DB: Maintains "Buy" rating on ZKH.US, expects Q4 results to meet expectations

ZKH.US, a leading industrial e-commerce platform, is expected to report fourth-quarter 2024 results in line with market expectations, Deutsche Bank said in a research report on February 25, maintaining its "buy" rating. The report noted that the company's gross margin is expected to rise year-on-year, thanks to the optimization of procurement costs and the rise in the contribution of its own-brand products. Meanwhile, operating cash flow is expected to remain positive due to the improvement in the cash conversion cycle. In particular, as the impact of business adjustments gradually fades, the company is expected to see a rebound in revenue growth in 2025, with the expansion of its own-brand products and economies of scale continuing to drive up gross margin and adjusted net margin. Shenzhou Group is actively seizing the opportunities brought by AI. Recently, it integrated "AI Material Management" into DeepSeek, significantly enhancing the tool's performance, such as a significant improvement in the accuracy of material identification and analysis, from 60% to over 90%. The company plans to develop and apply more AI tools in the future to further optimize supply chain management, enhance service performance, and accelerate business expansion. Its own-brand products have huge development potential, and it is expected to continue to be a strategic focus in 2025, effectively driving the long-term improvement of gross margin. Meanwhile, ZKH officially launched its independent website in the United States in December 2024, and its near-term strategic focus is expected to be building global supply chain capabilities, enriching product categories, and maintaining a cautious and steady investment rhythm and strategy in overseas expansion. The Company expects to release its fourth-quarter 2024 financial results in mid-March.