The logistics industry is a fundamental and strategic sector that supports the national economy and social development. With the continuous emergence of new technologies, new models, and new business formats, the integration of the logistics industry with the internet is deepening, which accelerates the transformation of the logistics industry towards smart logistics, injecting new vitality into the optimization and upgrading of China's economic structure and improving quality and efficiency.
According to a report released by the China Business Industry Research Institute, the market size of China's smart logistics industry is approximately 790.3 billion yuan in 2023, a year-on-year increase of 12.98%. It is expected that this market will grow to 854.6 billion yuan in 2024, with a year-on-year growth of 8.14%.
While the smart logistics industry continues to grow, a number of players in the logistics sector are also expanding, including Fuzhou Jiabin Modern Logistics Park Co., Ltd., which has initiated its journey to go public in the United States.
According to the Zhitong Finance APP, Smart Logistics Global Limited (hereinafter referred to as &#34;Smart Logistics&#34;), the actual controlling shareholder of Fuzhou Jiabin Modern Logistics Park Co., Ltd. (hereinafter referred to as &#34;Fuzhou Jiabin Logistics&#34;) based in Fuzhou, Jiangxi, submitted its public prospectus (F-1 document) to the SEC for the first time on October 4, applying for a listing on NASDAQ under the code &#34;SLGB.&#34; The scale and price of the issuance have not yet been announced.
However, from the financial report, Smart Logistics' performance has significantly declined. According to the prospectus, Smart Logistics' revenue in 2023 was 707 million yuan (RMB, the same below), a year-on-year decline of 11.5%, and its net profit was 9.3714 million yuan (excluding exchange rate effects), a sharp decline of 73.88% compared to 35.8758 million yuan in 2022. When considering exchange rate effects, the decline in net profit reaches as high as 88.22%.
The decline in Smart Logistics' performance stands in stark contrast to the continuous growth of the industry in 2023, which raises investors' curiosity about why Smart Logistics' performance is declining against the trend and whether it can return to a growth trajectory in the future. The answers can be found in its prospectus.
<h2>Total Transportation Distance Decreased by 31.4% Year-on-Year in 2023</h2>
Founded in July 2017, Fuzhou Jiabin Logistics is the domestic operating entity of Smart Logistics, dedicated to developing a smart logistics industry cluster. Its business encompasses transportation and distribution, modern warehousing, cargo distribution, urban and rural delivery, multimodal transport, drop-and-hook transportation, non-vehicle transportation, logistics information, and exhibition sales, with branches in Jiangsu, Guangdong, Chongqing, and Shandong.
In 2018, Smart Logistics acquired the Jiangxi Smart Logistics Park, which was crucial for building its logistics hub. As of now, Smart Logistics' B2B contract logistics business has been operational in the Jiangxi Smart Logistics Park and seven full truckload (FTL) centers across different regions of China, with each major client assigned a dedicated full truckload center to serve them. Smart Logistics plans to further cover China's five national economic zones and industrial economic zones by replicating the Smart Logistics Park in the future.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241103/1730632702180400.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="zhwl1.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241103/1730632702180400.png"/>
While building logistics hubs, Smart Logistics has also established its own transportation fleet. As of June 30, 2024, Smart Logistics has a fleet of 70 trucks to ensure readily available logistics capacity. At the same time, Smart Logistics will also hire truck drivers and dispatchers to handle customer orders during periods of capacity shortages. The number of truck drivers registered in Smart Logistics' Transportation Management System (TMS) has increased from 99,000 in 2022 to 110,000 in 2023, and the company will continue to expand the number of drivers.
Based on its self-built fleet and a large accumulated driver database, Smart Logistics' distribution network has covered over 300 cities in more than 30 provinces and autonomous regions in China, achieving nationwide network coverage, with logistics routes expanded to over 37,500.
According to the prospectus, Smart Logistics' strategic goal is to serve customers in the four major industries of papermaking, steel, coal, and food. After several years of accumulation, it has over 400 customers. In the papermaking industry, Lee &amp; Man Paper, the well-known Taiwanese paper company Yuen Foong Yu, and Chenming Paper are all customers of Smart Logistics; in the food industry, Smart Logistics' clients include Baolingbao and China Starch; in the coal and steel industries, Smart Logistics' clients mainly include major trading companies located in southwestern and northeastern China.
However, the large customer base has not prevented Smart Logistics from experiencing a decline in performance in 2023. According to the prospectus, Smart Logistics' revenue fell by approximately 11.5% to 707 million yuan in 2023, mainly due to reduced customer demand. During the reporting period, the total number of transportation orders, distance, and tonnage decreased by approximately 2.2%, 31.4%, and 5.3% year-on-year, respectively, with a significant drop in total transportation distance.
