New Stocks Outlook | Sunway Logistics: Stuck in the Quagmire of Increasing Revenue but Difficult to Increase Profit, Can Going Public Turn the Tables?

At present, the geopolitical situation is complex, and the global trade landscape is undergoing deep adjustments, with many risk factors making the development of cross-border e-commerce industry full of uncertainty. Against this background, how to break through the difficulties and achieve sustainable development in cross-border e-commerce has become the core issue of industry focus. In the cross-border e-commerce industry chain, logistics is a key link to ensure the development of the industry. High-quality and efficient logistics services can not only ensure the smooth circulation of goods globally, but also help companies reduce costs and risks by optimizing the supply chain, flexibly adjusting transportation routes, and choosing suitable customs clearance methods when trade policies change frequently. For example, choosing cost-effective transport solutions can alleviate the cost pressure caused by tariff increases, while stocking goods in overseas warehouses in advance can reduce the risk of goods being detained due to changes in customs clearance policies and enhance the flexibility of companies to respond to policy changes. In this industry environment, Shunyou Cross-border Logistics Co., Ltd. (hereinafter referred to as "Shunyou Logistics") as a deep-rooted player in the field of cross-border e-commerce logistics, is actively seeking change. On April 15, 2025, the company submitted its application for listing on the main board of the Hong Kong Stock Exchange, with China Securities Co., Ltd. as its exclusive sponsor. By seeking a listing on the Hong Kong stock market, Shunyou Logistics is expected to achieve high-quality development with the help of capital. However, it should not be overlooked that Shunyou Logistics also faces many challenges in terms of market environment, financial situation, and industry competition, and needs to continuously explore forward. The ninth largest B2C export e-commerce direct delivery logistics service provider in China According to the prospectus, Shunyou Logistics is an experienced provider of cross-border e-commerce logistics services, empowering cross-border e-commerce platforms and sellers through the company's foundation and cross-border logistics network in mainland China. Established in 2008, the company is committed to providing one-stop cross-border logistics services, with a substantial logistics network, tiered pricing, multiple delivery time options, and a wide range of transportable items coverage. The company is rooted in the Pearl River Delta region and has conducted business in Shenzhen, Guangzhou, and Dongguan in Guangdong Province, Yiwu and Ningbo in Zhejiang Province, Suzhou in Jiangsu Province, Hong Kong, and the United States. According to Frost & Sullivan, in the highly competitive market of B2C export e-commerce direct delivery logistics in China, Shunyou Logistics ranks ninth in terms of revenue calculated in 2024 and holds a market share of 0.5%. In the special cargo direct logistics services field, the company ranks sixth with a market share of 1.8%. At the same time, in the expansion of emerging markets, the company delivers parcels to approximately 30 countries and regions in Latin America, ranking fourth among its peers in terms of revenue generated from parcels delivered to that region in 2024. In terms of business model, Shunyou Logistics provides one-stop cross-border logistics services, covering direct logistics, headhaul logistics, and overseas warehouse services, meeting the diverse needs of cross-border e-commerce platforms and sellers. Among them, direct logistics services are its core business, with the share of revenue exceeding 96% in the period from 2022 to 2024. Revenue growth slows down, and profitability fluctuates significantly It is understood that since 2019, the GMV of China's B2C export e-commerce market has been growing rapidly. According to Frost & Sullivan, the industry scale has increased from 1,597.4 billion yuan in 2019 to 4,337.1 billion yuan in 2024, with a compound annual growth rate of 22.1%. In the future, the GMV of China's B2C export e-commerce market is expected to reach approximately 6,636.0 billion yuan in 2029, with a compound annual growth rate of 8.9% from 2024 to 2029. Against this backdrop, the market size of China's cross-border logistics continues to rise. From 190.7 billion yuan in 2019 to 400.0 billion yuan in 2024, with a compound annual growth rate of 16.1%. By 2029, this figure is expected to reach 570.0 billion yuan, with a compound annual growth rate of 7.3% from 2024 to 2029. Benefiting from the growth in demand, Shunyou Logistics' business scale continues to increase. The number of the company's customers increased from over 2,400 in 2022 to over 3,300 in 2023 and over 4,000 in 2024. However, during the period from 2022 to 2024, the company's revenue scale slowed down, with revenues of 1.184 billion yuan, 1.506 billion yuan, and 1.522 billion yuan respectively during that period. The revenue growth rate in 2024 decreased to 1.06% from 27.2% in 2023. At the same time, the company's profitability fluctuates significantly in different years. From 2022 to 2024, the company's gross profit was 73.16 million yuan, 158 million yuan, and 102 million yuan respectively, with gross margins of 6.2%, 10.5%, and 6.7%, respectively. The significant increase in gross profit margin in 2023 was due to strong market demand for B2C export e-commerce logistics services and a decrease in international shipping fees, while the decrease in gross profit margin in 2024 was due to pricing pressure in the direct logistics services market and changes in parcel volume, among other factors. In addition, from 2022 to 2024, the company's annual profits were approximately 31.875 million yuan, 73.465 million yuan, and 43.875 million yuan, showing significant fluctuations as well. Intense industry competition, dependence on a few customers poses hidden risks According to the prospectus, Shunyou Logistics faces many risks and challenges in its development process, which may have a significant impact on the company's future development. From an external perspective, the development of global e-commerce and macroeconomic conditions have a huge impact on the company's business. The company's business is highly dependent on the development of the cross-border e-commerce industry, and any fluctuations in the e-commerce industry may directly affect the company's business. Changes in macroeconomic conditions, such as economic downturn, inflation, exchange rate fluctuations, etc., may also impact the company's operations and profitability. The uncertainty of international trade policies may lead to an increase in logistics costs, a decrease in market demand, and have a negative impact on the company's business. Industry competition is also one of the important challenges facing the company. The competition in China's B2C export e-commerce direct delivery logistics service market is fierce, with approximately 5,000 service providers participating in the competition, and the top 10 participants accounting for only 21.9% of the total market share. Competitors may have advantages in service scope, technological facilities, brand awareness, and capital resources, posing a threat to Shunyou Logistics's market share. With the intensification trend of industry consolidation, the competitiveness of the industry is expected to further increase.Large enterprises may further enhance their competitiveness by means of mergers and acquisitions, bringing greater competitive pressure to Shunyou Logistics.There are also some risks within the company, with dependence on a few clients being one of them. The prospectus shows that Shunyou Logistics' main clients are cross-border e-commerce platforms and sellers. During the previous reporting periods, the revenue generated from the company's largest clients accounted for 45.8%, 36.2%, and 28.9% of the total revenue, respectively. By 2022-2024, sales to the five largest clients collectively accounted for 60.2%, 51.5%, and 52.4% of total revenue. During the same period, the company's trade receivables were RMB 131 million, RMB 118 million, and RMB 169 million; and trade receivables impairment was RMB 1.2 million, RMB 1.1 million, and RMB 1.6 million. Overall, as a significant participant in the cross-border e-commerce logistics sector, Shunyou Logistics has a good business foundation, market position, and growth potential. The company's strengths in special cargo transportation and expansion into emerging markets provide strong support for its future development. Faced with a complex and ever-changing market environment and various risk challenges, the company needs to continuously optimize its business model, strengthen cost control, improve service quality, and actively address various risks. In the long term, with the continuous development of the global e-commerce market and the maturity of the cross-border e-commerce industry, Shunyou Logistics is expected to achieve further growth in the industry. By utilizing the raised funds reasonably and implementing the established development strategy, the company has the opportunity to expand market share and increase profitability.