The mid-term performance of Lianyirong, the "first stock of supply chain finance technology SaaS" in China, has been released: multi-level circulation cloud business has grown rapidly, with an asset service scale of 142 billion yuan, a year-on-year increase of 22%

On August 28, 2023, Lianyirong Technology Group (09959. HK, hereinafter referred to as "Lianyirong"), the first domestic supply chain financial technology SaaS enterprise to be listed, disclosed its mid-term performance announcement for 2023 on the Hong Kong Stock Exchange. In the first half of 2023, the company's main business revenue and revenue were approximately RMB 391 million (including approximately RMB 364 million for supply chain fintech solutions and RMB 27.4 million for emerging solutions), with a gross profit margin of approximately RMB 238 million and a gross profit margin of 60.8%; The company's equity shareholders accounted for a loss of approximately 170 million yuan during the period, compared to a loss of 43 million yuan in the same period last year; The company's asset service scale reached 142 billion yuan, a year-on-year increase of 22%; As of the end of June, the company's cash reserves reached 6 billion yuan. In the first half of 2023, Lianyirong reached cooperation with 1548 core enterprises and financial institutions, covering 41 of China's top 100 enterprises and all of China's top 20 commercial banks.

Lianyirong stated that in the first half of 2023, China's macroeconomic temperature rebounded, but the pace of recovery in various industries has differentiated. From the perspective of the external environment, the international economic situation is complex, and external demand is weakening, creating sustained pressure on China's economic growth. In addition, there is still a certain delay in the transmission of macroeconomic recovery to market confidence and business performance, and the demand for supply chain financing activities is still in the recovery stage, putting short-term pressure on the development of the supply chain finance industry. However, given the enormous potential of the supply chain fintech market, the current strategic focus of the group is still to rapidly expand market share and attract new customers. To this end, Lianyirong Technology has adopted a more flexible market strategy and increased investment in technology development.

Supply chain finance plays an important role in unblocking the circulation of the national economy and maintaining the stability of the industrial chain supply chain. Under the guidance of government policy incentives and the wave of enterprise digitization, the growth prospects of the supply chain fintech market are broad. Since the beginning of this year, multiple relevant policies have been introduced to continuously stimulate the vitality of the industrial chain. In February 2023, the State Council issued the "Overall Layout Plan for the Construction of Digital China", strengthening the development of the digital economy from the top and promoting its inclusion in local assessments; In June 2023, the China Association of Interbank Market Dealers issued a notice on further leveraging the functions of the interbank enterprise asset securitization market and enhancing the quality and efficiency of serving the development of the real economy, further increasing support for the innovative development of the enterprise asset securitization market. Lianyirong stated that with the construction of the industrial ecosystem and technological iteration and upgrading, comprehensive deepening of relevant policies and guidance, the macroeconomic fundamentals continue to recover and improve, and the supply chain financial technology industry will enter a new stage of accelerated development.

The asset service scale reaches 142 billion yuan, committed to creating an industrial financial service ecosystem

Lianyirong was established in 2016 and is a leading provider of supply chain financial technology solutions in China. It mainly provides efficient and reliable supply chain financial technology solutions for core enterprises (larger enterprises with high credit in the supply chain) and financial institution customers, and enhances transparency and connectivity in the entire supply chain financial ecosystem to achieve digitalization of the entire supply chain finance workflow.

Lianyirong is committed to creating a leading industrial financial service ecosystem for customers, actively expanding multiple industry application scenarios and products. In the first half of 2023, the total number of customers for Lianyirong's supply chain financial technology solutions increased by 7% to 584 compared to 2022. Among them, there are 57 new core enterprise customers, with a total customer count increasing by 14% compared to 2022 to 458. Customers cover all industries in the 31 industries classified by Shenwan, and continue to consolidate and strengthen market leading advantages in industries such as infrastructure/construction, real estate, commerce/retail and manufacturing, comprehensive enterprise groups, and power equipment.

In the first half of 2023, the total transaction volume processed by Lianyirong's technology solutions increased by 22.5% year-on-year, reaching 142 billion yuan, mainly benefiting from the increase in business scale of existing core enterprise customers and driving the increase in transaction volume of core enterprise cloud processing. Affected by changes in customer and product structure, as well as the flexible pricing strategy adopted by the company to increase market share, the average price of products measured by transaction volume has decreased.

