Fast Dog Taxi (02246), the first stock in Tongcheng Freight, is experiencing an “eventful autumn”.

In December 2023, Kuaigou Taxi announced management personnel adjustments. Chen Xiaohua resigned as chairman and executive director, Yu Yongshi resigned as company secretary, and Ni Zhengdong resigned as independent non-executive director. Subsequently, the company appointed Co-CEO Lin Kaiyuan as the chairman; Ho Wing Nga was appointed as the company secretary and agent in legal proceedings.

It is worth noting that at a time when personnel were shaken, Alibaba, the shareholder of Kuaigou Taxi, sold shares in the company one after another. According to data from the Hong Kong Stock Exchange, on January 18, 2024, after Alibaba completed the latest round of holdings reduction, its shareholding ratio in Fast Dog Taxi fell to 5.74%, a sharp decrease of 6.23 percentage points from 11.97% in early November 2023. As Alibaba drastically reduced its Kuaigou Taxi shares, investors' “expectations” for the latter have dropped to a freezing point. On January 23, Kuaigou Taxi's stock price once fell to a record low of HK$0.395, a decline of more than 30% during the month.

Losses over the years, and the market value of 10 billion dollars has turned black

According to the Zhitong Finance App, Kuaigou Taxi was founded in 2014. The company, formerly known as 58 Express, belongs to the Arrive Group. The company officially changed its name to “Fast Dog Taxi” in 2018 and positioned as a “taxi platform for picking up goods”. It provides users with a short-distance goods delivery and trading service platform for pulling goods, moving, and transporting goods anytime, anywhere, and fully adapts to users' daily travel habits.

Fast Dog Taxi operates in more than 360 cities in mainland China, Hong Kong, Singapore, South Korea, India and Vietnam, and owns and operates two brands: Fast Dog Taxi in mainland China and GOGOX in other Asian countries and regions. As of June 30, 2023, there were 32 million registered shippers and 6.5 million drivers for Fast Dog Taxi, respectively.

The business has expanded overseas, and Fast Dog Taxi, which has a huge number of registered shippers, used to be the “darling” of capital. The investors behind the company have no shortage of star capital such as Alibaba, 58 Tongcheng, Cainiao, and Bank of Commerce International. When the company went public, CICC, UBS, BOC International, and Agricultural Bank International were co-sponsors. Moreover, with the “first share in the same city freight” aura, Kuaigou Taxi's stock price once reached HK$23.15 when it first went public in June 2022, corresponding to a market value of over HK$14 billion. Today, the company's market capitalization is less than HK$250 million, and the market value of 10 billion dollars has turned dark.

The reason for this is that the market value of fast dog taxis is not supported by generating profit returns. According to the company's official data, the losses for the 2018 to 2022 Kuaigou taxi period were 1.07 billion yuan (RMB, same below), 180 million yuan, 660 million yuan, 870 million yuan, and 1.21 billion yuan, respectively. In the first half of 2023, the company continued to lose 640 million yuan. Over the past five and a half years, the cumulative loss exceeded 4.6 billion yuan.

The “internal volume” of the industry is serious

According to the Zhitong Finance App, one of the major external causes of Kuaidou Taxi's losses over the years is that the “internal volume” of the industry is very serious. In addition to the original same-city freight online car-hailing brands such as Cargo Lala and Kuaigou Taxi, the company is located on the racetrack, giant companies in other industries have also begun targeting this segment and are actively increasing their layout. For example, in June 2020, Didi established “Didi Freight” to officially enter the freight market in the same city, and in August of the same year, Manbang Group bought provincial return vehicles and began entering the same city freight circuit. Prior to that, SF Express, the leading express delivery company, followed the trend and entered the same city freight industry with the same city delivery business.

In 2020, with the entry of many new players, the subsidy war for the freight industry in the same city began. In order to attract drivers to settle in and rapidly expand their market share, various companies are scrambling to pay high subsidies. During the period when the subsidy war was at its peak, some drivers even earned an average monthly income of nearly 20,000 yuan.

