Can Tiancheng Zhiliang achieve a higher valuation on Nasdaq in another Capital Market?
With the continuous wave of Chinese companies going overseas, the scale of China's cross-border logistics market has been growing in recent years. According to data from the China Research and Intelligence Industry Institute, in 2022, the scale of China's cross-border logistics market reached 2.36 trillion yuan, a year-on-year increase of 10.8%. It is estimated that by 2024, the market scale will reach 2.71 trillion yuan.
This enormous market, which exceeds two trillion yuan and continues to grow, provides vast development space for many participants in the cross-border logistics industry. Among them is Tiancheng Zhili Logistics Co., Ltd. (hereinafter referred to as "Tiancheng Zhili"), which has emerged alongside the development of the cross-border logistics industry. Currently, Tiancheng Zhili has embarked on the journey to list in the United States.
According to Zhitong Finance APP, after initially submitting a public version of the prospectus to the SEC on September 3, 2024, Tiancheng Zhili's holding company, Dongfang International, updated its prospectus for the second time on December 31, accelerating the IPO process.
According to the latest prospectus, Tiancheng Zhili plans to list on Nasdaq under the code "ELOG" and aims to issue 1.6 million shares of common stock in this IPO, with an issued price of 4 to 5 dollars per share, raising a maximum of 8 million dollars.
It is worth noting that Tiancheng Zhili was formerly known as Suzhou Longliqi Dongyuan Logistics Co., Ltd. and was listed on the National Equities Exchange and Quotations on May 17, 2017, under the stock name Dongyuan Logistics. It later terminated its listing on February 15, 2023, with a market cap of 98 million RMB at the time of delisting.
In terms of performance, Tiancheng Zhili's results are not impressive. Data shows that in the fiscal year 2024 (ending March 31), Tiancheng Zhili's revenue grew by 67.4% to 40.4436 million dollars, but net income fell by 8.9% to 1.0837 million dollars, a typical case of "increased revenue without increased profits." In the first half of the fiscal year 2025 (ending September 30, 2024), Tiancheng Zhili's revenue grew by 5.5% to 21.2721 million dollars, and net income increased by 3.8% to 0.54 million dollars, halting the decline in profits.
With this performance, can Tiancheng Zhilian, under a different Capital Markets environment, achieve a higher valuation on Nasdaq than when it was listed on the National Equities Exchange and Quotations?
Profit release is significantly hindered.
As the domestic operation entity of Oriental International, the development history of Tiancheng Zhilian can be traced back to 2006. Since its establishment, Tiancheng Zhilian has been providing Logistics services to corporate clients. By 2019, Tiancheng Zhilian began to expand its cross-border logistics services, primarily focusing on Land Transportation and Railroads between mainland China and Southeast Asian countries. As of now, the operation network of Tiancheng Zhilian covers major cities in mainland China, Hong Kong, Southeast Asia, and Central Asia.
In terms of service types, the logistics services of Tiancheng Zhilian have become project logistics services and general logistics services. Among them, project logistics services mainly include logistics for construction projects and special cargo logistics for large or Precision Instruments. Construction project logistics covers a certain stage or the entire process of a construction project, including procurement, packaging, storage, handling, transportation, fixing, installation, and other related logistics services for construction equipment and Machinery.
Tiancheng Zhilian mainly provides project logistics solution services for New energy Fund projects (including Wind Power, photovoltaics, and renewable energy storage), chemical equipment, and engineering and infrastructure construction (including roads, bridges, and tunnel construction), etc. Special cargo logistics for large and Precision Instruments refers to logistics services provided for manufacturers or purchasers of large Precision Instruments customized for stamping machines, lathes, aviation engines, etc.
General logistics service refers to the transportation, storage, handling, and distribution of ordinary products. Tiancheng Zhilian has subsidiaries and offices in Suzhou, Wuxi, Yancheng, Chengdu, Chongqing, Guangzhou, Shenzhen, Kunming, and Mohan, covering most major cities and regions in China, providing customers with full truckload or less-than-truckload delivery.
In terms of transport capacity, Tiancheng Zhilian has 20 trucks and has established cooperative relationships with over 2,000 trucks owned by other owners and drivers, outsourcing transportation tasks to these owners and drivers. Clearly, the main transport capacity of Tiancheng Zhilian does not consist of owned vehicles; it employs a transport outsourcing model that allows for light asset expansion.
To ensure the smooth transportation of products, Tiancheng Zhilian has four storage/logistics centers in three provinces in China, with a total area exceeding 0.03 million square meters, providing customers with general and special storage, distribution, and value-added services.
From the customer perspective, developing important large corporate clients is the core strategy of Tiancheng Zhilian, whose main clients are multinational corporations, large domestic enterprises, and listed companies, including industry leaders and well-known state-owned enterprises. These enterprises encompass various industries such as New energy Fund, home appliances, health and beauty products, and construction. Clients of Tiancheng Zhilian include Goldwind Science& Technology, China Shipbuilding Industry Corporation's Offshore Wind Power, Shanghai Huaneng, Jiangxi Electrical Utilities Group, Guizhou Electrical Utilities Group, Hydropower No. 4 Bureau, Trina Solar Co., Ltd., and JD.com.
In terms of revenue structure, Tiancheng Zhilian mainly divides its income into transportation service revenue and warehouse leasing service income, with transportation services being the core. In the fiscal year 2024, transportation service revenue accounted for 92.92% of Tiancheng Zhilian's total revenue.
According to the prospectus, Tiancheng Zhilian's total revenue grew by 67.4% to 40.4436 million USD in the fiscal year 2024, primarily due to the strong recovery of transportation services. In the fiscal year 2023, due to the impact of the pandemic, Tiancheng Zhilian's project logistics business was affected, completing only 818 project logistics service orders throughout the year. Entering fiscal year 2024, with the pandemic's impact eliminated, Tiancheng Zhilian completed 2,947 project logistics service orders for the year, driving transportation service revenue growth of 78.2% to 37.5785 million USD. However, warehouse leasing service revenue decreased by 6.9%, which had a certain drag on the overall revenue growth due to a few clients not renewing contracts after the service period expired due to insufficient market demand.

