First, the company’s share price has continued to rise and hit new peaks, which has increased by 37% since its listing, in sharp contrast to the 16% drop of Hang Seng Index. Subsequently, the company announced that it was successfully selected as a constituent of Hang Seng Family of Indexes on August 19, which indicated that the value of Huitongda Network has been further recognized by the capital market.
On August 23, Huitongda Network delivered another good news – in the 2022 interim performance statement, the company’s revenue and net profit both achieved high-rising prosperity, giving investors great confidence in its business and development prospects.
According to the interim statement, for the sixmonths ended June 30, 2022, Huitongda Network achieved revenue of RMB 39.89 billion, representing a YoY increase of 33%, and gross profit of RMB 1.15 billion yuan, representing a YoY increase of 49%. Also, the company’s adjusted net profit attributable to shareholders of the parent increased by 58% YoY to RMB 190 million. As of 30 June 2022, the company have accumulatively connected 191,750 member stores, representing a YoY increase of 22%.
Since 2022, under the global macroeconomic downturns triggered by repetitive coronavirus pandemic outbreaks, the complexity and uncertainty of the external environment have reached an unusual degree. However, as a leading and fast growing company in the retail industry of domestic sunken market, the overall business development of Huitongda Network has demonstrated very strong resiliency. While its revenue has significant increase, the company achieved full profitability – indicators such as gross profit, profit structure, and cash flow from operating activities have all maintained stable year-on-year growth, which proves the company’s performance resilience and high growth attributes.
Zhitong Finance APP believes that the steady rise of the company’s performance is mainly due to the efforts in the following four aspects:
1. The “Huitongda Model” continues to lead, driving performance to increase against the trend
In these few years, with the improvement of economic development level, the continuous advancement of urbanization process, the boost of infrastructure construction and logistics systems, and the increase of residents’ disposable income, the sunken market has revealed unprecedented consumption potential. Although fully tapping the consumption potential of townships and promoting the sinking of channels and services are still important efforts to promote the recovery of consumption in China in the long run, due to the impact of the epidemic, the YoY retail sales of rural consumer goods fell slightly in the first half of 2022.
Under such circumstance, Huitongda Network, known as the “No.1 stock in the sunken market”, has successfully achieved contrarian growth. Specifically, in the first half of 2022, the transaction business of the company’s commodity supply chain achieved a YoY increase of 32% in operating revenue. Moreover, the revenue of the service business such as SaaS increased significantly by 117%, reaching RMB 360 million.
Under the pressure of the epidemic and overall market environment, Huitongda Network has always been committed to the “Two Ends with One Road” capacity building of the supply end as well as the client end, successfully driving its revenue to maintain a sustainable, stable and rapid growth. This not only shows the strong resilience of China’s sunken retail market, but also reveals the high adaptability and leading role of the “Huitongda Model” to the sunken retail market.
2. Supply chain capacity being further upgraded, six major industries go hand in hand
From the perspective of transaction business, in terms of supply chain, Huitongda Network continued to enhance its layout in 6 major industries including household appliances, consumer electronics, agricultural production materials, home building materials, beverages and transportation in the first half of this year. The company actively strengthened strategic partnerships with leading brands in these industries, while further optimized the subcategories to better meet the needs of consumers in the sunken market. Up until 30 June 2022, Huitongda Network has successfully strengthened collaborative relationships with nearly 1,000 leading brands.
Specifically, in the new energy field, Huitongda Network is positioned as a regional operator jointly cooperating with automobile OEMs. Through the integration of upstream OEMs and the “broker” model, the company builds a strong bond between brand manufacturers and consumer. Under this model, Huitongda Network is more focused on developing supply chain and marketing channel, making the original offline transaction efficiency.Helping small and medium car dealers solve the problems of car supply, cost reduction, vehicle circulation in many aspectsin the sunken market
Zhitong Finance APP learned that the company has successively entered strategic cooperation with Skywell (Skyworth Automobile) and Chery Group (Karry New Energy) on the basis of innovatively exploring the “can Manager Mo”el” in the sunken market with Hozon (Neta) Automobile. At present, Huitongda Network’s relevant business involvement has covered OEMs and brands including Neta Automobile, Skyworth Automobile, Karry New Energy, and BYD.
Regarding to the consumer electronics industry, Huitongda Network has involved in the entire consumer electronics chain, providing a full range of digital services for upstream factories, agents, distributors, retailers, etc., covering business of mobile phones, tablets, computers, smart wearable devices, wireless headsets, digital and pan-wisdom products.
