ZKH Group Limited (ZKH) Q3 Earnings call transcript Nov 22, 2024

ZKH Group Limited, a leading digital MRO (Maintenance, Repair, and Operations) service platform in China, recently held its third quarter 2024 earnings call, offering insights into the company's performance and strategic initiatives. The call, led by executives Jin Li, Eric Chen, and Max Lai, provided a comprehensive overview of the company's financial health and growth prospects.

Financial Performance and Strategic Optimization

ZKH reported a GMV (Gross Merchandise Value) of RMB 2.69 billion in the third quarter, with a revenue of RMB 2.28 billion, marking a slight year-over-year decline in GMV. However, when excluding the impact of business optimization initiatives, the company's third-quarter GMV maintained double-digit year-over-year growth. These strategic moves, aimed at optimizing business areas that didn't align with the company's long-term competitiveness, have contributed to a more resilient and sustainable business structure.

Profitability and Investment

ZKH's gross profit and gross margin continued to grow, with the gross margin rising from 16.3% to 17% year-over-year. The company also narrowed its adjusted net loss, demonstrating a clear path towards profitability. Despite these improvements, ZKH remains committed to investing in future growth, focusing on product development, IT capabilities, and global expansion.

Customer Strategy and Market Outlook

ZKH's customer strategy emphasizes a multi-pronged approach, focusing on key large enterprises while also catering to SMEs through an e-commerce model. The company's aim is to engage high-quality core customers and provide exceptional service, driving long-term business growth. In the MRO market, ZKH sees a stabilizing market environment, with product and supply chain capabilities and digital and AI capabilities playing crucial roles in success.

International Expansion

Looking ahead, ZKH is set to expand overseas, starting with the United States, where it aims to replicate its business model and cater to local manufacturing SMEs. This strategic move underscores the company's ambition to become a global player in the MRO sector.

Challenges and Future Outlook

ZKH faces challenges, such as geopolitical risks and potential tariffs, but the company is proactively addressing these issues by diversifying its supplier base and leveraging strategic partnerships. With a focus on product development, supply chain optimization, and customer engagement, ZKH is well-positioned for continued growth and success in the evolving MRO market.

Conclusion

ZKH Group Limited's third-quarter earnings call painted a picture of a company that is strategically optimizing its business, focusing on profitability, and expanding its footprint globally. With a clear vision and robust strategies in place, ZKH is poised to capitalize on the opportunities in the MRO market and drive sustainable growth for the long term.