From entering China to nearly 30 years later, METRO has transformed from a &#34;cold&#34; warehouse membership store that only allowed B2B customers to enter, to a large-scale retail store, and then to exploring &#34;small-scale models&#34; such as convenience stores, currently in the process of transforming its warehouse membership store.
After being acquired by Wumart Group, METRO seems to have embarked on a new development track. According to the Wise Finance APP, METRO, under the name of METRO Supply Chain, has separated retail from the supply chain and initiated an IPO through the supply chain.
On June 28th, according to the documents of the Hong Kong Stock Exchange, METRO Supply Chain Limited (hereinafter referred to as &#34;METRO Supply Chain&#34;) officially submitted its prospectus for listing on the Hong Kong Stock Exchange. The joint sponsors are UBS Group and CMB International.
Before the IPO, as of the last feasible date, Dr. Zhang Wenzhong collectively owned approximately 73.31% of the company's issued shares through intermediary entities. Rising Vista Holding, Mighty Solution, Easy Joy Ventures, Tencent, Ultimate Lenovo, National Education, Fuzhou Economic and Technological Development Zone Xingrui and Sheng Equity Investment Partnership (Limited Partnership), among others, also hold shares.
Three-year Decline in Revenue Reveals Liquidity Crisis
The prospectus shows that METRO Supply Chain is a leading food and fast-moving consumer goods supply chain solution service provider in China, providing safe and high-quality goods and efficient solutions to a wide range of corporate and institutional customers as well as retailers. This includes food service and distribution solutions, welfare gift solutions, and retailer distribution solutions (including product sales to retailers and supply chain services).
During the reporting period, METRO Supply Chain provided food service and distribution solutions and welfare gift solutions to over 52,000 and over 88,000 customers respectively. As of December 31, 2023, the company provided retailer distribution solutions to 100 METRO stores, 366 Wumart supermarkets, and 304 Wumart convenience stores in China.
According to Frost &amp; Sullivan data, based on the 2023 revenue, METRO Supply Chain's industry position in China is as follows: the company is the second largest food and fast-moving consumer goods supply chain solution service provider; the second largest retail supply chain solution service provider; the fifth largest catering supply chain solution service provider and the largest group meal supply chain solution service provider; and the second largest commercial welfare and gift solution service provider.
Despite being a leader in food and fast-moving consumer goods supply chain solutions, METRO Supply Chain's revenue performance is not impressive. From 2021 to 2023 (hereinafter referred to as the &#34;reporting period&#34;), the company's revenues were RMB 27.82 billion, RMB 27.102 billion, and RMB 24.858 billion respectively, showing a continuous decline, with a three-year compound annual growth rate of -5.47%.
At the same time, the company's profit margin also fluctuated significantly, with net profits of approximately RMB 332 million, -471 million, and 253 million respectively, with a three-year compound annual growth rate of -12.76%, and a significant loss in 2022. Looking at the profit margin, the company's gross profit margin during the period was approximately 9.1%, 9.7%, and 10.7%, showing relative stability;
The net profit margins are approximately 1.2%, -1.7%, and 1.0%, showing significant fluctuations. Moreover, the net profit margin is meager.
 <img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240702/1719887890699008.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image 1.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240702/1719887890699008.png"/>
In addition to unstable performance, other financial indicators of METRO's supply chain are also concerning.
At the end of each reporting period, the company's cash and cash equivalents were 2.58 billion yuan, 1.86 billion yuan, and 0.53 billion yuan respectively, with a continuous decrease in cash flow. Especially in 2023, the cash and cash equivalents on the books were only about 0.5 billion yuan.
While cash on hand is decreasing, the company's external debt continues to rise sharply. From 2021 to April 30, 2024, the company recorded net current liabilities of 0.68 billion yuan, 1.90 billion yuan, 4.37 billion yuan, and 8.23 billion yuan respectively.
Cash is far from sufficient to cover current liabilities, posing a significant challenge to the liquidity of METRO's supply chain. The company also stated in the risk disclosure that if it fails to maintain sufficient cash and financing, METRO's supply chain may not have enough cash flow to fund its business, operations, and capital expenditures.
Receivables from related parties exceed 4.5 billion yuan, backed by &#34;Beauty&#34; and &#34;Not Beauty&#34; of Wumart
Since being acquired by Wumart, METRO China and Wumart's supply chain have started to integrate resources synergistically. In 2024, METRO's supply chain will sell its retail business to the controlling shareholder to focus on providing food and fast-moving consumer goods supply chain solutions in China.
Backed by Wumart, METRO's supply chain embodies both &#34;Beauty&#34; and &#34;Not Beauty.&#34;
On one hand, heavy reliance on Wumart has led to challenges in the company's liquidity. During the reporting period, Wumart Group was the company's largest customer, contributing revenues of 17.10 billion yuan, 16.89 billion yuan, and 15.41 billion yuan respectively, accounting for 61.5%, 62.3%, and 62.0% of total revenue in the same year.
Compared to Wumart, METRO's supply chain is in a weak position in terms of bargaining power, reflected in the continuous high growth of the company's receivables. During the reporting period, the company's receivables from related parties were 1.87 billion yuan, 2.74 billion yuan, and 4.53 billion yuan respectively, with year-on-year growth rates of 46.5% and 65.3%. The accelerated growth of receivables from related parties undoubtedly worsens the cash flow situation of METRO's supply chain.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240702/1719887902378537.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image 2.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240702/1719887902378537.png"/>
On the other hand, empowered by Wumart, METRO's supply chain can enjoy the growth dividend of the domestic food and fast-moving consumer goods supply chain industry
According to Frost &amp; Sullivan data, based on revenue, the market size of China's food and fast-moving consumer goods (FMCG) supply chain industry increased from RMB 7.0366 trillion in 2018 to RMB 9.9007 trillion in 2023, with a compound annual growth rate of 7.1%. It is expected to continue growing at a compound annual growth rate of 7.4% from 2023 to 2028, reaching an estimated market size of RMB 14.1497 trillion by 2028.
In terms of competitive landscape, the Chinese food and FMCG supply chain industry is highly fragmented. In 2023, the market share of the top five food and FMCG supply chain solution service providers accounted for 0.8% of the market. In the same year, METRO Supply Chain had a market share of 0.2%, making it the second largest food and FMCG supply chain solution service provider in China. The revenue gap between the company and the industry leader is not significant.
In summary, in the vast track of the trillion-dollar market, there is no absolute leader yet. With the further increase in industry concentration, METRO Supply Chain has broad room for growth. If it can successfully pass the Hong Kong Stock Exchange hearing, the company is expected to expand and improve its supply chain, incorporate more industry participants, enhance its industry chain discourse power, and consolidate its market position.
However, whether it is further market expansion domestically or the improvement of corporate operational independence, METRO Supply Chain needs to enhance its profitability to smooth out operational fluctuations. Currently, METRO Supply Chain has reached a critical crossroads in its corporate development, with continuous cash flow shrinkage, increasing liabilities, and an urgent need for listing to address short-term funding requirements and ensure long-term competitiveness

Metro Supply Chain is preparing to list on the Hong Kong Stock Exchange, with its prospectus showing that it is a Chinese food and fast-moving consumer goods supply chain solution provider, offering retail distribution solutions. However, Metro Supply Chain has seen a continuous decline in revenue over the past three years, and a liquidity crisis is gradually emerging. The company is backed by Wumart Group, but relying on Wumart may exacerbate its financial concerns

IPO Preview | METRO Supply Chain: Performance "roller coaster" depends on Wumart or exacerbates financial concerns