Furthermore, in the e-commerce industry, Huitongda Network’s subsidiary “Jujia Express” and Apple have completed the construction of over 7,500 OTC stores and the upgrade of 145 “Township Selected Stores” in the sunken market.
“Jujia Express”, a wholly owned subsidiary of Huitongda Network, has successfully become China’s fourth multi-category channel distributor of Apple in September 2021. As of June 30 this year, “Jujia Express” has completed the construction of 7,511 Apple OTC stores and the upgrade of 145 “Township Selected Stores”.
From the perspective of the beverage industry, Huitongda launched its own beverage brand “JiuPinhui” in July 2021, which is an online and offline beverage store that integrates order combination, goods collection, and product customization all in one store. In addition to taking advantage of Huitongda’s existing retail terminal advantages that have already covered 21 provinces and the industry interconnection, it approached the sunken market with the “1+N” product structure (mainly Maotai-flavor liquor, supplemented by other flavored liquor).
Up to now, Jiupinhui’s business has covered Jiangsu, Anhui, Zhejiang, Shandong, Henan and other provinces, and has cooperated with over 210 upstream brand manufacturers, including Wuliangye, Jinsha, Zhaiyao, Wuliangchun, Guizhou Chun, Yelanggu, Xifeng, Jinzhongzi, Guotai, Langjiu, Hengchang Shaofang, etc.
It is worth mentioning that the improvement of the company’s supply chain capabilities is also reflected in its headquarters supply chain and the reverse customization of products. Zhitong Finance APP noticed that the proportion of the company’s headquarters supply chain has rised from 38% at the end of 2021 to 48% in the first half of 2022.
In the agricultural materials industry, Huitongda has successfully launched a series of customized agricultural products – “Huizhongtian” brand compound fertilizer series. In the first half of 2022, the “Huizhongtian” has covered six staple grain provinces including Jiangsu, Shandong, Henan, Anhui, Hubei and Hebei. Through Huitongda’s agricultural channels in towns and villages, it has served 150,000 acres of agricultural land, benefiting thousands of rural households.
In addition, in the new energy industry, the jointly customized model of Huitongda and Karry New Energy has been officially put into production; in the liquor and beverage industry, the jointly customized liquor of Huitongda and Guowei Liquor has also been formally launched, which all reflected the enhancement of the company’s industrial capabilities.
Meantime, in respond to the national policies this year for new energy vehicles and household appliances to go to the countryside, Huitongda Network has been doing active layout. Taking the new energy industry as an example, the company established the “New Energy Vehicle Division”. Thanks to the leadership of this professional team, the company has successfully formed the joint ventures with Neta, Skyworth, Karry, as well as the strategic cooperation with BYD, GAC and other OEMs, promoting the 2022 H1 revenue of the entire transportation segment to increase by 34% year-on-year.
3. Network of membership stores continues to expand, escorting the service business for the better
The service business of Huitongda Network, as the other end of its “Two Ends with One Road” strategy, has gone deep into the sunken market through various forms of online and offline integrated services. Its SaaS+ business was further implemented in 2022, digitally transforming the traditional retail model of township and driving further expansion of the company’s membership store network.
In the first half of this year, the company added more than 20,000 membership stores, increasing the total number from 169,000 at the end of 2021 to 191,000, among which the number of stores in rural areas has increased to 22,000. Also, the number of active membership stores exceeded 65,000, a YoY increase of 63%; the number of SaaS subscribers exceeded 110,000, a YoY increase of 55%.
In addition, in the four major industries of household appliances, consumer electronics, agricultural means of production, and liquor&beverages, Huitongda Network has newly opened more than 1,800 “industrial benchmark stores” with high user viscosity and mainly selling goods from its own warehouse. The benchmark stores effectively implement the company’s strategy in respect of “customer management, product management, and store management”, which is a new store model Huitongda Network created for the sunken retail market.
With the continuous expansion of the company’s membership store network, members’ stickiness has been steadily increasing, and the company’s internal SaaS capabilities have been successfully optimized, hence improving Huitongda’s overall service level.
In the retail side of the sunken market, Huitongda Network also has remarkable performance. In the first half of this year, Huitongda Network kept on promoting the upgrade and transformation of digital infrastructure, targeting at different customer types such as small and micro enterprises, small stores, medium-sized stores, regional chain stores, brand channel customers. The company aims to provide customers with differentiated services to meet the various needs of operation and management through developing and launching customized tools and products.
