Gelonghui September 30th | CICC issued a research report today, initiating coverage of ZKH Group (ZKH.US) with an outperform rating compared to the industry. ZKH Group is China's leading industrial products (MRO) B2B procurement platform, with a platform trading volume exceeding 11.1 billion yuan in 2023. CICC believes that leveraging its professional product capabilities and delivery performance system in online procurement services for industrial products, the company is expected to continue to consolidate the market. ZKH Group is a leading one-stop industrial products (MRO) procurement service platform in China. By the end of 2023, the company had 32 advantageous production lines, over 17 million SKUs, serving approximately 0.067 million customers, with products mainly covering spare parts, chemicals, processing manufacturing, general consumables, and administrative supplies. With the push for transparent procurement policies and the increasing demand from enterprises to reduce costs and improve efficiency in the procurement process, online and digitalization of MRO procurement is the trend. Zhishizixun predicts that the scale of China's online MRO procurement service market will reach 847 billion yuan by 2027; among which, online procurement service platforms represented by ZKH Group are expected to contribute around 60.0% of online MRO sales volume. Besides the extensive product selection, ZKH Group's product competitiveness mainly lies in its selection capabilities, quality and cost-effectiveness advantages, and its ability for immediate delivery fulfillment. At the same time, the company has established a nationwide core industrial hub fulfillment network, providing guarantee for professional, timely, and reliable fulfillment services based on an intelligent fulfillment system. With the support of product and technological advantages, the company's platform size effect and network effect continue to strengthen. It is estimated that the total revenue of the company will reach 9 billion/10.51 billion yuan in 2024/25, corresponding to a compound growth rate of 10% from 2023 to 2025. Initiating coverage with an outperform industry rating, a target price of $4.0, based on 2.8 times the 2024 P/GP. The company is currently trading at 2.2 times the 2024 P/GP, corresponding to a 29% upside potential.