BingEx delivers profitable IPO option for U.S. investors

The intracity courier’s $100 million listing could be the largest by a Chinese company in New York since Zeekr listed in May

Key Takeaways:

• With $388 million in mezzanine financing under its belt, BingEx hopes to raise up to $100 million in a Nasdaq IPO
• The intracity delivery company hires its drivers and 61% of its customer service staff on an outsourced basis to keep costs down

By Edith Terry

Chinese IPOs haven’t exactly roared back onto Wall Street this year, as China-U.S. tensions and weak investor sentiment more than offset the clearing of most regulatory obstacles that halted the flow three years ago.

But a few notably big listings are slowing finding their way to New York, including BingEx Ltd., which is aiming to raise $100 million with its new application last week. That would make it the largest Chinese IPO on Wall Street since electric vehicle maker Zeekr (ZK.US) raised $441 million in May. While BingEx, which provides intracity delivery services, is far smaller, such an IPO would still be large compared to most of the Chinese minnows that have listed this year.

According to Dealogic, only 13 Chinese IPOs had launched on Nasdaq and New York Stock Exchange this year through mid-August, raising $642 million. The scale of the BingEx’s IPO, as well as the earlier one from Zeekr, suggest the tide may be turning.

But it’s definitely a slow process. We should note that another major IPO by autonomous driving firm WeRide was halted at the 11^th hour last month due to weak sentiment. Online education company YXT.com (YXT.US) successfully completed its Nasdaq listing last month, but only raised $25 million after originally targeting $33 million.

BingEx didn’t provide information on its fundraising target in its IPO prospectus. But media reports said it was targeting $100 million at a valuation of 7.1 billion yuan ($1 billion), which would be down 30% from 2021. Prior to the IPO application, BingEx raised a sizable $388 million in seven funding rounds, including $125 million in its latest in March 2021, led by Shunwei Capital, Susquehanna International Group (SIG) and N5 Capital.

Unlike many Chinese IPO candidates from an earlier era, BingEx is actually profitable. That should be a big plus for the company, since U.S. investors have tired of supporting Chinese companies with lots of customers but also big losses. Testifying to the relatively strong potential of its listing, the company has signed up relatively big-name investment banks CICC, CLSA, Deutsche Bank and UBS to underwrite the IPO.

BingEx’s prospectus shows it was profitable in seven out of the 10 quarters between March 2022 and June 2024. Those profits come with some caveats, which we’ll discuss later. But the ability to operate profitably at all is still quite respectable.

According to the prospectus, BingEx, whose Shan Song service means “flash delivery,” earned a profit of 124 million yuan on revenue of 2.28 billion yuan in first half of this year. That compares favorably to competitor Dada Nexus (DADA.US), which lost 614 million yuan on net revenue of 4.8 billion yuan in the first half of the year. And unlike Dada Nexus, whose second-quarter revenue was down 6.5% year-on-year, BingEx’s revenue rose 7.5% in the first half of this year from a year earlier.

China’s largest intracity delivery company, Hangzhou SF Intra-city Industrial (9699.HK) reported a profit of 62.2 million yuan on 6.88 billion yuan in revenue for the first half of this year. But the small profit, as well as another small profit for all 2023, came after years of losses.

Big labor costs

The big problem for these on-demand, intracity delivery companies is labor costs. BingEx says it addresses that issue by crowd sourcing its drivers, who sign up for jobs through an app and are attracted by the relatively high fees. It is also willing to employ just about anybody, including a foreigner who use the name “Raz” and recorded his experience on Youtube.

Driver fees and incentives are the company’s largest cost, equal to 85.4% of revenue in the first half of 2024. It also outsources as much of its other labor as possible, including 61% of its 203 customer service representatives.

The company says it also achieves its profits by simply charging more than its rivals, believing customers will recognize its higher level of service and be willing to pay a premium.

BingEx has steered away from the aggregation model used by most other e-commerce logistics services, which assigns multiple tasks to individual riders, saying such practice adds costs and leads to losses. Instead, it assigns a single task to a single rider – something for which business customers may be more willing to pay a premium. Indeed, one source said business customers account for 20% to 30% of the company’s orders.

“Companies like SF Express and the other major courier companies all tried to control risk by lowering their costs as the scale of their operations grew,” said Xue Peng, BingEx’s founder and chairman, in a media interview. “We took another route altogether, by starting with the service and crafting it so that it is consumer-grade and satisfies users’ speed and security needs.”

The BingEx prospectus distinguishes between “captive” on-demand delivery services like Dada Nexus, which gets much of its business from majority shareholder JD.com; and independent couriers like itself. It claims the independents are growing faster than the overall industry, at 27.8% annually between 2023 and 2028, compared to 19.1% annually for the overall on-demand delivery market.

BingEx says it is the largest player in the “independent” category, with 33% of the market, deliveries in 295 Chinese cities and 2.7 million registered riders as of June. The company says its independent status allows it to put customers first, while captive companies like Dada Nexus must prioritize deliveries from their associated stakeholders.

But as we noted earlier, BingEx’s profits come with an asterisk. Its net income last year totaled 110.5 million yuan, compared to a loss of 180.4 million yuan in 2022. The company’s move into the black was partly facilitated by government grants that increased from 9.2 million yuan in 2022 to 74.3 million in 2023. In its prospectus it points to this increase as a key factor behind its ability to achieve profitability for the year, noting that such grants are “determined at the discretion of the relevant governmental authorities.”

China’s delivery industry has attracted both regulatory scrutiny for labor abuses and also from the occasional accounting scandal because of complicated revenue structures. Shares of Dada Nexus took a big hit earlier this year when it admitted to overstating revenue by about 500 million yuan. The risk for similar irregularities applies to many Chinese companies, though the situation should be improving as their external auditors become stricter.

Meantime, China watchers will be keeping a close eye on BingEx to see if it’s able to complete its IPO and meet its $100 million fundraising target. Its profitability and growing revenue could help it attract investors, though lingering negative sentiment towards China stocks will remain a major headwind.

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