HUITONGDA NETWORK（9878.HK）sees 66.4% YoY surge in adjusted net profit attributable to parent, further strengthens supply chain and SaaS service in lower-tier market

（Hong Kong, 30 March 2022）-- Huitongda Network Co., Ltd. (“Huitongda Network” or the “Company”, Stock Code: 9878.HK) is pleased to announce the audited consolidated results of the Company and its subsidiaries (together, the “Group”) for the year ended December 31, 2021. Huitongda Network is China's leading commerce and service platform for business customers in the retail industry in the lower-tier market.

China’s economic development was faced with challenges and changes in 2021, due to the sporadic and regional outbreaks of the COVID-19 pandemic nationwide and the subdued market consumption. Meanwhile, the central government emphasized the leading role of the domestic economic cycle and introduced a series of policies to support digital development in rural areas. Against such a backdrop, Huitongda Network adhered to the original intention of “creating a better life for farmers” and has made continuous progress in empowering and serving business customers in the retail industry of the lower-tier market. Through the continuous improvement of supply chain capabilities and rural digital (SaaS) services, the Company has achieved outstanding results in all aspects.

Adjusted Net profit attributable to parent soars 66.4%; service business sees dramatic growth

In 2021, the Group recorded total revenue of RMB65.76 billion, representing a year-on-year growth of 32.5%. Revenues from its commerce business and service business (two core business segments of the Group) increased 32.3% and 80.4% year-on-year to RMB65.22 billion and RMB438 million, respectively. The two core business segments reinforced each other, creating a remarkable flywheel effect. The rapid growth of the service business not only brings strong growth momentum to the Group, but also proves the correctness and success of the Group’s SaaS+ business strategy. The Group will continue to further the implementation of its SaaS+ business strategy and grasp the digital development opportunity in the retail industry of the lower-tier market.

During the year, the Group continued to deepen strategic cooperation with upstream brand manufacturers, with its commerce business expanding into six major industries, namely consumer electronics, agricultural means of production, household appliances, vehicles and auto parts merchandise, homebuilding and renovation materials, and liquor and beverages. In particular, its revenue from consumer electronics, vehicles and auto parts merchandise, homebuilding and renovation materials, and liquor and beverages witnessed a rapid growth.[Note to Company, the revenue from Agricultural means of production increased 55.7% year on year. Please consider whether it should be included here] The high-speed growth of its business in various industries brings strong confidence for the Group to continuously achieve high-quality development, and also lays a foundation for the Group to achieve a broader and diversified business model in the future.

In respect of the service business, the Group increased efforts in R&D and marketing in 2021. Meanwhile, it adopted the layered and graded management of its products and customer demand, and improved the service effectiveness of its member stores. During the reporting period, the number of SaaS+ users of the Company’s paid stores reached 17,905, and revenue from subscription service rose 133.8% year-on-year. The performance of the service business, products and the number of customers all witnessed a dramatic growth. With the improved supply chain capabilities and the increase in the number of customers in member stores, the service business has ushered in sustainable and broad development prospects.

The Group’s gross profit increased by 38.9% from approximately RMB1.34 billion in 2020 to approximately RMB1.87 billion in 2021. As the profit in the Group’s financial statements was affected by its interest expenses arising from redeemable capital contributions, the adjusted net profit (non-IFRS measure) attributable to parent rose 66.4% year-on-year to RMB327.6 million, which more truly reflected the Group’s profitability. It is believed that the Group’s net profit attributable to parent may achieve sustained rapid growth, driven by both its commerce business and service business.[Note to Company: this expectation had not been disclosed in ARA, please confirm whether it shall be deleted] Meanwhile, thanks to the improved structure of the commerce business and the cooperation with upstream brand owners, the Group’s operating efficiency improved remarkably, with inventory turnover days reduced from 20 days in 2020 to 14 days in 2021.

Huitongda Network sees rapid growth in active member stores, further strengthens supply chain capabilities and SaaS+ strategy

Local member stores serve not only as the customer base of the Company’s commerce business, but also as the low-cost traffic source of its SaaS+ subscription service. Expanding and strengthening the rural member store network is one of the core tasks of Huitongda Network. During the reporting period, the Company deepened and explored the strategy designed for its member stores through developing new stores and providing extensive services. While expanding its incremental member stores, the Company also intensified the launch and engagement service of its existing member stores.

