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Lalamove cannot support a valuation of US$13 billion – DoNews

Lalamove cannot support a valuation of US$13 billion – DoNews
Lalamove cannot support a valuation of US$13 billion – DoNews

Author|Zhang Yu

Editor|Yang Bocheng

The city’s freight giant Lalamove was interviewed again.

Recently, the Ministry of Transport issued an announcement stating that the Office of the Inter-Ministerial Joint Conference on Collaborative Supervision of New Transport Businesses conducted an interview with Lalamove and reminded platforms such as Manbang Group, Didi Cargo, and Kuaigou Taxi. The interview focused on the outstanding problems in Lalamove’s operation and management, and required Lalamove to immediately implement the interview requirements and take targeted measures to ensure that comprehensive rectifications are in place.

In fact, it is not new for Lalamove to be interviewed by regulatory authorities. In April 2023, the Office of the Inter-Ministerial Joint Conference for Coordinated Supervision of New Transportation Business Forms had interviewed Lalamove, and from 2022 to the present, Lalamove has been given seven “yellow cards” by regulatory authorities.

The reasons why Lalamove has been repeatedly interviewed are mainly due to the platform’s arbitrary adjustment of pricing rules, disguised overloading, malicious price competition, multiple charges, and excessive commission ratios.

The reason why Lalalamove refuses to change despite repeated admonitions is actually because Lalamove is still under huge pressure to lose money. When it is overwhelmed, it has to improve its profitability by changing the charging model, increasing commissions and other methods at the expense of the interests of drivers. However, the resulting The contradiction has had a backlash on Lalamove, but in order to tell a better capital story, Lalamove still does not hesitate to take personal risks many times.

Sustained profitability is questionable

In the domestic intra-city freight market, Lalamove is the undisputed industry leader. It was established in 2013 and is mainly engaged in intra-city/cross-city freight, enterprise logistics services, moving, LTL freight (shared transportation tools for multiple batches of goods), and car rental and sales. and aftermarket services. Since 2015, Lalamove has conducted a total of 8 rounds of financing, with a total financing amount of US$2.495 billion, and a valuation of up to 10 billion US dollars. Among the investors, there are many star investment institutions such as Red Shirt and Hillhouse.

In the prospectus, Lalamove stated that according to Frost & Sullivan, Lalamove is the world’s largest logistics trading platform and the world’s largest intra-city logistics transaction in terms of closed-loop freight GTV in the first half of 2023. Platform; Lalamove is the world’s largest logistics trading platform in terms of monthly active merchants in the first half of 2023, and it is also the world’s largest logistics trading platform in terms of the number of completed orders in the first half of 2023.

As of the first half of 2023, Lalamove has facilitated more than 260 million orders, with a global freight GTV of US$3.93 billion. Its business covers more than 400 cities in 11 markets around the world. The average monthly active merchants in the first half of 2023 are approximately 12.2 million. The average number of monthly active drivers is approximately 1.1 million.

Even though it is the industry leader, Lalamove only achieved its first profit ten years after its establishment.

According to the prospectus, from 2020 to 2022, Lalamove’s total revenue was US$529 million, US$844 million, and US$1.036 billion respectively, with a compound annual growth rate of 39.9%, showing a year-over-year upward trend. In 2020 and 2021, Lalamove’s adjusted net losses were US$155 million and US$631 million respectively, and the cumulative loss was US$786 million (approximately RMB 5.642 billion). However, in 2022, Lalamove achieved Profited on an adjusted basis for the first time since its inception, with adjusted net profit of US$53 million.

Source: Lalamove prospectus

Although Lalamove has achieved profitability, after calculation, Lalamove’s net loss in the past three years has been as high as 733 million U.S. dollars. If calculated in RMB, the net loss in the past three years has also been 5.344 billion yuan. If plus the net loss in previous years, The loss will exceed 20 billion yuan.

And it needs to be pointed out that one of the reasons why Lalamove will get out of the quagmire of losses in 2022 is to significantly reduce sales costs. Specifically, Lalamove’s sales and marketing expenses in 2020 were US$239 million, which increased significantly to US$673 million in 2021, an increase of 182.12%. By 2022, its sales and marketing expenses dropped to US$198 million, compared with A decrease of US$475 million in 2021 is also a decrease of US$40.51 million compared with 2020. This means that Lalamove’s profitability is not achieved by strong enough business growth, but by reducing sales and marketing expenses.

A signal that cannot be ignored is that Lalamove has entered a growth bottleneck period. In 2022, Lalamove completed 427.5 million orders, a year-on-year increase of only 5%. At the same time, the number of monthly active users of Lalamove has also continued to decline. The Bank of China Securities report pointed out that in the past two years, the number of monthly active users of Lalamove has experienced a sharp decline. Under such circumstances, it is still unknown whether Lalamove can maintain sustained profitability in the future. Lalamove also admitted in the prospectus that it needs to continue investing in incentive discount promotions to maintain the activity of platform participants, expand the market, and Increased R&D expenditures, etc. may not be able to maintain or improve profitability in the future.

