Listed SaaS Company YouZan Chasing Profits on top of Explosive Growth
China has praised that there are still many stumbling blocks on the road to achieving the “profit dream”.
Recently, China has praised (hereinafter referred to as praise) movements constantly. In March, it opened up the cooperation with Inke Live Broadcasting Platform, and then announced the opening of a full subsidy program for live broadcast traffic, all of which were approved by the capital market. On April 8th, an announcement of a high-priced placement of HK $ 784 million caused its share price to plummet. As the placing price of HK $ 0.64 was 11.11% lower than the previous day’s closing price, Affected by this, Youzan’s share price fell after the opening day, and closed at HK $ 0.65 on the same day, a decrease of 9.72%. As of now, it is reported to be 0.66 Hong Kong dollars, with a total market value of 10.207 billion Hong Kong dollars.
Source: Snowball
As a WeChat applet service provider, the market’s combat effectiveness is obvious to all. The data shows that the GMV of e-commerce in 2019 is 33 billion yuan, an increase of more than 80%; there are currently 82,000 paying merchants in stock, and 54,000 new ones will be added in 2019. Zan retail, Youzan education, Youzan industry and other stores SaaS products and Youzan chain and a series of new retail solutions, targeting the offline stores.
However, judging from the 2019 financial report data, Youzan’s current transformation is not smooth. Moreover, the competitor Weimeng on the track has achieved full profit in 2019. In contrast, how can Youzan, which has further increased losses during the same period, compete with its opponents? Although the vigorous development of decentralized e-commerce in recent years has brought more imagination to Youzan, and the outbreak of the epidemic has also made many merchants realize the importance of online sales channels and private domain traffic, but you can really How much is the benefit? Perhaps we can first take a look at the financial data showing awesome.
Why do you like to rush to practice “inner skills”?
According to Youzan, the financing for the placement was mainly for system upgrades and product development. Specifically, the announcement shows that the proceeds from the placing are HK $ 784 million, of which approximately HK $ 705 million will be used for system upgrades, product development and marketing expenses; the remaining approximately HK $ 78.4 million will be used for general operating funds. It can be seen that you like to seek more funds to expand your own strength, and then improve market competitiveness. So, what exactly is the praise at this stage?
According to Youzan’s 2019 financial report, during the period, it achieved a revenue of 1.17 billion yuan, an increase of 99.7% from the 586 million yuan in the same period of 2018. However, the annual loss further expanded by 26.1% to 915 million yuan; the loss attributable to owners was 592 million yuan, an increase of 37.2% year-on-year.
Although the revenue has maintained a remarkable growth rate, the ever-expanding losses are further testing its management capabilities. The data shows that in 2019, the sales cost of Youzan increased significantly. During the period, this expense increased by 192%, and the sales expense ratio also increased from 31% in 2018 to 45% in 2019.
On the other hand, although there are 82,000 paid merchants in China by the end of 2019, this is an increase of 54,000 compared to 59,000 in 2018. But according to Sina Finance data, if one calculates this, the customer retention rate of Youzan is only 47.8%, and the renewal rate is less than 50,000.
The above-mentioned multi-faceted data actually reflects some of the market anxieties that exist with Zan. The big increase in revenue is the rising sales expenses and the expanding losses. Youzan also directly indicated that a large part of the proceeds from this financing was used for system upgrades, marketing costs, product development, etc., which is in line with the current problems in Youzan ’s financial report. It can be seen that Youzan ’s need for funds The degree is more clear. However, the capital market is not satisfied with this demand for praise, otherwise the stock price will not fall more than 9% on that day.
However, for Youzan, some of the challenges behind the financial report data may be exacerbating the risks it faces.
There are still many stumbling blocks on the way
For Youzan, the continued rise of competitors is putting great pressure on it; on the other hand, although it is backed by Tencent, it is not necessarily a good thing to rely too much on Tencent.
1. The rapid development of Weimeng has brought great pressure to Youzan
It must be said that the opponents with praise can’t get around Weimeng. Established in 2013, Weimeng won the title of “SaaS First Share” after successfully listing in January last year.
With its “SaaS service + precision marketing” business model, Weimeng has continuously achieved breakthroughs in performance and increased market share. According to relevant information, the market share of Weimeng in the business service industry was 17% in 2017. This data rose to 20.9% in 2018. Judging from Weimeng’s 2019 financial report, during the period, total revenue reached 1.437 billion yuan, a year-on-year increase of 66.1%, exceeding market expectations. The two core businesses of SaaS products and precision marketing have achieved substantial growth, driving the increase in gross profit margins, making Weimeng achieve full profit in 2019, with a net profit of 311 million yuan for the whole year. Compared with Youzan’s further expansion of losses, the current gap between the two is still not a small distance.
Moreover, in 2019, Weimeng Group successfully entered the offline market of large passengers and launched smart retail cooperation with well-known retail chain companies such as Lenovo, Mengjie, Lin Qingxuan, and Carbin in the smart retail sector. As of December 31, 2019, the number of Weimeng Group’s smart retailers reached 1,101, and revenue accounted for 8.8% of total SaaS revenue, of which 217 were branded merchants. Dake offline market has become another weapon for Weimeng to battle the market.