In terms of product and scenario innovation, Lianyirong continuously extends and enriches supply chain financing solutions around the supply chain upstream and downstream ecosystems of customers in different industries. For example, in the internet industry, assisting Meituan in upgrading the digital intelligence of supply chain financial management; In the communication industry, the comprehensive industry and finance platform built by China Mobile has successfully implemented the order financing scenario solution; In the food industry, we have built a new generation of bill system for Guangming Group and helped Jiahe Food establish a multi-level dealer financing circulation platform; In the building materials industry, we have jointly launched the "Central Materials Tongrong" bill financing platform with China National Building Materials Corporation; Collaborating with Liugong Group in the mechanical industry to issue the first installment factoring supply chain asset securitization product for construction machinery in China; In the electronic product manufacturing industry, we have helped OPPO Group's supply chain finance platform extend cross-border supply chain financing scenarios and assist it in completing digital and intelligent transformation of its overseas supply chain system.

In addition, while maintaining a leading market share in China, we continue to expand our international business. The company's cross-border cloud business is closely following the wave of Chinese enterprises going overseas. Following traditional cross-border trade, cross-border e-commerce, and online tourism platforms, it further expands the cross-border financing scenario to assist in the digital upgrading of the supply chain of Chinese manufacturing enterprises going overseas. The company also participated in an innovation plan led by the Hong Kong Center of the Bank for International Settlements Innovation Center, and collaborated with partners such as Standard Chartered Bank, Yuancoin Technology, and Miaoying Technology to develop innovative highland models and explore the use of digital trade tokens in financing for small and medium-sized enterprises.

As an explorer and practitioner of innovative application achievements in supply chain finance technology, Lianyirong continues to focus on the application of cutting-edge technologies such as artificial intelligence, blockchain, and big data in the supply chain ecosystem. With the rise of ChatGPT and other large models worldwide, artificial intelligence has moved from an era of innovative applications to an era of widespread application. In the first half of 2023, Lianyirong actively embraced the industry changes and opportunities brought by AIGC innovation, established a vertical GPT model for supply chain finance by integrating open source big models, improved the efficiency of industry information integration and transaction analysis, helped achieve an intelligent risk assessment system, reduced financing and operating costs, and promoted the construction of a safer, more accurate, and efficient digital inclusive financial service ecosystem for supply chain finance technology.

In the fields of environment, society, and governance, Lianyirong also adheres to the mission of "technology supporting sustainable supply chain finance development". As of the end of the first half of 2023, Lianyirong has accumulated over 210000 small and micro enterprises through its technological capabilities to access convenient, efficient, and low-cost digital inclusive financial services through system solutions, and continues to optimize green supply chain financial technology solutions. In the first half of 2023, the asset scale of the sustainable development industry chain served by the company (including new energy, rural revitalization, environmental protection, and intellectual property, etc.) reached RMB 4.4 billion, a year-on-year increase of 108%.

Rapid growth of multi-level circulation cloud business, seizing opportunities for treasury development

The Lianyirong supply chain financial technology solution mainly includes core enterprise cloud and financial institution cloud.

In the AMS cloud business, in the first half of 2023, the total amount of assets processed by Lianyirong was 33.4 billion yuan, a year-on-year decrease of 4.0%, mainly due to the continuous pressure on the real estate industry, which led to a decline in the overall market issuance scale of supply chain asset securitization. According to Wind data statistics, the overall scale of the supply chain asset securitization market in the first half of 2023 decreased by 20% year-on-year, with the real estate industry's issuance scale decreasing by 45% year-on-year. However, since some leading real estate companies resumed issuing supply chain asset securitization products in June 2023, the market has begun to stabilize and show signs of recovery.

In the multi-level circulation cloud business, Lianyirong has maintained rapid growth. In the first half of 2023, the total amount of assets processed by Lianyirong was RMB 55 billion, a year-on-year increase of 106.3%; The number of core enterprise customers served has reached 413, a year-on-year increase of 28% compared to 323 in 2022, and the customer retention rate has reached 99%. In addition, Lianyirong has made breakthrough progress in various financing scenarios upstream and downstream of the industrial chain, such as accounts receivable, prepayments, inventory, and warehouse receipts. It has loaded innovative data-driven financing solutions such as order financing and dealer financing on multiple core enterprise supply chain financing platforms.

