By Pencil Dao | A Xin

Recently, Suzhou has unveiled a formidable hidden champion: Dongyuan Logistics (brand name "Tiancheng Zhilian"), sprinting towards an IPO on Nasdaq. In simpler terms, its core competency lies in providing domestic and cross-border professional logistics services tailored to enterprise customers.

Remarkably, the company's main entity has been established for just two years yet has embarked on an IPO journey, a unique narrative indeed. What's the secret behind its success?

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Despite the listed entity's youth, Dongyuan Logistics has been operational for 19 years. Its domestic operating entity, Suzhou Tiancheng Zhilian Logistics, assists customers in resolving complex transportation challenges for large equipment through bespoke logistics solutions. For instance, it serves as a key carrier for national wind power generation projects, transporting large wind turbine blades, motors, nacelle components, and other equipment for leading wind power companies.

Its logistics services are primarily categorized into two types: project logistics, encompassing large-scale project handling and special cargo transportation, and general logistics, such as express delivery services. These two primary businesses (transportation services) contribute to over 90% of the company's total revenue. In the fiscal year ending March 31, 2024, its transportation service revenue amounted to $37.5785 million, representing 92.92% of total revenue. Dongyuan Logistics's major clients include multinational corporations, large domestic enterprises, and listed companies like Goldwind Science & Technology, CSSC Haizhuang Wind Power, and Shanghai Huaneng.

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Dongyuan Logistics operates within the realm of modern logistics, specifically the enterprise customized logistics sector.

From the late 1990s to 2005, this sector entered a nascent stage of development. Logistics enterprises began transitioning from purely transportation and warehousing services to integrated multi-functional services, such as distribution, packaging, and circulation processing, aiming to provide customers with more comprehensive customized logistics solutions. They increased investments in logistics facilities and equipment, constructing logistics parks and distribution centers. From 2005 to 2015, enterprise customized logistics witnessed rapid growth. The demand for logistics services shifted from basic functions like transportation and warehousing to a deeper integration with supply chains. Logistics enterprises were expected to offer customized services spanning the entire supply chain, from procurement to production, sales, and after-sales. Since 2015, the industry has been advancing towards "intelligence, greenness, and globalization." Intelligence has emerged as a significant trend, with logistics enterprises widely adopting technologies like artificial intelligence, driverless vehicles, and robots. Simultaneously, the concept of green logistics gained traction, and enterprise customized logistics placed greater emphasis on energy conservation, emission reduction, and sustainable development, adopting new energy transportation vehicles and eco-friendly packaging materials. Additionally, logistics enterprises actively expanded into international markets to establish a global logistics network. In 2023, the domestic logistics industry generated a total revenue of 13.2 trillion yuan, with an average annual compound growth rate of 3.94%—indicating low to medium growth. However, specific data on enterprise customized logistics in China is scarce.

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Dongyuan Logistics's competitors primarily fall into three categories: 1) Traditional logistics giants such as DHL, UPS, and domestic behemoths like SF Express and JD Logistics; 2) Regional logistics enterprises, like Jiaji Express, which holds certain advantages in eastern China; and 3) Emerging technology-driven logistics enterprises, including tech companies like Huomanche and Cainiao Network.

Compared to its competitors, Dongyuan Logistics differentiates itself in its business positioning by focusing on inland and railway transportation between mainland China and Southeast Asian countries. It also excels in logistics for new energy projects, chemical equipment, and other specialized areas. In the fiscal year 2023, Dongyuan Logistics's total revenue reached $40.44 million (280 million yuan), with a net profit of $1.08 million. In the first half of 2024, its total revenue stood at $21.27 million, with a net profit of $0.54 million. The data reveals a very low net profit margin (2%-3%). Among the 47 listed logistics companies in the first half of 2024, 10 had a net profit margin exceeding 10%, 5 had a net profit margin between 5% and 10%, and 6 reported a negative net profit margin. Dongyuan Logistics's net profit margin in the first half of 2024 was merely 2.54%, significantly lower than companies with a net profit margin over 10% and even those in the 5%-10% range, indicating a relatively low profitability.

The content of this article is for reference purposes only and does not constitute investment advice.