US IPO Preview | Shilu Logistics: Abandoning Basic Freight Forwarding Amid "Volume Growth, Thin Margins," Betting on Digitalization and Overseas Networks

Global cross-border logistics market size in 2025 is approximately RMB325.85 billion, with a CAGR of only 4.3% over the next six yearsincremental growth is neither thin nor steep; what truly defines the industry's texture is volatility on the profit sidein the first three quarters of 2026, the China Export Container Freight Index averaged a year-on-year increase of 22.57%, while air cargo spot rates rose 38% year-on-year. Rising freight rates can temporarily boost freight forwarders' revenue, but at the same time expose the deep binding of cross-border logistics companies' profitability to the freight cycle. Huatai's judgment in its transportation Q2 earnings review is quite blunt: the cross-border logistics sector is under overall pressure but performance is diverging, with leaders possessing core capacity resources and pricing pass-through capability relatively benefiting. Against this industry picture of "volume growth, thin margins, and intensifying divergence," Shilu Logistics (World Road), which enters the market with a combination of modular freight forwarding and integrated logistics solutions, filed at a window when freight rates are elevated but small and medium-sized participants have cramped room for price pass-through, making its capitalization attempt more observation-worthy. On filing cadence, the company confidentially filed on December 23, 2024, and publicly filed its prospectus for the first time on May 16, 2025; the latest prospectus expands the offering size from 1.5 million shares to 6 million shares and adjusts the price range from US$46 to US$56. Based on the midpoint of US$5.5, the raise is approximately US$33 million and the market value approximately US$190 million. **Relying on cost reduction and efficiency gains to defend the net profit bottom line** The prospectus shows that Shilu Logistics was founded in 2020 and is an integrated logistics provider headquartered in Wuhan and operating through regional hubs in Shanghai and Shenzhen. Looking through its consolidated statements, the company displays an extreme "shrink the balance sheet to protect profit" characteristic: revenue contracts, gross profit is thin, and it relies on aggressive cost reduction and efficiency gains to defend the net profit bottom line, but the massive bleeding of its operating cash flow exposes the fragility of this company's bargaining power in the industrial chain. Shilu Logistics' FY2026 revenue was RMB381 million (approximately US$55.249 million), down about 17.8% year-on-year from RMB464 million in FY2025. This figure forms a sharp contrast with the industry environmentin the first three quarters of 2026, the China Export Container Freight Index averaged a year-on-year increase of 22.57%, while air cargo spot rates rose 38% year-on-year. In a year of broad freight rate increases, why did Shilu Logistics, whose main business is freight forwarding and integrated logistics, see revenue fall rather than rise? This precisely confirms the industry's core pain point: small and medium-sized participants lack core capacity resources and direct-customer stickiness, and cannot smoothly pass on rising freight rates to downstream customers. As Huatai stated in its research report, in the cross-border logistics sector, "leaders possessing core capacity resources and pricing pass-through capability relatively benefit." Its revenue decline may, on the one hand, stem from actively contracting some low-margin or loss-making business lines when freight rates were elevated; on the other hand, it also reflects that in fierce competition for existing volume, the loss of its basic business volume or customers exceeded the book compensation brought by rising freight rates. Reflected on the profit side, the company's FY2026 gross profit was RMB23.69 million, down 20% from RMB29.61 million the prior year, with gross margin slipping to 6.22%. Even as revenue and gross profit both contracted, Shilu Logistics still achieved nearly flat net profit attributable to shareholders in FY2026: edging down from RMB8.931 million in FY2025 to RMB8.602 million (approximately US$1.246 million), with net margin even rising slightly from 1.92% to 2.26%. This defense of profit is entirely attributable to extreme compression of operating expenses. The statements show that total operating expenses were sharply cut from RMB18.252 million in FY2025 to RMB11.883 million, a decline of 34.9%, among which general and administrative expenses (G&A) plunged from RMB17.088 million to RMB10.337 million. More importantly, in FY2026, net cash provided by operating activities of Shilu Logistics turned from positive to negative, plunging from a net inflow of RMB6.143 million in FY2025 to a net outflow of RMB38.261 million (approximately -US$5.545 million). For freight forwarding and logistics companies, a large outflow of operating cash flow usually means two things: first, downstream customers' collection periods lengthen, and receivables pile up; second, in order to lock in capacity or shipping space, they have to advance large amounts of prepayments to upstream suppliers (such as shipping lines and airlines). In a seller's market with elevated freight rates, small and medium-sized freight forwarders not only find it difficult to pass costs on to customers, but instead need to subsidize operations with their own funds, indicating that Shilu Logistics is in an absolutely weak position in the capital game with upstream and