The development of digital technology has promoted the upgrading of central state-owned enterprises towards the integration of industry and finance and the direction of group treasurers. Lianyirong has successfully won the bid for 15 central state-owned enterprises and top private enterprise supply chain comprehensive platform projects, including China Electric Equipment Group, Wuhan Metro Group, Jiangxi Financial Investment Group, and China Communications Capital. In addition, Lianyirong officially launched the layout of the "Group Smart Industry Finance Treasurer Platform" in the first half of this year, building innovative treasury solutions.

In the ABS cloud business, in the first half of 2023, the total supply chain assets processed by Lianyirong were RMB 12.6 billion, a year-on-year decrease of 23.1%, mainly affected by the overall downward trend of the supply chain asset securitization market. Due to the continuous pressure on the market, Lianyirong has also lost some financial institution customers who previously provided asset securitization services.

In the e-chain cloud business, in the first half of 2023, the total supply chain assets processed by Lianyirong were RMB 35 billion, an increase of 6.7% compared to the same period last year, returning to the growth track. However, with the trend and consensus of core enterprise customers building their own platforms, financial institutions are more willing to embed their financial products into the scenarios of large and medium-sized core enterprise platforms, which has caused some transaction volume diversion for e-chain cloud business. In the future, Lianyirong will actively explore opportunities for innovative development of financial technology services with various financial institutions outside of the supply chain finance scenario, empowering financial institutions to achieve high-quality digital transformation in areas such as digital marketing, digital risk control, and digital operations.

In cross-border cloud business, the total supply chain assets processed by Lianyirong are RMB 5.7 billion, a year-on-year increase of 23.2%. In recent years, with the advancement of more and more Chinese enterprises' internationalization and globalization strategies, Chinese enterprises, especially manufacturing enterprises, have set off a new wave of going overseas. Lianyirong actively lays out financing scenarios and models around Chinese enterprises' overseas upstream and downstream supply chains, relying on Lianyirong's mature overseas supply chain financial technology system implementation and operation experience, to assist overseas enterprises in building an efficient and comprehensive global supply chain management system, and accelerate the embrace of globalization dividends.

In the credit technology business of small and medium-sized enterprises, Lianyirong has strategically reduced the transaction scale of offline merchants and explored new customer groups and business scenarios in this business segment.

With the rise of social media traffic driving the rise of live streaming e-commerce, the "live streaming economy" has shown explosive growth. Lianyirong started providing financing solutions in live streaming e-commerce scenarios this year, providing data-driven supply chain financing and other services for live streaming small and micro merchants. In the first half of 2023, Lianyirong used artificial intelligence, big data and other technologies to restructure the profile of small and medium-sized customers, connecting the entire process of live streaming e-commerce industry chain, and forming a supply chain financial technology solution for the live streaming e-commerce industry. It collaborated with financial institutions, supply chain enterprises, and other industries to serve multiple e-commerce categories such as clothing, food, fresh food, jewelry, department stores, and digital products, Help small and medium-sized farmers and businesses in the live streaming e-commerce industry chain alleviate financial pressure.

Lianyirong's industry position and innovative achievements continue to receive high recognition from the market. In the first half of 2023, Lianyirong was awarded multiple qualifications and honors, including the "Specialized, Refined, and New" enterprise in Shenzhen, the "2022 Guangdong Engineering Technology Research Center", the "2022 Excellent Supply Chain Finance Solution Provider", and the "Best Digital Supply Chain Finance Solution" by Caicai in 2023.

In the second half of the year, Lianyirong will seize the opportunities in the supply chain financial technology market, focus on the layout of the treasury platform, optimize internal resource allocation, and improve operational efficiency. On the basis of deeply cultivating the needs of existing customers, continue to expand new customers, and obtain higher market share. Lianyirong will balance short-term and long-term returns of products, continue to implement cost reduction and efficiency increase, and focus on higher quality growth Chairman and CEO Song Qun stated.

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