On August 30th,Fengchao Holdings Co.,Ltd.(hereinafter referred to as "Fengchao") submitted its prospectus to the Hong Kong Stock Exchange,with Huatai International as the sponsor.

It is reported that if the listing is successful,Fengchao plans to use the raised funds to expand and optimize the layout of smart lockers,enhance the capabilities of last-mile logistics services,improve the capabilities of value-added services,and meet the needs of local communities.At the same time,Fengchao will also strengthen its advertising business,expand the service network of laundry and home life services,and invest in the construction and optimization of its own laundry factories.These measures are expected to further enhance Fengchao's market competitiveness and profitability.

If Fengchao can go public smoothly,it will become the fifth SF Group company to be listed after SF Holding,SF REIT,Kerry Logistics,and SF Same City.

However,there are still some hidden dangers on the way to Fengchao's listing.

Accumulated loss of 3.7 billion yuan in three years,first profit in the first five months of 2024

The prospectus shows that from 2021 to 2023 and the first five months of 2024,Fengchao achieved revenues of 2.526 billion yuan,2.891 billion yuan,3.812 billion yuan,and 1.904 billion yuan,respectively; the net profits for each reporting period were -2.071 billion yuan,-1.166 billion yuan,-541 million yuan,and 71.602 million yuan,respectively; the adjusted net profits (measured by non-IFRS standards) for each reporting period were -1.414 billion yuan,-842 million yuan,-1.845 billion yuan,and 219 million yuan,respectively.

As of the end of May 2024,Fengchao's smart parcel locker network covers 31 provinces in China and Thailand,including 330,200 sets of Fengchao smart lockers with a total of 29.9 million compartments.

From 2021 to 2023,Fengchao accumulated a loss of 3.778 billion yuan.In response,Fengchao explained that this was mainly due to the huge costs and expenses incurred by the investment in the construction and operation of the Fengchao smart locker network,which serves as the foundation of its services.It was not until January to May of this year that Fengchao achieved a net profit of 71.6 million yuan for the first time,marking its first profit.

In terms of business categories,Fengchao mainly has three business segments: last-mile delivery services,value-added services and others,and consumer smart delivery services.In it,the main part of the revenue comes from the last-mile delivery service of express delivery,which achieved revenues of 1.46 billion yuan,1.69 billion yuan,1.84 billion yuan,and 777 million yuan from 2021 to 2023 and the first five months of 2024,respectively.Although it still maintains a positive growth,its proportion has decreased from 58.3% in 2021 to 40.8% at the end of May 2024.

This is mainly due to the rapid growth of consumer intelligent delivery services.From 2021 to 2023 and the first five months of 2024,the revenue from consumer intelligent delivery services was 149 million yuan,310 million yuan,1.02 billion yuan,and 692 million yuan,respectively.The proportion of revenue increased rapidly from 5.9% in 2021 to 36.3% at the end of May 2024.

However,the development of value-added services and other businesses has been slow,with revenues of 922 million yuan,896 million yuan,956 million yuan,and 435 million yuan in each reporting period,respectively.The proportion of revenue decreased from 36.5% in 2021 to 22.9% at the end of May 2024.

Riding the e-commerce wave,community services are hard to improve.

It is reported that the continuous increase in the volume of product returns and exchanges driven by the rise of live broadcast and short video sales models has promoted the development of consumer intelligent delivery services of Fengchao.Data shows that from 2019 to 2023,the number of e-commerce reverse logistics increased from 3.6 billion pieces to 8.2 billion pieces,with a compound annual growth rate of 22.7%,and it is expected to further increase to 20.9 billion pieces by 2028.

As of August 20,2024,Fengchao has cooperated with 12 e-commerce platforms to provide integrated return and exchange services.From 2021 to 2023 and the first five months of 2024,the number of parcels sent by Fengchao's e-commerce return and exchange integrated services were 18.5 million,36.5 million,133 million,and 77.2 million,respectively; during each period,the number of personal single-piece shipments was 95.8 million,105 million,99.7 million,and 36.2 million,respectively.

However,due to the increasing proportion of low gross margin reverse logistics in the total volume of end delivery parcels,which reached 68.1% in the five months ended May 31,2024,the gross margin of consumer intelligent delivery services decreased from 12.4% in the first five months of 2023 to 7.3% in the same period of 2024.

Regarding profitability,Fengchao places more hope on community services,launching home living services and self-operated laundry businesses in 2022.In the prospectus,Fengchao also mentioned that the raised funds will be used to expand the service network of washing and home living services,and invest in the construction and optimization of self-operated washing factories,etc.

The prospectus shows that as of May 31,2024,Fengchao's washing network includes the aforementioned self-operated washing factories and 135 third-party washing factories nationwide.Currently,the number of Fengchao's washing service orders has increased from 69,000 in 2022 to 548,000 in 2023,and as of May 31,2024,the number of orders has further increased to 962,000.In terms of home services,Fengchao has reached a total of 71,400 orders as of this year's May 31.

However,it is worth noting that these two businesses are merged into value-added services and other businesses in the prospectus.As mentioned earlier,this business category has slow growth,and its proportion of revenue has been declining year by year.This indicates that Fengchao has not yet fully opened up the market for community services.Additionally,Fengchao has received multiple rounds of investment,with investors including Yunda,Zhongtong,Zhongding Capital,Fushan Investment,and others.However,the last round of financing was finalized on February 1,2021.Since 2022,Fengchao's financing cash flow has turned negative,and as of the end of May 2024,Fengchao's cash on hand was 859 million yuan,which is half of the 1.78 billion yuan at the end of 2021.This may also be one of the major reasons why Fengchao is seeking to go public.

Will Fengchao,which has lost favor in the primary market,be able to gain support in the secondary market?We will continue to pay close attention.