On November 22, Beijing time, China's leading MRO procurement service platform ZKH Group (NYSE: ZKH) released its 2024 third-quarter performance report before the pre-market trading of US stocks.

The financial report shows that ZKH Group's financial performance is robust, achieving revenue of 2.28 billion RMB. Excluding the optimized base number impact of related businesses, it achieved steady growth in core industry large customers and small and medium-sized customers. In terms of profitability, ZKH Group's gross profit continues to increase and the gross margin has significantly improved. The gross margin increased from 16.3% in the same period last year to 17.0% in the current quarter. At the same time, the adjusted loss rate decreased from 4.4% in the same period last year to 2.9% in the current quarter, continuing to show quarter-on-quarter improvement. It is worth mentioning that in this quarter, the net cash flow from operating activities continues to flow in by 0.16 billion RMB, further enriching the cash flow.

Facing the constantly changing market environment, ZKH Group strategically focuses on the quality of growth, continues to promote the optimization of business structure, and enhances product strength, supply chain capabilities, and digital AI capabilities to lay a solid foundation for sustainable long-term development. Currently, the multidimensional strategic progress has been significant.

At the customer development level, the MRO market in China is huge. As a leading digital service platform for industrial supplies, ZKH Group has built a solid customer base. In the third quarter, the number of service customers was 47,876, an increase of 16.9% year-on-year. From January to September this year, the number of service customers exceeded 75,000, an increase of over 30% year-on-year. Currently, among the top 1000 manufacturing groups in China, ZKH Group has served over 600 group companies. During the conference call, the management emphasized the continuous focus on high-quality customers and regions, deployment of personnel and resource allocation, further exploring the deep cooperation potential of top 1000 group customers, and using the Gongbang platform (GBB) to serve small and medium-sized enterprises in a pure e-commerce mode. It is reported that Gongbang has recently reached a strategic cooperation with Taobao Tmall Industrial Products.

In terms of product development, ZKH Group mainly operates in industrial supplies such as spare parts, general consumables, office supplies, processing and manufacturing, chemicals, etc., with 32 production lines and 17 million SKUs. The management stated in the conference call that it will continue to manage the industry's commodity pool and supply chain system, deepen cooperation with suppliers, and achieve the strategic goal of transitioning from a sales-driven model to a supply-driven model. According to the management, the majority of ZKH Group's current procurement is done directly from the source of production, purchasing directly from the original factory or its agents, making its procurement costs more competitive. In addition, ZKH Group will establish an innovative research and development center at the Taicang factory in the near future to continue investing in developing product design, R&D, testing, and selection capabilities, as well as promoting the development and sales of proprietary brand products. From January to September this year, ZKH Group's own brand GMV reached 0.49 billion RMB, a year-on-year growth of 24%, accounting for 6.3% of total GMV. The management stated that the long-term goal is for the share of own brand GMV to exceed 30%.

In terms of digital AI capabilities, as a digital industrial supplies service platform, ZKH Group is committed to using AI technology to solve pain points in the procurement and sales process of industrial supplies. Following the earlier launch of two AI products, the "AI Expert Assistant" and "RPA Robot", ZKH Group has recently launched several new AI products, including the first domestic generative AI material management tool "AI Material Butler", the "AI Price Comparison Assistant" that can quickly select the best prices from tens of thousands of suppliers, and the "AI Product Recommendation Brain" to help customers choose products more quickly and accurately.

ZKH Group plans to officially launch its independent site operation in the United States in early December. Currently, product selection, testing, validation, and stocking are basically ready. In the initial stage, thousands of SKUs in categories such as personal protective equipment, hand tools, packaging materials, and instruments will be launched, and other categories will be gradually expanded later. After the US business matures, the plan is to enter markets such as Canada, Mexico, and Europe, starting a new journey of globalization.

ZKH Group's Chairman and CEO Chen Long stated: "In the third quarter, facing the constantly changing market environment, ZKH Group's financial performance remained robust, and the overall improvement of operational quality through continued optimization of business structure has enhanced profitability. In addition, the construction of the supply system enables us to provide more competitive products, and the proportion of GMV contributed by proprietary brand products continues to expand. Looking ahead, we will continue to focus on long-term business success and do the right things, creating value for all stakeholders."

In addition, according to the third quarter 13F report as of September 30, 2024, disclosed by the long-term fund Fidelity International (FIL) usa, Fidelity International increased its shareholding in zkh group in the third quarter.