1.183 billion! The reason behind Jitu's acquisition of SF Express's loss making subsidiary is this

Tech 2023-05-21 11:17:48 Source: Network

The wave of mergers and acquisitions in the express delivery industry is still ongoing.Recently, SF Holdings announced that its subsidiary Shenzhen Fengwang Holdings Co

The wave of mergers and acquisitions in the express delivery industry is still ongoing.

Recently, SF Holdings announced that its subsidiary Shenzhen Fengwang Holdings Co., Ltd. and its subsidiary Shenzhen Jitu Supply Chain Co., Ltd. of Jitu Express have signed an "Equity Transfer Agreement", intending to transfer 100% equity of its wholly-owned subsidiary Shenzhen Fengwang Information Technology Co., Ltd. for RMB 1.183 billion.

In short, in this transaction, Jitu successfully included Fengwang under its umbrella.

Jitu, who was once banned by multiple express delivery companies such as the "Tongda Group", has transformed into someone who others cannot afford after performing real business battles one after another.

Shunfeng and Jitu each take what they need

As is well known, SF Express has always been specializing in high-end express delivery, focusing on "good and fast", while the overall style of Fengwang seems extremely inconsistent.

In 2018, SF Express faced a dilemma of slowing down its main business growth and getting closer to the ceiling. In order to tell a new story to the capital market, SF Express has turned its attention to the sinking market. Therefore, in 2020, when Jitu provoked an industry "price war" with extremely low prices, Fengwang also emerged.

However, due to the fact that Fengwang is still in the stage of ramping up production capacity, the overall cost is too high, coupled with the impact of the excess spare parts volume of the large network, the overall gross profit margin of SF Express is further dragged down.

According to the financial report data of SF Express over the years, in 2017, the gross profit margin of SF Express was as high as over 20%, while in 2020, the gross profit margin of SF Express dropped to 16.35%. In 2021, it was the largest decrease in gross profit margin since its listing, dropping to 12.37%. Until 2022, SF Express' gross profit margin did not significantly increase, only 12.49%.

This kind of Fengwang has become a burden for SF Express. Therefore, selling Fengwang is undoubtedly a rational choice for Shunfeng.

However, A's arsenic, B's honey.

According to data, in the past three years, Fengwang has grown very rapidly. Its network currently covers 27 provinces across the country, with an average daily volume of about 8 million orders. In 2022, its revenue scale exceeded 3.2 billion. Such a size and scale are inevitably a piece of "fat" for the "attacking" polar rabbit.

Since March 2020, Jitu has relied on its "burning money" model to not only provoke industry wars and break the stable oligopoly pattern of the express delivery industry for many years, but also gain considerable market share and successfully enter the first tier.

Therefore, for Jitu, obtaining the franchisee resources behind Fengwang will not only further expand its market size, but also accelerate its listing pace. According to industry estimates, the target valuation of Jitu is at least $20 billion. From this perspective alone, Jitu's acquisition of Fengwang will bring significant help to the listing valuation.

Express Jianghu Accelerated Shuffle

The main theme of the express delivery industry can be roughly summarized with the word 'roll'.

For a long time, the domestic express industry has a low concentration ratio and significant head effect. After a round of elimination competitions, a stable pattern of "four links and one reach+SF" has been formed. Until 2020, Jitu gained strong support from Pinduoduo, and at that time, its opponents of "Four Links and One Access" were constantly losing out through price wars.

It is reported that at that time, Jitu burned 20 billion yuan in 10 months, and the strategy of "sending 2 pieces to the whole country and 1 piece to Jiangsu, Zhejiang, and Shanghai" directly shattered the floor price of the express delivery industry for many years. What's even more exaggerated is that Jitu lowered the single ticket price to the lowest of 80 cents, which was once known as the "price butcher" in the industry.

This year, the price war in the express delivery industry does not seem to have stopped.

According to data from the National Bureau of Statistics, the online retail sales of physical goods from January to March this year were 2.78 trillion yuan, a year-on-year increase of only 7.3%, compared to over 20% before 2020. In addition, in February of this year, the single ticket revenue of China's express delivery industry was about 9.26 yuan, a decrease of 1.36 yuan from 10.62 yuan in January, and a month on month decrease of 12.81%.

After the acquisition of Fengwang by Jitu, it can continue to integrate resources and expand the market, which also indicates that the industry's reshuffle may continue to heat up. Prior to this, whether it was Jitu's acquisition of Baishi for 6.8 billion yuan or JD.com's acquisition of Debang for 9.7 billion yuan, this has already been demonstrated.

The change brought to the Chinese express delivery industry by this foreign catfish, Jitu, may have just begun. However, for Jitu, in order to go further, the key aspects such as its service, performance, and efficiency will be tested. Relying solely on wild growth and blind running is not enough.

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