In terms of gross margin, Smart Logistics' gross margin decreased from 7.3% in 2022 to 4% in 2023, a year-on-year decline of 3.3 percentage points, mainly due to the drop in revenue and the discounts offered to certain major customers in response to insufficient demand, while driver costs could not be reduced, thus affecting profitability.
While revenue declined and gross margin fell, Smart Logistics' administrative expenses and general expenditures still increased by 53.47% to 12.1119 million yuan, further impacting the company's profit release, leading to a net profit plunge to 9.3714 million yuan in 2023 (excluding exchange rate effects), compared to 35.8758 million yuan in the same period of 2022, a year-on-year decline of 73.88%.
<h2>High Concentration of Single Customers May Be the Main Reason for Demand Decline</h2>
After gaining a basic understanding of Smart Logistics' performance decline, a sharper question arises: In 2023, the market size of China's smart logistics industry grew by 12.98% year-on-year to 790.3 billion yuan, indicating an expanding downstream market demand. However, in such an industry context, why did Smart Logistics experience a decline in customer demand?
According to the prospectus, in 2022 and 2023, revenue from a single customer and its subsidiaries accounted for 33% and 35% of the company's total revenue, respectively. This may suggest that the decline in Smart Logistics' performance is related to the company's excessive reliance on a single customer
When a company overly relies on major clients, the volatility of its performance increases. If the demand from these key clients weakens or they directly leave, it can significantly impact the company's performance. Additionally, excessive reliance on major clients leads to another issue: difficulty in raising prices during transactions. The discounts offered to major clients by Smart Logistics in 2023 may serve as evidence of this.
Apart from the over-reliance on a single client, Smart Logistics faces numerous other operational challenges. Firstly, the industry is highly fragmented and competitive. In fact, B2B logistics services are severely homogenized, making it difficult to achieve significant differentiation, which leads to intense competition within the industry. Once industry demand enters a downturn, price wars and losses are not uncommon in the logistics sector.
Secondly, after a large number of logistics companies went public, the capital market has developed a certain level of aesthetic fatigue towards logistics companies. If a company's revenue model remains relatively singular, primarily based on logistics income, it becomes challenging to achieve high valuations in the capital market. In contrast, companies with diversified business income that can provide value-added services to truck drivers, thereby creating new growth curves, are more likely to attract the favor of the capital market. Smart Logistics has stated its commitment to creating a vibrant after-sales ecosystem for trucks and providing a range of value-added services for truck drivers, but whether this initiative can help Smart Logistics achieve scalable monetization remains to be seen.
Moreover, B2B logistics is strongly correlated with the macroeconomy; if the macroeconomy weakens, it will affect the downstream demand for Smart Logistics. Additionally, significant fluctuations in oil prices can also impact the profitability of logistics companies. Therefore, when investors assess the performance of Smart Logistics, they should pay close attention to the macroeconomy and oil prices.
In summary, Smart Logistics is experiencing a counter-cyclical decline in performance due to weakened client demand, which will undoubtedly be a negative factor during its IPO. Furthermore, it faces multiple challenges, including high client concentration, intense market competition, and the lack of scaled value-added services. Therefore, Smart Logistics will need to demonstrate its strength with more impressive data in the future

600794

300532

Smart Logistics plans to go public on NASDAQ, with a revenue of 707 million RMB in 2023, a year-on-year decline of 11.5%, and a significant net profit drop of 73.88%. Despite the overall growth of the smart logistics industry, Fuzhou Jiabin Logistics' performance has declined against the trend, with total transportation distance decreasing by 31.4% year-on-year. Investors are concerned about whether it can return to a growth trajectory in the future

- The logistics industry is crucial for national economic and social development, with a market size of approximately 790.3 billion yuan in 2023, growing 12.98% year-on-year.  
- Smart Logistics Global Limited, the major shareholder of Fuzhou Jiabin Modern Logistics Park, has filed for an IPO on NASDAQ, despite reporting a significant revenue decline of 11.5% in 2023.  
- The company's challenges include high customer concentration, intense competition, and reliance on a single client, raising concerns about its future growth prospects amid a growing industry.

U.S. Stock IPO Outlook | Annual Revenue Exceeds 700 Million, When Will Smart Logistics Return to a Growth Track?