Urgent need for new growth curve

The intra-city freight track has become increasingly crowded. This track is crowded with Lalamove, Didi Freight, Manbang Group, Kuaigou Dache, SF Express, and even and Meituan, which means that freight Lala will struggle to get more of the pie.

Judging from Lalamove’s current situation, it is not easy to support a valuation of US$13 billion. The precedent is Kuaigou Taxi, the “first intra-city freight stock”. At present, its performance in the secondary market can be described as “horrible.” To describe it, since its listing, Kuaigou Taxi’s share price has plummeted, and its market value has evaporated from more than 13 billion Hong Kong dollars to more than 300 million Hong Kong dollars.

Lalamove’s revenue mainly comes from freight platform services, diversified logistics services, and value-added services. Freight platform services are the largest source of revenue. In 2022, freight platform service revenue will account for more than 54% of total revenue. For Lalamove, it is urgent to explore a new growth curve.

In March 2023, Lalamove announced that its errand running business was officially launched. The errand running industry is a high-quality industry. In terms of consumer groups, those born in the 1980s and 1990s use errand running services more frequently and have become the main force in errand running services. According to iiMedia Research’s survey data, users aged 26-30 and 31-40 use errand running services more frequently, concentrated in 1-4 and 5-10 times a month, accounting for more than 70% of the total; all age groups A small number of users use it more than 10 times a month. As the pace of work and life accelerates, and users’ immediate needs increase, the penetration rate of the errand running industry will further increase.

As a city-wide freight platform, Lalamove will inevitably evolve into a comprehensive logistics service platform if it wants to achieve growth. In the process of exploring diversified businesses, the errand business can provide strong support for it to build a logistics ecosystem. However, although the errand running business can provide Lalamove with high-frequency traffic entrances and help it further create a closed business loop, as far as the current situation is concerned, Lalamove does not have much advantage in the errand running business. New stories may not bring new growth curves.

Car building is also a new growth curve that Lalamove wants to explore. Lalamove mentioned in its prospectus that the company is using its existing vehicle rental and sales service experience to develop new business opportunities, such as the research and development of electric commercial vehicles.

Tianyancha shows that Xiamen Dora New Energy Automobile Technology Co., Ltd. was registered and established in October 2023 and is 100% owned by Lalamove Automobile Service Co., Ltd.

In fact, as early as May 2021, there was news that Lalamove would launch a car-building project. At that time, Lalamove began to recruit talents in new energy truck manufacturing, and launched positions such as new energy truck product experts on the recruitment platform; in July 2022, Lalamove planned to spend 10.5 billion yuan to directly manage Chongqing High-tech Zone The Automobile China Headquarters was established within the park, and the layout and construction includes the vehicle research institute, intelligent network connection center, supply chain and large manufacturing collaboration center, etc.; in April 2023, Tianyancha showed that Shenzhen Huolala Technology Co., Ltd. had undergone industrial and commercial changes. The business scope includes manufacturing of smart vehicle equipment, sales of smart vehicle equipment, sales of complete new energy vehicles, manufacturing of auto parts and accessories, and sales of new energy vehicle electrical accessories.

It should be pointed out that building a car is an all-round competition in terms of technology, process, capital, supply chain, etc. For Lalamove, which has just achieved profitability, just the capital aspect is like a big mountain, and cross-border car building is far away. Not as easy as imagined.

Still facing many hidden worries

Although Lalamove has turned a profit, it still faces many hidden worries.

Lalamove has been interviewed several times by regulatory authorities for harming the legitimate rights and interests of truck drivers. If drivers choose not to provide services through the Lalamove platform, Lalamove may not be able to provide enough drivers to attract new merchants and retain existing merchants. . Insufficient supply of merchants and drivers will adversely affect Lalamove’s revenue and operating results.

In addition, in order to attract new platform users and retain existing platform users, Lalamove has to provide generous driver incentives and merchant discounts and promotions. In some regions, especially those where Lalamove does not have a leading market position, it can only choose to further increase the amount of incentives, discounts and promotions to gain a competitive advantage, which often puts pressure on its funds and ultimately affects its operating performance. and financial performance. More importantly, if Lalamove no longer provides incentives, discounts and promotions, or competitors provide more favorable conditions, users and drivers will inevitably switch to other platforms.

Finally, safety issues are also a top priority. In February 2021, the “Lalala female passenger crashed and died” completely exposed the safety issues of intra-city freight platforms in the spotlight. After the incident, Lalamove admitted that there were problems such as lack of safety warnings, imperfect product safety functions, and slow follow-up speed, and announced a rectification work plan.

A fact that cannot be ignored is that Lalamove adopts a crowdsourcing model, which only acts as an intermediary and plays the role of information integration and matching. Although it can quickly establish a huge capacity reserve pool to quickly match goods and vehicles, This increases the volume of freight orders and reduces costs, but there is no affiliation or employment relationship between Lalamove and freight drivers, which means that Lalamove’s binding and management rights over freight drivers are still very limited.

How Lalamove can continue to make profits and how to efficiently explore new growth curves are important issues that have to be considered. What is certain is that Lalamove’s future road will not be easy.

The article is in Chinese

Tags: Lalamove support valuation US13 billion DoNews


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