Date: May 2023
Jayud’s IPO Is Backed By Impressive Financial Performance Through The Expansion Of Freight Forwarding Services.
- The cross-border supply chain industry experienced significant growth due to the high demand for ocean and air logistics services, particularly in e-commerce.
- Jayud Global Logistics plans to use the net proceeds from the IPO to support its operations in China and globally.
- Jayud reports a 174.7% YoY increase in revenue due to expanding freight forwarding services. It is resulting in a 363.6% increase in net income.
- The company has specialized R&D teams, proprietary IT systems, and strategic partnerships with major transportation hubs.
Jayud Global (NASDAQ: JYD) Company Overview
As cross-border e-commerce continues to thrive and globalization becomes increasingly prevalent, the demand for efficient and reliable logistics solutions is greater than ever. In this context, Jayud Global Logistics (JYD) is a leading player in the end-to-end cross-border supply chain industry.
It is reporting remarkable growth in revenue in 2022 due to the expansion of its freight forwarding services. With specialized R&D teams, proprietary IT systems, and strategic partnerships with major transportation hubs, Jayud is well-positioned to capitalize on the expanding demand for ocean and air logistics services, particularly in the e-commerce sector. In this article, we will delve into Jayud’s impressive financial performance and industry outlook, and explore the company’s core competencies and plans for expansion.
Integrated Freight & Logistics Stock Industry Outlook
Jayud operates in the global end-to-end cross-border supply chain solution industry, which experienced a CAGR of 44.7% from 2017 to 2021 due to the increased demand for ocean and air logistics services caused by the pandemic.
Ocean and air logistics services are expected to remain in high demand, particularly from the e-commerce sector. As a result, the global ocean freight market is expected to reach 262.1 million twenty-foot equivalent units by 2026, highlighting a projected CAGR of 4.8% between 2021 and 2026. Finally, the air freight market is expected to resume pre-COVID levels, in the foreseeable future.
Source: SEC Fillings
Additionally, trade lanes between Asia and North America, Europe, and intra-Asia experienced significant growth in volume from 2017 to 2021. The Asia-North America trade lane is projected to reach 44.7 million TEUs by 2026, with a CAGR of 6.5%. Cross-border e-commerce and globalization are significant drivers of the industry. Digitalization enables supply chain management to become more efficient by applying blockchain, IoT, RFID, machine learning, and AI technologies.
Furthermore, Jayud expects the adoption of visualization and cloud technology to improve supply chain efficiency. Tailored supply chain services are also becoming increasingly important. Moreover, the favorable regulations present opportunities for integrated logistics service providers in China to play prominent roles in cross-border e-commerce businesses.
Finally, entry barriers for the industry include strong customer relationships, a comprehensive network and industry resources, high-quality and stable services, industry expertise, and authorized certifications.
Leading players enjoy operation efficiency and customer loyalty due to their extensive client base, solid relationships, and well-established logistics capabilities. Integrated logistics service providers must have a good grasp of customs brokerage, warehouse management, and freight forwarding businesses to overcome underlying obstacles and mitigate uncertainties, which set up significant barriers for new entrants.
Jayud Global Financial Performance & IPO Success
Jayud Global Logistics has priced its initial public offering (IPO) of 1.25 million shares at $4 per share, with the underwriters having the option to purchase an additional 187.5 thousand shares. The gross proceeds are expected to be $5 million, with net proceeds estimated at $3.3 million, rising to $4.0 million if the underwriters exercise the over-allotment option.
Jayud plans to apply the net proceeds from the IPO for various purposes, including supplementing its operating cash flow and general corporate use, leasing or purchasing warehouses, adding new chartered services in key trade lines, registering and operating overseas business entities, and investing in potential mergers and acquisitions in the future.
In addition, the company expects to use approximately 20% of the net proceeds to fund the operations of its offshore subsidiaries and 80% to fund the operations of its subsidiaries in the PRC. The IPO is expected to support the daily operations of the company’s onshore and offshore subsidiaries, focusing on expanding its operations in the logistics industry in China and globally.
Jayud reported significant revenue and gross profit growth for H1 2022 compared to 2021. The YoY increase in total revenue was approximately RMB288.8 million, or 174.7% YoY, primarily due to the expansion of its freight forwarding services.
Source: SEC Fillings
Interestingly, revenues from freight forwarding services increased by RMB 273.6 million, or 197.5% YoY, and accounted for 25.9% of total revenue. It is primarily due to the development of new routes for chartered airline freight services and an increase in customers.
Meanwhile, revenues from supply chain management grew by 57.1% YoY, and revenues from other value-added services increased by 52.4% YoY based on an expanded customer base and increased revenue per customer. However, the cost of revenue also increased by 175.7%, primarily due to increased fuel prices.
Consequently, the company’s gross profit increased by 161.3%, amounting to RMB30.9 million for the half year ended June 30, 2022, compared to RMB11.8 million in the same period the previous year.
However, the gross profit margin slightly decreased from 7.2% to 6.8%, due to a jump in operating expenses driven by elevated costs related to expanding business operations. Consequently, its net income rose by 363.6% YoY to RMB14.2 million for the six months ended June 30, 2022, compared to RMB3.1 million in the same period the previous year.
Meanwhile, Jayud had cash of RMB46.7m ($7m) and working capital of RMB9m ($1.3m) as of June 30, 2022., but its net cash in operating activities decreased from RMB17.9m in 2021 to RMB9m in 2022. Nevertheless, the company believes its working capital can support operations for the next 12 months.