The reason for significant revenue increase in fiscal year 2024 while net income decreased is mainly due to two factors. Firstly, the gross margin declined by 2 percentage points to 12.4%, mainly because the gross margin of warehouse leasing services dropped from 31.4% to 15.3%, dragging down the overall gross margin level.

Secondly, compared to the fiscal year 2023, Tiancheng Zhilian experienced a year-on-year decline in exchange income, property and equipment disposal gain, government subsidies, insurance compensation, and other net income during fiscal year 2024, which affected the release of net income.

Entering the first half of the 2025 fiscal year, Tiancheng Zhiliang's revenue growth has significantly declined, with only a 5.5% year-on-year increase, of which the core business transportation service revenue grew by only 2.5%. The growth in transportation service revenue was mainly due to an increase in general logistics revenue, while project logistics revenue saw a decline year-on-year. The revenue from warehousing subletting services surged by 38.7%, primarily because the increase in demand for general logistics services necessitated supporting warehousing services.

Although Tiancheng Zhiliang's total revenue in the first half of the 2025 fiscal year only grew by 5.5%, its optimization of the pricing inquiry and comparison process during the reporting period effectively controlled costs, leading to an increase in the gross margin of transportation services by nearly 4 percentage points, which drove the company's gross margin during the reporting period from 11.1% to 14.2%. Therefore, gross profit saw a significant increase of 35.7% during this period.

However, due to the significant impact of multiple factors such as exchange gains, interest expenses, and government subsidies on Tiancheng Zhiliang's profit release, net income during the period only grew by 3.8%. Although the profit has stopped decreasing compared to the 2024 fiscal year, issues caused by exchange gains, interest expenses, and government subsidies still exist.

