EDA Group (EDA) is a one-stop end-to-end supply chain solutions provider for e-commerce vendors. It offers supply chain solutions that encompass cross- border logistics, overseas warehousing, and fulfilment delivery services that are seamlessly integrated into EDA Cloud. EDA Cloud is EDA’s self-developed platform that houses a comprehensive range of digital supply management tools, enables operating efficiency improvement for all related parties, and serves as the core pillar within EDA’s ecosystem in helping improve connecting efficiency between logistic suppliers and end customers. In terms of revenue in 2022, EDA ranked the seventh among all B2C export e-commerce supply chain solutions providers primarily utilizing pre-sale stocking model in the PRC, with market share of c.0.4%, per Frost and Sullivan (F&S). We are positive on EDA’s long-term business development potential, backed by rapid increase in industry demand, and its technology capability which can aid customers to improve inventory turnover and fulfilment efficiency. On a 2023-26E rev CAGR of 31.9%, we are forecasting an adj. NP CAGR of 34.3%. Our TP of HK$3.57 per share is based on 11.0x 24E PE, inline with that of industry peers. Initiate at BUY.

B2C export e-commerce market is expected to record fast growth. Per

F&S, market size of B2C export e-commerce supply chain solutions market achieved a CAGR of 28.8% over 2017-2022, and reached RMB402.4bn in 2022. F&S estimates the market size to reach RMB621.3bn in 2027, representing a 2022-2027E CAGR of 9.1%, within which F&S forecasts the market of supply chain solutions adopting the direct shipping model to achieve a CAGR of 3.9%, and the market of supply chain solutions adopting the pre-sale stocking to achieve a CAGR of 14.5%.

EDA Cloud platform a key competitive edge. EDA Cloud platform can

efficiently connect logistics and supply chain services providers with B2C ecommerce merchants, which in our view could improve operational efficiency for all related parties. Both strong technological capabilities as well as EDA’s differentiated asset-light model consisting of self-operated warehouses and partnered warehouses, enable EDA to grow its business scale in a more efficient way compared to industry peers, in our view. This could support a decent profitability level in the long term. We forecast adjusted NPM to expand from 7.6% in 2023 to 7.7/7.8/8.0% in 24/25/26E.

A broad and high-quality customer base with long-term relationship paves way for long-term development. EDA has maintained stable and

long-term strategic relationships with its largest customers. It has on average around four years of business relationship with its five largest customers, which in our view demonstrated EDA’s ability in sustainably providing differentiated value-add to its customers. EDA has established solid relationship with some of the leading e-commerce platforms worldwide, which in our view demonstrated EDA’s strong technological and fulfillment capability. EDA has become an eBay Certified Docking Warehouse in 2022, and it has successfully connected EDA Cloud platform with the TEMU system, becoming an official TEMU-Certified Warehouse in 2Q24.

Key catalysts: 1) mitigation of geopolitical risks; 2) cooperation with more leading e-commerce platforms; and 3) stronger-than-expected earnings growth.