As of 2021, Kuaigou Taxi's sales and marketing expenses reached 335 million yuan, an increase of 71.91% over the previous year. Revenue and marketing expenses accounted for 50.7% of that year's revenue. In 2022, the company's sales and marketing expenses remained at $321 million, accounting for 41.5% of revenue. Although the epidemic disrupted the pace of “burning money” in the industry to a certain extent, the subsidy war gradually came to an end due to the slowdown in the listing process and tight funding conditions for various companies. However, when the hustle and bustle receded, the fast dog taxi did not successfully “go ashore”.

In the first half of 2023, Kuaidou Taxi's share of sales and marketing expenses fell to 29.8%, but the company's gross margin fell to 32.1%, down 4.5 percentage points from 2021. Among them, the core cost is the subcontract cost for logistics service providers. This cost is the cost of expanding B-side users, but the growth rate is clearly higher than revenue.

Fast dog taxis cannot cover rising costs through price increases, and one of the main reasons still points to the “internal volume” of the industry. According to Kuaigou Taxi's prospectus, the online same-city logistics market in mainland China is currently highly concentrated. Based on total transactions as of 2021, the five major market players account for about 64.9% of the total market share. Among them, the number one market share in the industry was 52.8%, the second largest market share in the industry was 5.5%, while Fast Dog Taxi ranked third, with a market share of only 3.2%. Looking at the corresponding data, it can be seen that the company with the highest market share mentioned above refers to Cargo Lala, and the second refers to Didi Freight.

You need to know that Didi Freight only officially entered the industry in 2020/6, and it only took more than a year to take the second place in the Kuaidou taxi industry. In a situation where there were “strong enemies” before and “troopers” later, it seems that Fast Dog, which is in the “middle of the gap,” should bet more on overseas markets.

Is it time to break up overseas?

In fact, the overseas performance of fast dog taxis in 2022 was already impressive. Among them, revenue from the Indian market surged 704.3%, and revenue from the Korean market increased 31.9% year on year. Overseas business achieved overall revenue of 425 million yuan for the year, a significant increase of 34.06% over the same period in 2021, contributing more than 55% to total revenue. Combined with data analysis of previous financial reports, the compound annual growth rate of Kuaigou Taxi's overseas business revenue reached 28.78% in 2018-2022. In the first half of 2023, Kuaidou Taxi's revenue from corporate services was 228.5 million yuan, an increase of 6.3% over the previous year. It was mainly due to significant growth in business revenue in Hong Kong and overseas markets, particularly India (274.8%), Singapore (16.7%) and South Korea (14.5%).

China Merchants Securities announced its 2024 investment strategy for the express delivery industry, stating that looking forward to 2024, balance between quantity and profit will be the core, and new demand will be discovered in the era of stock competition. The bank pointed out that the overseas e-commerce market is developing rapidly, and there is plenty of room for express delivery to overseas.

In 2017, the Southeast Asian logistics platform GoVan, which was acquired by Kuaigou Taxi, has already paved the way for the company to “go overseas.” According to the disclosure, GoVan is mainly engaged in providing logistics services and platform services in mainland China, Hong Kong and other Asian countries. However, from a company perspective, whether Kuaidou Taxi can continue to maintain a steady overseas expansion trend requires drawing a question mark. The reason is that the company's acquisition of GoGoVan has generated more than 1 billion yuan of goodwill, and the hidden danger of a “goodwill thunderstorm” is quietly occurring.

In 2023, Kuaigou Taxi revealed in its mid-term earnings report that the company's goodwill mainly comes from the acquisition of a subsidiary of GoGo Tech Holdings Limited in 2017. During the period, Kuaigou Taxi conducted an impairment test on goodwill. The company believes that both business revenue and profit did not meet the original growth expectations, and considered macroeconomic and logistics industry prospects to reduce goodwill. In the first half of 2023, the total goodwill depreciation was $512 million, accounting for nearly 50% of the total goodwill value, with a loss of 307 million yuan in China, accounting for 60%.

According to the reason for the impairment of goodwill given by Kuaigou Taxi, the company does not seem to be fully sure. Using overseas business to reverse the “quagmire” of loss of performance, the possibility of further impairment of the company's goodwill is not ruled out. How to get a quick dog taxi? The market needs answers from the new chairman Lin Kaiyuan.