Company highlights
(1) Fanyuan International is a cross-border e-commerce logistics service provider founded in 2004. It mainly provides package collection, warehousing, security inspection, packaging, labeling and sorting services within the end-to-end logistics value chain, and provides express, standard or economical delivery service options according to customer budgets and preferences.
(2) The company's service outlets in China are distributed in Zhejiang Province, Shanghai City, Guangdong Province, Fujian Province, Sichuan Province, Henan Province, Shandong Province and Hong Kong where there is strong demand for e-commerce logistics services.
(3) The company's business is heavily dependent on customers in the e-commerce industry, accounting for 92.1% of the company's revenue in 2022. Customer concentration has gradually increased in recent years. The share of the top five customers in total revenue increased from 22.8% in 2020 to 28.5% in 2022. Among them, Alibaba (9988 HK) was the largest customer, accounting for 12.2% of revenue in 2022.
Industry prospects
According to Frost & Sullivan's report, in terms of value, the compound annual growth rate of the market size of China's cross-border e-commerce logistics industry in 2018-2022 is 20.4%, and the forecast compound annual growth rate for 2022-2027 is 9.0%. China's cross-border e-commerce logistics industry is highly fragmented.
In terms of revenue in 2022, the total market share of the top five service providers was 2.5%. The company ranked between 25 and 30, with a market share of 0.03%.
Company operation
The company's revenue fell 17.2% from $1.51 billion in 2020 (RMB, same below) to $1.25 billion in 2022. Among them, revenue from end-to-end cross-border delivery services fell 27.7% to $980 million from $1.36 billion. Among them, express delivery revenue increased 13.9% to $770 million, but standard and economy delivery revenue fell by .53.2% and 88.1% to 180 million and 35.96 million yuan respectively. According to customer regions, revenue from end-to-end cross-border delivery services in mainland China, Hong Kong, and the US decreased by 13.1%, 20.6%, and 93.8% respectively to 1.09 billion, 110 million, and 4.65 million yuan. The company's gross margin fluctuated slightly in 2020-2022, at 8.1%, 7.4%, and 8.4%, respectively. Sales, administration and other expenses increased by 44.5% to $73.24 million from $50.67 million in 2020, and their share of revenue increased from 3.4% to 5.9%. Shareholders' net profit fell 51.0% from $52.7 million in 2020 to $25.8 million in 2022 due to lower revenue and increased expenditure. Excluding listing expenses, adjusted net profit for 2022 was $39.03 million.
Revenue for the first half of 2023 increased 10.5% year on year to 670 million yuan. Among them, revenue from end-to-end cross-border delivery services increased 18.7% year on year to 590 million yuan. Among them, express delivery revenue fell 9.8% to 340 million yuan, standard delivery revenue increased 134.9% to 230 million yuan, and economy delivery revenue fell 21.1% to 14.78 million yuan. The gross margin for the first half of the year increased 0.1 percentage point year over year to 8.1%. Shareholders' net profit fell 20.6% year on year to 10.92 million yuan due to high listing expenses. After deduction of listing expenses, adjusted net profit increased 19.9% year over year to 21.4 million yuan.
Valuation level
We selected six Hong Kong stock logistics partners for benchmarking, including Zhongtong Express (2057 HK), JD Logistics (2618 HK), Kerry Logistics (636 HK), Eneng Logistics (9956 HK), Yinghui Logistics (1442 HK), and Jiahong Logistics (2130 HK).
In terms of valuation, the price-earnings ratio of the company in 2022 was 25.3-37.6 times, but after deducting the impact of listing expenses, the adjusted price-earnings ratio was 16.7-22.7 times, which is in the middle of peer valuation.
A track record of price stability
The price stabilizer this time is Zhongyi Capital. Since the beginning of 2023, it has participated in sponsoring 1 project and acted as price stabilizer. Performance declined on the first day.
Market atmosphere
Since the beginning of the year, a total of 62 IPOs have been listed in Hong Kong stocks. The market atmosphere was repeated in the first half of the year, and the atmosphere improved in the second half of the year. The breakout rate on the first day of the past three months was 18.2%, with an average increase of 8% on the first day. The company introduced 3 real estate executives as cornerstone investors, including Mr. Yang Yingwu, Deputy Investment Manager of Zhongcheng Dayou (Shenzhen); Ms. Liu Lijun, Marketing Director of Shenzhen Wanmingsheng Industrial; and Mr. Guo Shaojun, Chief Executive Officer of Hangzhou Wanhua Holding Group. The company only introduces individual investors as the cornerstone. This arrangement is rare in the market.
Subscription advice
Alibaba is a shareholder of the company and can attract market attention. However, China's cross-border e-commerce logistics industry is highly fragmented, and market competition is fierce. The company's market share is low. The company's revenue and profit performance have fluctuated in recent years, and the trend is yet to be verified. In terms of valuation, the company's adjusted price-earnings ratio falls into the middle of peer valuations. The IPO atmosphere has improved in recent months, but price stabilizers lack sufficient track record. The company only introduces individual investors as the cornerstone. Arrangements are rare in the market, and may not necessarily boost market confidence. Therefore, based on the above, it was given a score of 65, and the rating was “neutral.”
Risk warning
(1) e-commerce industry risk, (2) market competition risk, (3) customer concentration risk, (4) policy risk