Taking the Xinmao Communication Store in Quanzhou, Fujian as an example, Huitongda successfully helped the store to gain visibility and influence as an “Apple Official Authorized Distributor” through its unique SaaS+ transaction empowerment system to act as “buying agent”, “selling agent” and “managing agent”. It is reported that the membership operation team of Huitongda Fujian branch helped the store to hold customized O2O online events, and to establish the “Xinmao Mobile City – Apple Authorized Distributor” Huixianggou online store applet to thereby open up both online and offline channels. Besides, the company’s “push” team also assisted the store in social media marketing such as WeChat Moments, WeChat groups and other platforms, attracting traffic by over 1,000 people, converting 159 fans, and selling 20+ Apple mobile phones in one single event.
At present, the company has built a client management team of nearly 3,000 people, and completed 15,000 store marketing events in the first half of the year, which covered tool/event/commodity trainings of over 20,000 people.
In addition, the company’s warehousing capabilities to connect the supply side and the retail side has also made progress. With the iterative optimization of the digital cloud warehouse and cloud distribution system, the proportion of the company’s logistics fulfillment cost to gross profit is also steadily decreasing.
4. Assisting in promoting the development of digital villages is the long-term implementation of corporate mission
Zhitong Finance APP also noticed that since the 18th National Congress of the Communist Party of China, the Party Central Committee has attached great importance to the development of the digital economy and raised it as a national strategy. Digital village Strategy plays an important role of China’s digital construction since the “Implementation of Digital Village Strategy” was first proposed in the Central Document No. 1 in 2018, which has stated instructions and deployments for the construction of digital villages for five consecutive years. In 2022, the Central Document No. 1 clearly emphasized that we should vigorously promote the construction of digital villages, accelerate the standardization construction of digital villages, study and formulate development evaluation index systems, and keep carrying out digital village pilots.
For a long time, Huitongda Network has actively responded to the national call to help promote the development of digital villages. At the same time, the company has also been practicing the corporate mission of “Change Farmers’ Lives for the Better”, taking corporate social responsibilities, creating corporate social value, thus combining corporate mission with the central policy. The company carried out digital rural services such as new farmer trainings and digital transformation of township stores under the guidance of the government.
In 2021, Huitongda Network and Zhejiang Shengzhou Municipal Bureau of Commerce conducted in-depth cooperation on the construction project of national e-commerce demonstration county. Huitongda participated in the construction of “Shengzhou E-commerce Public Service Center”, and was heavily involved in the construction of 217 local agricultural product upstream sites. Also, Huitongda Network has also started a strategic cooperation with Jiangsu Yancheng Bureau of Commerce to actively promote the digital transformation and upgrading of the small stores in Yancheng, which successfully achieved a win-win cooperation between government and enterprises.
Up to now, Huitongda Network has acquired broad spectrum of capabilities and solutions for digital villages, including rural governance solutions, digital cultural tourism, digital farmland, rural earthquake precaution and disaster reduction, and Smart Party Building.
Looking ahead, the huge market potential of the sunken market may be further released. According to Accenture’s “2022 China Sunken Market Consumer Insights” report, with the continuous development of China’s economy, the advancement of urbanization, the improvement of infrastructure construction and logistics systems, and the increase in the disposable income of residents in the sunken market, the supply of goods is abundant. Driven by both sides of supply and demand, the sunken market has revealed unprecedented consumption potential.
As for the future of Huitongda Network, the management said that Huitongda Network will continue to focus on five major strategies including the service needs of membership retail stores, the digital needs of omni-channel differentiation, the diversified commodity demands of customers, and the construction of warehousing and logistics system in the sunken market, and the organizational construction of future strategy implementation. The company will also intensify the construction of “Two Ends with One Road” and maintain stable, efficient and sustainable growth to create more value for the society, customers and its investors.
Taken together, the general trend of sunken market development has created favorable external conditions for the business development of Huitongda Network. And from the crowd emerged this company, Huitongda Network, with its unique business model, strong network of membership stores, and its excellent supply chain management capabilities.
Based on the current circumstances while bearing in mind the future development, it is foreseeable that the high growth of Huitongda Network will be sustainable given the great potential of the sunken market and the favorable policies.
Additionally, the strong growth expectation also explains why the stock price of Huitongda Network can swim against the tide and keep rising after the listing. The company’s inclusion as a constituent stock of HSCI also demonstrates the capital market’s recognition of its business performance, investment value and growth prospects.
The global capital market rising volatility, it may be the best strategy for investors to continue seizing high-quality growth stocks like Huitongda Network.
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