High client concentration and accounts receivable.
From an industry perspective, the continuous growth of the logistics industry in the long term is a certainty. With the stable growth of China’s economy and the continuous expansion of consumer demand, the demand for logistics is also increasing. Data shows that from 2019 to 2023, the market size of general logistics in China grew from 294.98 billion yuan to 357.11 billion yuan, with a compound annual growth rate of 4.88%. In the coming years, with the continuous growth of China's GDP, the scale of the logistics industry is expected to continue to grow at a low single-digit rate.

With the overall development of the logistics industry in China, project logistics as a specialized subfield is also showing a steady growth trend. Data shows that from 2019 to 2023, the market size of project logistics in China increased from 26.88 billion yuan to 36.49 billion yuan, with a compound annual growth rate close to 8%, and the development speed of the project logistics market is significantly faster than that of general logistics. Compared with foreign counterparts, project logistics companies in China still have significant room for improvement in operational scale, profit margin, management level, service philosophy, and awareness. Moreover, the Chinese economy remains a strong engine for the recovery of the world economy, and the Belt and Road Initiative Concept has also brought more opportunities for cross-border project logistics companies.

Undoubtedly, the continued growth of the logistics industry and the accelerated development of the project logistics service subfield will benefit Trina Solar Co., Ltd., but it is worth noting that while benefiting from industry development opportunities, Trina Solar Co., Ltd. also faces numerous potential challenges.
The first is intense market competition. Whether in general logistics or project logistics, the industry is severely homogenized in supply, and leading companies rely on economies of scale to maintain a stable market share, but mid-tier and lower-tier competition is particularly fierce. Data shows that by the end of 2023, the number of companies in China’s express service industry was close to 0.14 million. And as of October 2023, the number of cross-border logistics companies in China had reached 0.1567 million, a significant increase from about 0.1467 million in 2022, indicating that competition will continue to intensify.
The second is that the release of profits for Trina Solar Co., Ltd. is still constrained by factors such as foreign exchange gains and interest expenses, which leads to the net income growth for the fiscal year 2024 and the first half of 2025 being far lower than the growth rate of operating income. If this issue does not improve in the future, the company's profitability will still be affected.
The third issue is the relatively high customer concentration of Trina Solar Co., Ltd. According to the prospectus, in the fiscal year 2023, revenue from the two major clients accounted for 23% and 15%, respectively, totaling 38%. By fiscal year 2024, these two major clients accounted for 35% and 23% of the company's total revenue, totaling 58%, further increasing customer concentration. Over-reliance on major clients can lead to excessive revenue volatility, and if major clients are lost, it could have a significant impact on the company's business operation.
The fourth issue is high accounts receivable. Generally, if a company has a high customer concentration, it may be in a relatively weak bargaining position in transactions with clients, either struggling to raise the average transaction price or facing long credit terms. The large accounts receivable of Trina Solar Co., Ltd. may be due to its high customer concentration. According to the prospectus, as of September 30, 2024, Trina Solar Co., Ltd. had note receivables of 1.982 million dollars, with total accounts receivable amounting to 14 million dollars, meaning that the sum of note receivables and accounts receivable reached nearly 16 million dollars, while the company's total assets during the same period were 24.2171 million dollars, accounting for 66% of total assets and about 85% of current assets.
Such a high accounts receivable not only significantly increases the risk of bad debts, but the slow speed of cash recovery can affect the company's expansion and even increase the company's debt-to-asset ratio over the long term.
Overall, after the impact of the pandemic is eliminated, Tiancheng Zhilian has started to see a significant recovery in business since the 2024 fiscal year. However, in the first half of the 2025 fiscal year, the revenue growth rate has shown a significant decline, and the release of profits since the fiscal year 2024 has not been smooth, affecting net income growth. Although the continuous development of the industry will bring growth opportunities, Tiancheng Zhilian still needs to face potential challenges and risks such as intense market competition, high customer concentration, and high accounts receivable.