and the use of a large number of homogenous business models and technical infrastructure across regions to improve operating efficiency, leading to cost reductions.
Overall, it can be seen that on the one hand, the potential for digital penetration of road freight is quite impressive. As Cargo Lala continues to develop new cities around the world and consolidates and expands the market share of existing cities to push the scale of business to a new level; on the other hand, by continuing to cultivate naturally extensible logistics services such as cross-city freight, it will also inject more incremental volume into its performance. Following this trend, it is also to be expected that cargo lala will continue to enjoy premiums brought about by increased network effects and the emergence of scale effects.
3) Accelerate entry into the profit period, and future prospects are promising
In addition to showing continued high growth (especially in the past three years, which were strongly disturbed by external factors), Cargo Lala achieved its first profit under an adjusted benchmark in 2022, and further increased its profitability in the first half of 2023.According to the newly disclosed prospectus of Cargo Lala, in the first half of 2023, Cargo Lala achieved an adjusted profit of 150 million US dollars. This announced the establishment of its business model, and the correction of net operating cash flow during the same period, which will undoubtedly further enhance market confidence.
Furthermore, in recent years, many domestic digital freight platforms have intensively launched listing plans. This phenomenon also means that the road freight market is ushered in a historic inflection point of capitalization and digitalization.
After leading platforms such as Cargo Lala go public, they will also gain a greater competitive advantage, whether in terms of capital, brand, or comprehensive management, which is expected to support their more efficient development in the next stage.
Epilogue
The digital trend of road freight is unstoppable. For our country in particular, road freight, as the most weighted mode of freight, is imperative, whether it is due to the need to reduce costs and increase efficiency in social logistics or the consideration of low-carbon green development. Therefore, this has also created a historic development opportunity for digital freight service platforms such as Cargo Lala.
Furthermore, since 2020, China's platform economy strategy has also clearly changed, from strengthening governance to supporting development. On July 12 this year, while hosting a symposium on platform enterprises in Beijing, Premier Li Qiang expressed the hope that the vast majority of platform enterprises will look forward with firm confidence, practice their “internal skills,” work hard to resolve “growth problems,” and show great strength in leading development, creating employment, and international competition. Therefore, with strong support from national policies, confidence in the development of the platform economy will continue to increase.
