ZKH Group's Q3 2024: Mixed Performance Amidst Strategic Shifts

ZKH Group Limited, a leading MRO procurement service platform in China, recently announced its unaudited financial results for the third quarter ended September 30, 2024. The results reflected a mixed performance, with some key metrics improving while others showed a decline. This article analyzes ZKH Group's Q3 2024 financials, highlighting the company's strategic shifts and their impact on the business.

ZKH Group reported a slight increase in net revenues, up 0.7% to RMB2,280.7 million, compared to the same period last year. However, its gross merchandise value (GMV) declined by 7.2% to RMB2,685.9 million, indicating a slowdown in overall transaction volume. The customer base, however, grew by 16.9% to 47,876, demonstrating strong market penetration.



The company's gross margin improved by 72.1 basis points to 17.0%, reflecting enhanced product capabilities and a shift towards private-label products. Despite this improvement, ZKH Group's operating loss narrowed to RMB105.4 million, a 13.2% reduction from the previous year. Notably, the company generated positive operating cash flow of RMB160.5 million, compared to negative cash flow in the prior year.



ZKH Group's strategic focus on controlling the value chain and enhancing product offerings contributed to the customer base increase. The shift from the marketplace (3P) to a product sales (1P) model, along with the 20.1% growth in ZKH Platform customers, suggests a strategic move to capture greater value for the company. However, the marketplace (3P) GMV decreased by 35.8% year-over-year, indicating a challenge in maintaining top-line growth.

To mitigate the impact of decreasing marketplace (3P) GMV on overall revenue growth, ZKH Group should focus on expanding its product sales (1P) model and optimizing operational efficiency. By optimizing its value chain and leveraging its strong cash position (RMB2.06 billion in cash and equivalents), ZKH Group can maintain profitability amidst the shift in business model.



ZKH Group's transformation shows promising signs in the competitive MRO sector. With a customer base increase of 16.9% and a significant improvement in cash flow, the company's optimization strategy is paying off. Despite the 7.2% decline in GMV, key profitability indicators show progress, indicating that ZKH Group is on the right track to achieve long-term success.

In conclusion, ZKH Group's Q3 2024 financial results demonstrate a mixed but gradually improving financial picture. While the company faces challenges in maintaining top-line growth amidst the shift in business model, its strategic focus on controlling the value chain and enhancing product offerings positions it for long-term success. With a strong cash position and positive operating cash flow, ZKH Group is well-equipped to navigate the competitive MRO sector and continue its transformation.