China's ANE Logistics files for Hong Kong IPO

The company is one of three leading players in the less-than-truckload (LTL) space, alongside SF Freight – a sub-brand of local courier company SF Express – and Yimidida. All three have received substantial private funding in anticipation of consolidation of a still fragmented industry.

ANE raised a $300 million round led by CPE and featuring Greater Bay Area Fund (GBA), NWS Holdings, Liumai Capital, and Huagai Capital as recently as February. This followed a $300 million round led by Centurium in 2020. Around the same time, SF Freight raised $300 million through a convertible note issue and Yimidida closed an extended Series B round of RMB1 billion ($140 million).

LTL represents the logistics industry’s middle ground. Couriers carry loads of 30 kilograms to 3 tons; too big for the express parcel players and too small for full-truck-load players. “You can distinguish between the three segments in last-mile delivery by vehicle type,” Jeff Wang, chairman of ANE, told AVCJ in March. “It’s motorcycles for general parcels, vans for LTL, and trucks are full-truck-load.”

ANE is China’s largest LTL operator by freight volume, having carried approximately 10.2 million tons in 2020, which equates to a 17.2% market share, the prospectus states. The company has 147 self-operated sorting centers connecting over 2,000 inter-provincial direct line-haul routes and a self-operated fleet of 1,500 line-haul truck tractors and over 2,700 trailers.

Beyond that, ANE relies on a network of approximately 26,400 freight partners and agents who maintain outlets at their own cost and manage pick up and dispatch services to serve 3.6 million shippers nationwide.

This combination of centrally-controlled critical infrastructure and outsourced last-mile services – plus a technology platform that brings it all together – is key to ANE’s cost and operational efficiency. The company claims that its unit cost of revenue was among the lowest in express freight networks in China last year, while unit line-haul transportation costs fell 22.7% between 2018 and 2020.

“The operational efficiency gap between the top LTL players will continue to widen, just like in express,” Wang said. “Scale rankings mislead investors. When the evaluation model moves from price-to-sales to price-to-earnings, two players might be of similar scale but one has a 20-30x larger market capitalization than the other.”

He maintains that profit is more important in scale and that ANE is the only LTL company in China to realize a profit. Revenue came to RMB7.1 billion in 2020, up from RMB5.3 billion the previous year. Net profit reached RMB218.2 million compared to a loss of RMB214.9 million in 2019. Over the same period, the operating profit margin rose from 1.1% to 8.2%. In 2018, it was negative.

ANE customers are primarily in manufacturing, distribution, and e-commerce. Flexible manufacturing – the consumer-to-manufacturer (C2M) model, characterized by small batch, high frequency deliveries – is the real growth driver. The company is positioning itself as a one-stop-shop to capitalize on this trend with plans to extend service coverage to mini parcels as small as 15 kg.

Centurium is the largest external shareholder with 27.81%, having taken out a position held by Warburg Pincus as well as injecting fresh capital on investing last year. CDH Investments has 10.39%, while CPE has 6.87%. Other investors such as Carlyle, NWS, GBA, Ping An Group, and Goldman Sachs each have less than 5%.

Sequoia, which provided ANE’s RMB30 million Series A in 2013, and then Warburg Pincus led a $50 million Series B later the following year. A Series C of $64.6 million closed later the same year, and then Carlyle led a $150 million Series D in 2015. Sequoia exited its position alongside the Series E in 2016, which saw CDH lead a $150 million investment.

Centurium taking out Warburg Pincus is classified in the prospectus as the Series H round.

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• Topics
• Greater China
• IPO
• Support services
• China
• IPO
• Centurium Capital
• The Carlyle Group
• Citic Private Equity
• CDH Investments Management
• Goldman Sachs