As of the end of the reporting period, the Company’s total number of accumulated registered member stores reached 169,466, representing a year-on-year increase of 20.6%; the number of its active member stores was 62,203, representing a year-on-year increase of 90.1%; the total number of its SaaS+ subscription users was 102,047, representing a year-on-year increase of 64.4%. The rapid growth of active member stores and SaaS+ subscribers most directly reflected the Company's current development condition and driving force for future growth.  

In addition, the Company continues to deepen cooperation with premium brand manufacturers and all of its staff acted in concert to consolidate the operation of its member stores. The Company provided "face-to-face" service by more than 2,900 offline service teams and .[Note to Company: this expectation had not been disclosed in ARA, please confirm whether it shall be deleted] organized over 20 major promotion activities throughout the year for its member stores, which effectively enhanced the engagement and stickiness of its member stores. In respect of supply chain infrastructure, the Company proactively developed an industry-wide customized system and launched the proprietary industry channels. Meanwhile, it provided 500+ warehouses for rent and 10,000+ cooperative private vehicles to realize the warehousing and logistics system solution featuring “direct delivery by manufacturers + three-stage logistics + Pickup at the warehouse”, which is applied to differentiated commercial scenarios of the lower-tier market and provides stable and efficient commodity transaction solutions for member stores. .[Note to Company: this expectation had not been disclosed in ARA, please confirm whether it shall be deleted]

In 2021, the Company further implemented the SaaS+ business strategy. As for the products, it further clarified the three core functions of SaaS+ products, namely “Help to Sale”, “Help to Buy” and “Help to Manage”. At the same time, it strengthened the data analysis function of the platform. In response to differentiated customer needs, it also stratified products and customers to rapidly expand incremental subscribers, and effectively improved the retention rate of existing users.

Highly consistent with China’s rural digital development policy, Huitongda Network wins heavyweight domestic awards

In recent years, China's digital economy has developed rapidly, and the government has issued relevant policies to encourage digital development in rural areas.  In February 2022, the State Council released a document, which focused on vigorously promoting digital development in the countryside. Huitongda Network actively grasped the opportunity of the times. During the reporting period, the Group increased investment in research and development of technology, with research and development costs increasing by 34.8% year-on-year to RMB78.5 million. The Company continued to consolidate the digitalized infrastructures and the “Cloud Field Project”, which is being promoted as a key project, has now completed the system construction and delivery for use. Its 12 functions online have been fully realized, which guarantees the closed loop of online transactions in all scenarios and the full life cycle management of customers.

In view of the Group’s outstanding achievements in rural digital development and its growing influence, the Group was invited to participate in special meetings organized by several central and provincial ministries and commissions, and won 12 national-level honors and 6 provincial-level honors, including China’s Top 500 Enterprises, China’s Top 500 Private Enterprises, China’s Top 10 Industrial Internet Companies, China’s TOP 100 Internet Companies in Comprehensive Strength, China’s Unicorn Enterprises, etc.

The year of 2022 is the first year since the listing of the Company. Huitongda Network will accelerate the improvement of supply chain capabilities, and speed up the transformation from decentralized supply chains to headquarters supply chains. Moreover, the Company will continually deepen the strategy of member stores, speed up the network layout of member stores and improve operational capabilities. Besides, it will increase investment in IT infrastructure, speed up digital development, improve the big data analysis capabilities of platform and execution efficiency of transaction system, and optimize the functions and risk control systems of SaaS products, so as to improve the operational efficiency of customers at each side of the link and reduce operational costs.

In addition, the Company will accelerate the construction of the warehouse distribution system, continuously upgrade the digitalized infrastructure of the warehousing and logistics system, so as to provide customers with standardized, specialized, efficient logistics and delivery experience. In terms of organizational development, it will increase the introduction and training of professional talents and promote the continuous upgrading of organizational construction in order to stimulate business vitality. The Company will be dedicated to carrying out the above tasks to achieve the strategic goal of “ensuring growth and improving quality” in 2022.

-End-

About Huitongda Network Co., Ltd.

HUITONGDA NET（9878.HK）is China's leading commerce and service platform for business customers in the retail industry in the lower-tier market. While providing customers with a stable one-stop supply chain, the Company also uses its digital capabilities to provides SaaS+ subscription service and merchant solutions for all partners in the value chain, such as member stores, channel customers and brand manufacturers, to meet their diversified business needs. The service business has become a new rapid growth driver for the Company.

Media Contacts:

Hong Kong Zhixin Financial News Agency Limited

Ms.Fancy Wang Tel：(86-755) 2589 3557

Email：info@zhixincaijing.com