It achieved revenue of 3.702 billion yuan, realized gross profit of 167 million yuan, and successfully turned a loss into profit to achieve adjusted net profit of 5.513 million yuan. Although QH.US (QH.US) achieved positive results such as net profit for the whole year in 2023, it still did not escape the curse of “high revenue and low profit,” which is an important factor that has always been criticized.

After the financial report was released on April 17, the market confirmed Quhuo's performance in achieving a number of key financial indicators. The company's stock price closed up 8.29% on the same day, but it still couldn't stop the downward trend in its stock price. In fact, Quhuo's stock price has fallen by 58.5% since the beginning of the year, and has fallen below $1.

However, from a business perspective, Quhuo's performance was not without its highlights. In particular, after entering the domestic used car parallel export business in 2023, the company achieved business revenue of 154 million yuan through 30 million yuan of working capital within 7 months. However, as domestic new energy vehicles become more and more popular globally, competition in the domestic parallel export market is also becoming increasingly heated, and it is still unknown whether this business can support Quhuo's valuation in the future.

Achieving profit by cutting costs?

According to the Zhitong Finance App, Quhuo's main business currently includes localized lifestyle services such as takeout delivery, travel services, cleaning, and lodging.

In terms of revenue structure, Quhuo's revenue mainly comes from three major business segments, namely platform fulfillment solutions, travel solutions, and clean accommodation solutions. Among them, platform fulfillment solutions and travel solutions still account for most of its revenue.

Judging from revenue during the reporting period, the company's overall revenue has been on a downward trend. Compared with 2021, Quhuo's total revenue in 2023 has fallen 8% to 3.702 billion yuan, but the company still achieved a positive net profit for the whole year in 2023. The key is Quhuo's “cost control”.

In fact, in order to obtain greater profits as an intermediary, Quhuo can only focus on downstream workers and upstream platforms, in addition to improving operating efficiency. However, in this game, compared to downstream workers, the platform undoubtedly has more voice and bargaining power.

In takeout delivery, the core business of Quhuo, the company's role is to act as a “contractor” for takeout platforms and undertake the expenses of workers' salaries and personnel management for asset-light takeout platforms. This business model has caused Quhuo's revenue costs to become the biggest bottleneck limiting the increase in its gross margin.

Judging from financial reports, from 2021 to 2023, Quhuo's share of the cost of paying wages to workers fell from 85.8% to 81.8%, and the cost amount also dropped from 3.453 billion yuan to 3,029 billion yuan, a decrease of 424 million yuan, while the company's total revenue cost fell by 314 million yuan during the same period. In other words, the main reason why Quhuo was able to achieve cost control was to optimize the costs associated with workers' wages and personnel management.

Although cost-side control is the main reason why Fun Huo is profitable, it is not the only factor. On the cost side, Funhuo's marketing expenses fell 13.7% year-on-year to 184 million yuan in 2023, achieving two consecutive years of decline.

As can be seen, the main way for Quhuo to achieve positive profits is to control costs for itself and downstream workers, but for upstream platforms, Quhuo's voice is clearly weak. Generally speaking, the ability to collect accounts determines the right to speak. Financial reports show that in 2023, the company's accounts receivable reached 482 million yuan, accounting for 13% of total current revenue. Under the chain reaction, the company's current net cash flow from operating activities is 97.282 million yuan, which is far higher than the company's current net profit level.

Parallel exits hold up the sky?

In the 2023 financial report, Quhuo focused on the company's international business, that is, the used car export business. Financial reports show that in just 7 months, through 30 million revolving capital investment, the business contributed 154 million yuan in annual revenue, accounting for 66.1% of the revenue from travel service solutions, driving a year-on-year increase of 116.4% in annual travel service revenue.

On the one hand, this shows that Quhuo's used car export business is progressing rapidly. On the other hand, it also shows the current popularity of domestic new energy vehicles in the global market.

Looking at the market, data from the China Automobile Dealers Association shows that in recent years, the growth rate of China's used car exports has been significantly higher than that of new cars. In 2021, China exported only about 15,000 used cars. By 2022, it had soared to nearly 70,000 units, an increase of 356% over the previous year. The industry expects China's used car exports to reach 400,000 vehicles by 2025.

Furthermore, according to data from the China Automobile Dealers Association, exports of new energy passenger vehicles and quasi-new vehicles account for more than 80% of used car exports. This is exactly what is called a “parallel export vehicle,” which allows new domestic new energy vehicles to be exported abroad in the form of used cars. Due to the high configuration and low price of domestic NEVs, they have a certain advantage in the international market, so many used car exporters take “parallel export” of NEVs as their main focus. Fun is one of them.

But this type of business has its own pain points. According to the Zhitong Finance App, currently China's used car export traders are facing problems such as unstable overseas orders; customers don't understand Chinese brands and are worried about product quality and after-sales service; asymmetry between overseas procurement and domestic supply information; international logistics costs for small-scale exports are too high; building their own overseas warehouses requires large investment, and how to expand overseas markets are all limiting the development of parallel export business.

To solve the above pain points, Quhuo will launch Carnuxt, a used car export trading platform with a “full hosting model” this year. Its service model is similar to Carvana, a well-known used car trading platform listed in the US. It can solve problems such as used car product quality, sales channels, and after-sales service in one stop by integrating functions such as quality certification, guarantee services, and insurance claims.

The launch of Carnuxt was interpreted by the market as Quhuo's intention to cultivate it as a platform-based business to support the company's valuation. Because in the US stock market, this kind of used car service model has been recognized by the secondary market. Take the Carvana mentioned above as an example. Since its listing in 2017, Carvana's market capitalization has reached a maximum of 76.12 billion US dollars. Although its stock price declined sharply in 2022, the current market value is still 14.426 billion US dollars, and PE (TTM) is 32.06 times higher.

However, from the perspective of market competition and track replacement, the reason why Carvana is recognized by the secondary market is that its convenient online car purchase experience, contactless service, transparent pricing strategy, vehicle quality assurance, and technical support have disrupted the traditional used car trading model in the US market. This is also the reason why Carvana surpassed the established US used car supplier Carmax in just 4 years after launch.

However, in reality, Quhuo is not the same market situation facing Carvana in the used car market. Currently, most opinions in the industry believe that models arriving overseas through parallel exports cannot promote a high degree of localization like officially exported cars, and it is even difficult to meet the requirements of local regulations. Also, for car companies, parallel import behavior can also interfere with companies' normal overseas plans, particularly affecting car companies' overseas pricing and brand value.

Furthermore, as the domestic used car export business gradually turned popular from the blue ocean, export traders engaged in this business also experienced internal turnover, and profits declined. In this context, whether the used car business can become the backbone of Quhuo's future depends on whether it can successfully gain a foothold in this volatile market. Furthermore, judging from the size of the parallel export market, Quhuo still has a long way to go if its used car business reaches the scale of its platform fulfillment service business.