downstream of the industrial chain. To make up for the "bleeding" on the operating side, the company's net cash inflow from financing activities in FY2026 reached as high as RMB36.4 million, most likely through debt financing or shareholder loans to maintain cash flow. As of the end of the period, the company's balance of cash and cash equivalents was only RMB10.547 million (approximately US$1.529 million), which is stretched thin relative to its revenue base of hundreds of millions and its daily freight advance funding needs. From the allocation of its fundraising proceeds (50% for supplementing working capital and general corporate purposes), it is strongly evident that the company's primary objective in this listing is "blood transfusion"; the remaining 20% is for IT services and data processing, and 20% for overseas entity expansion. **Can low-margin small parcels reshape the moat for going global?** In the macro picture of slowing incremental growth in the global cross-border logistics market and sharply surging sea and air freight rates in the first three quarters of 2026 (sea freight up 22.57% year-on-year, air freight up 38%), small and medium-sized freight forwarders often face the most extreme "scissors gap" squeeze. At the revenue level, Shilu Logistics' FY2026 total revenue fell from RMB464 million the prior year to RMB381 million (approximately US$55.249 million), down 17.9% year-on-year. However, looking through the surface of this overall contraction, its business structure is undergoing a dramatic "seesaw effect." The modular freight forwarding business, the core foundation of traditional freight forwarding, suffered a cliff-like shrinkage, with revenue plunging from RMB32.427 million to RMB15.753 million, a decline of 51.4%. Most notably, in a year when industry sea and air freight rates soared, its air freight forwarding revenue plunged 98.2% year-on-year (leaving only RMB173,000), while sea freight forwarding nearly went to zero (down 99.5% year-on-year). Such anomalous data intuitively reveals the industry pain point: in a seller's market where capacity is in short supply, small and medium-sized freight forwarders lacking first-hand shipping space resources simply cannot obtain competitive prices from airlines or shipping lines; high freight rates cause them to completely lose room for price pass-through, and a large number of basic customers are lost or business lines are forced into strategic suspension. However, its ground distribution business bucked the trend with growth of 91.7%, showing that the company still retains local advantages in last-mile fulfillment. In sharp contrast to the collapse of modular freight forwarding, integrated logistics solutions became the absolute pillar supporting the company's survival, with its revenue share climbing further from 93.0% to 95.9%, recording RMB365 million. This segment includes integrated small parcel logistics (56.7% share) and global customs clearance and delivery (39.2% share). Although revenue from these two core businesses also declined 14% to 17.2% year-on-year, amid the industry headwinds of weak macro consumption and peaking cross-border small parcel dividends, their declines were relatively manageable. This indicates that Shilu Logistics' customer base and product structure are already highly skewed toward cross-border e-commerce and specific direct customers, and the company is trying to hedge the fragility of single trunk-line capacity forwarding through end-to-end integrated services. Profitability data further confirms the "razor-thin" nature of its business model. Total gross profit fell from RMB29.614 million to RMB23.69 million, with overall gross margin slipping to 6.2%. Among the breakdown, the high-margin customs brokerage business collapsed (gross profit plunging from RMB4.903 million to RMB289,000), reflecting tightening global trade compliance and white-hot competition in cross-border customs clearance. Yet what is thought-provoking is that the gross margin of its foundation integrated logistics solutions rose slightly against the trend, especially the gross margin of "integrated small parcel logistics," which increased from 4.9% to 6.0%. Achieving improvement in unit economics against a backdrop of declining revenue shows that Shilu Logistics, after abandoning inefficient basic freight forwarding business, is "defending profit" through extreme cost control, route optimization, and abandoning low-margin orders. Overall, Shilu Logistics is trying to break away from the traditional freight forwarding intermediary model of "depending on the weather and earning spreads" and transform into a digitalized, service-heavy integrated logistics provider. Combined with the use of proceeds from its US IPO (20% for enhancing IT services and data processing capabilities, 20% for registering and operating overseas entities and offices), its future growth path has surfaced: first, relying on the digital capabilities of IT systems to improve the efficiency of small parcel route planning and customs clearance delivery, thereby squeezing scale effects out of the low-margin small parcel track; second, by establishing an overseas entity network, truly controlling last-mile delivery and customs clearance nodes to build barriers. However, the near-zeroing of its basic sea and air freight foundation exposes its fatal shortcoming in capacity control; and the overseas asset investment and IT R&D required for the transformation are highly dependent on the successful "blood transfusion" from this fundraising (50% of proceeds for supplementing working capital).