Of course, we have also seen Youzan also building online sales channels for some offline merchants. However, as far as Youzan is concerned, the gap with Weimeng is still relatively obvious. After all, Weimeng’s eye-catching net profit is more popular in the capital market than Zanlian’s loss-making status. The current share price of HK $ 5.0 is 44% higher than the issue price of HK $ 2.8, while Youzan ’s current share price of HK $ 0.66 is not too surprising compared to the issue price of HK $ 0.53.
2. Backing to Tencent is good, but it also hides hidden worries
With the rapid development of the Internet, online bonus traffic has almost disappeared now, and it is at this time that “new retail” is coming. The praise as “WeChat Ecology First Share” should belong to the first wave of companies enjoying dividends and rising rapidly.
Relying on WeChat’s 1.1 billion user advantage, Youzan fully tapped this private domain traffic pool. Reshape a Taobao-like underlying system within the WeChat ecosystem, but it is different from Taobao’s central platform gameplay, and it is a technical service provider that provides merchants with a micro mall system and a complete mobile e-commerce solution in the SaaS model. Last year, the WeChat advertisement delivery end has already been connected to the Youzan applet. Youzan provides advertisers with an applet landing page to reduce the threshold for advertisers to place WeChat applets and attract more merchants to access the Youzan applet.
However, relying on Tencent or a double-edged sword, it can be said that the business development of praise is inseparable from the social dividend of WeChat, especially after WeChat released the applet, it gave it a hand to penetrate the physical retail industry. After all, Saas is a decentralized digital business platform based on Tencent WeChat and applets. In recent years, as Tencent has further empowered B-end merchants, it has also provided more dividends for Youzan. But at the same time, we should also note that too much dependence will inevitably bring corresponding risks. In the future, once Tencent’s business focus changes, it will also bring more uncertainty to Youzan’s development. As far as Tencent is concerned, it is just a change in the business center, while for Youyouzan, it is likely to be the impact of the whole body. However, with the outbreak of the epidemic, the value of new retail is more prominent, which also brings more gospel to the development of Saas companies.
The outbreak of the epidemic highlights the value of new retail and the “decentralized e-commerce” trend
In the context of the national campaign, more and more physical retailing began to transform online, and the value of new retailing was highlighted. The outbreak has helped Youzan educate offline merchants. At present, many well-known domestic brands have strengthened the layout of private domain traffic during public health events, such as Anta, GXG, Wenfeng Group, Bubble Mart, Dali Garden, Yiye, etc. have passed the online layout of Youzan.
Take the Red Dragonfly as an example. With a day of praise, 5.07 million members were transferred online. According to Tian Ye, the consultant of Red Dragonfly’s chairman, the Red Dragonfly mini-program took only one day from technical development, mall building to official operation, and behind it was Zanzhen who provided technical support and opened a green channel during the outbreak. Such speed of praise. On the first day of launch, the red dragonfly applet transaction reached 300,000 yuan. In addition, the national clothing brand GXG has transformed the national shopping guide online, and the first large-scale sales after the Spring Festival reached tens of millions in 3 days. With the continuous development of new retail business, Youzan’s new retail business is expected to accelerate growth in the future.
At the same time, in the view of Dongxing Securities, decentralized e-commerce is the general trend, and it is appreciated that it will benefit from the booming development of decentralized e-commerce. From the second half of 2019, GMV of Youzan service merchants shows a trend of accelerated growth. In the first half of 2019, GMV growth rate is 50%; in 2019Q3, GMV growth rate is close to 90%; in 2019Q4, GMV growth rate has reached 165%. At present, Youzan has been connected to more and more traffic platforms such as WeChat, Kuaishou, One Live, and Yingke. With the continuous improvement of the system, it is expected that more traffic platforms will be connected, or it will benefit from the development of the entire decentralized e-commerce.
With the strengthening of Youzan’s commercial monetization capability, overall revenue may continue to rise. Accelerating the development of industrial ecology or a line of defense worth exploring. Through the construction of an ecosystem by Zanyun, third-party developers, third-party service providers and agents, we can better serve the majority of merchants and form an effective ecological closed loop. In view of this, Dongxing Securities has given Youzan a 12-month target price, equivalent to a target price of HK $ 1.1. Maintain the “strongly recommended” rating.
Building an industrial ecology under the trend of “decentralized e-commerce” is a direction worth exploring. However, in the view of the Hong Kong Stock Research Institute, there is still a long way to go from the idealized state. In other words, this does not It is not easy to achieve in a short period of time. Although the epidemic has accelerated the exploration of private domain traffic and the transformation of online business, this process will not be very simple.
Even though Youzan has grown GMV by more than 80% to 33 billion yuan in the past year, for SaaS companies, visible revenue and gross profit and customer retention are more important than GMV, and how to reverse the further expansion of losses It’s a matter of urgency. Some people may say that the prospect of SaaS service providers has been recognized by the market. It may not be difficult to profit from Zan. Weimeng is a good example, but how to make the capital market as patient as Zan is not easy.
Source of this article: Hong Kong Stock Research Institute (public number: ganggushe)-designed to help Chinese investors understand the world, senior Hong Kong stock investors take you to learn more about Hong Kong stocks.
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