Still, it may require additional cash resources if there are changes in business conditions or if it wishes to pursue opportunities for investment, acquisition, capital expenditure, or similar actions. In addition, the company may issue equity or debt securities or obtain credit facilities if it determines that its cash requirements exceed the available liquidity.
Finally, Jayud’s financials have grown significantly, primarily driven by freight forwarding services. While operating expenses have increased, the company’s net income has also increased. Finally, JYD maintains sufficient working capital to support its operations, but the company may need to explore additional cash resources to pursue opportunities for growth and expansion.
Jayud Global’s Geographic Reach & Core Competencies
Jayud is a leading logistics company headquartered in Shenzhen, China, with a plan for global expansion. The company’s location in Shenzhen offers several benefits. It includes a large customer base, sustained economic growth, and proximity to the Greater Bay Area, a hub for logistics development. In addition, Jayud offers end-to-end supply chain solutions covering all links of the cross-border supply chain. That includes integrated cross-border and fragmented logistics services and other value-added services.
Source: SEC Fillings
Moreover, Jayud has established a global presence in 12 provinces in mainland China and over 16 countries across six continents. However, it is focusing on China as its primary market. They partner strategically with significant container shipping companies and air freight forwarding service providers.
It enables efficient connections between significant transportation hubs in China, Southeast Asia, and the US. The company operates warehouses with a total GFA of approximately 25,000 sq. m. In addition, it has a fleet of self-owned trucks, cooperating with rail transport and third-party trucking service providers for overland freight services.
Additionally, Jayud’s customized service offerings cater to the demands of various industries. The company provides contract and basic logistics, covering the entire supply chain process and modularized integrated logistics services. Jayud’s comprehensive service capabilities and logistical IT systems allow customers to outsource their supply chain processes to them.
Jayud’s specialized R&D team and proprietary IT systems integrate with its ERP system. The company has increased its R&D investment by 6.1% and owns 51 software copyrights. Jayud’s IT systems allow for better operational efficiency and customer service. Finally, they offer productive features such as inventory visibility, logistics visualization, BI data analysis, and real-time cargo booking information.
Jayud has a diverse customer base, including leading manufacturers in various industries, and has established sound relationships with many major customers due to the quality and reliability of its service.
The top ten customers for 2021 had an average of three years of cooperation, with four having over five years. With knowledge of their supply chain operations, Jayud provides customized solutions that have become a preferred option. It expands its level of service for each customer.
Freight & Logistics Stock Competitive Landscape
Jayud Global Logistics is a prominent provider of cross-border supply chain solutions in China. Despite the highly fragmented market, with the top ten companies accounting for only 1.2% of the market share, Jayud Global Logistics stands out, holding fifth place in revenue generated for end-to-end cross-border supply chain solutions in Shenzhen.
Additionally, the company capitalizes on the competitive advantages of the Greater Bay Area. It includes favorable government policies supporting trade liberalization, a strategic geographical location, and rapid GDP growth.
In 2021, Jayud Global Logistics experienced an 85.1% increase in revenue from end-to-end cross-border logistics services. For the half year ended June 2021, and 2022, Its top five customers generated 40.0% and 53.1% of total revenue, but the company’s average revenue per customer (ARPC) dropped from RMB542.7 thousand to RMB420.0 thousand (US$65.9 thousand) for fiscal 2021.
However, Jayud Global Logistics has successfully expanded its customer base, leading to a 64.0% increase from the previous year as of June 30, 2022. Lastly, the company has seen an impressive 142.8% growth in the number of customers in 2021 compared to the previous year, but Jayud must continue attracting new customers and increasing ARPC to sustain its future growth.
Jayud Global Risks and Downsides
Jayud’s financial performance is intricately tied to global and local economic conditions. While economic growth positively impacts the logistics industry, the ongoing COVID-19 pandemic, trade wars, and regional conflicts negatively affect the sector. To mitigate risks associated with uncertainties in the business environment, it aims to increase revenue and market share through marketing efforts and adopting improved technology.
Additionally, to enhance its capabilities and competitive position in China’s fragmented end-to-end cross-border supply chain market, Jayud is pursuing strategic investments in warehouses and e-commerce licenses. Any potential changes in government policies and regulations could significantly impact its operations.
Unfavorably, Jayud is facing inflationary pressures as the increase in fuel prices caused by global inflation and the Russia-Ukraine conflict affects its freight forwarding services. However, since its operations are primarily in China, where inflation has been stable, the business is less affected by an inflation-related economic slowdown. The company plans to diversify its service lines by expanding its warehouse management services to counter the rising fuel costs.
Finally, the COVID-19 pandemic caused disruptions to the company’s operations. But the global demand for Chinese exports stimulated by the outbreak offset some negative impacts. In addition, the war in Ukraine caused supply chain disruptions in Europe. Also, as Europe accounts for a small percentage of the company’s revenue, the disruptions did not have a material impact.
What’s Ahead for Jayud Global Stock
In conclusion, Jayud Global Logistics’ impressive financial performance and industry outlook position it well for long-term growth and success in the cross-border supply chain industry, particularly in the high-demand e-commerce sector. However, the company may need to explore additional cash resources to pursue opportunities for growth and expansion.
In addition, adopting visualization and cloud technology, as well as favorable regulations, presents opportunities for integrated logistics service providers in China to play prominent roles in helping cross-border e-commerce businesses. Nevertheless, these factors could positively impact Jayud’s long-term performance and valuations, making it a potentially attractive investment opportunity in the growing global logistics market.