Quhuo's stock price soars by over 300%! Yet it loses momentum in the flexible la

On Tuesday Eastern Time, several stocks in the U.S. stock market experienced a sudden surge, with some individual stocks even skyrocketing by 24 times.

Qoohe (QH.US), a labor dispatch service provider for Meituan (03690.HK), also saw its stock price join the party, with the share price continuously rising throughout the trading day, eventually closing up by 306.6%, setting a new high since March of this year. On that day, Qoohe's trading volume reached as high as 346 million shares, accounting for more than 60% of its cumulative trading volume since its listing in 2020; at the same time, the trading value for the day reached $311 million, also the highest single-day trading volume in history.

In addition to Qoohe, many Chinese concept stocks also showed strong gains, with stocks such as Star Electronics International (BNSOF.US), Youjia Insurance (UBXG.US), and Kuke Music (KUKE.US) all seeing significant increases.

The unusual surge in Qoohe's stock price did not have any particularly significant news to support it, which left many small shareholders puzzled. Some netizens joked, "It's become a demon stock" and "We workers have strength!"

However, beneath the impressive stock price, Qoohe's ability to generate profits is questioned by the market, and its performance in the domestic flexible labor market, which is in high demand, is disappointing.

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Stalling on the Golden Track

Founded in 2012, Qoohe is a localized life service platform for flexible employment, providing end-to-end operational solutions for the life service market by linking workers with localized life service providers.

The flexible employment scenarios provided by Qoohe mainly include on-demand delivery for takeout, ride-hailing, cleaning, and maintenance of shared bicycles, with corporate clients including Meituan, Ele.me, Didi, and other life service platforms. Among them, the on-demand delivery sector is the most important source of income for Qoohe. In the first half of this year, the company's revenue from on-demand delivery solution services reached 1.499 billion yuan (same below), accounting for more than 92% of total revenue.

This year, the takeout industry at home and abroad has maintained growth, with strong demand for courier labor. According to data from the Beijing Municipal Commission of Commerce, the number of workers in Beijing's catering delivery and takeout meal services increased by 49.7% year-on-year in the first half of 2024. Meituan, the "golden patron" of Qoohe, has shown impressive operational data, with the number of instant delivery transactions in the first and second quarters of this year increasing by 28.1% and 14.2% year-on-year, respectively.However, Quhuo failed to reap the benefits of the food delivery market.

In the first half of this year, Quhuo achieved a revenue of 1.62 billion yuan, a year-on-year decrease of 6.7%. The on-demand delivery solution revenue dragged down the company's overall revenue, with the business revenue dropping 9.1% year-on-year to 1.499 billion yuan. The company stated that this was mainly due to the disposal of several low-quality business areas, leading to a decrease in revenue scale.

Furthermore, Quhuo's losses widened in the first half of this year, with a net loss of 46.515 million yuan, compared to a net loss of 5.69 million yuan in the same period last year.

Due to the high costs of paying couriers, Quhuo has a high labor cost, resulting in a low gross margin. According to financial report data, in the first half of this year, Quhuo's gross margin was only 1.53%, compared to 3.85% in the same period last year.

Looking at the longer term, Quhuo's revenue has been on a downward trend in recent years. In 2022 and 2023, the company's revenue decreased by 5.09% and 3.09% respectively, mainly due to the annual reduction in on-demand delivery solution revenue.

The market competition is fierce, with many peers recording growth in the first half of the year.

Flexible employment refers to various forms of employment outside the actual employment enterprise's own staff, including job outsourcing, expert services, crowdsourcing platform employment, part-time work, and various short, medium, and long-term temporary employees.

The flexible employment market, represented by the food delivery and express delivery industries in China, is vast, giving rise to many enterprises providing flexible employment services. In addition to Quhuo, Renrui Talent (06919.HK), Koray International (300662.SZ), and ManpowerGroup (02180.HK) are also engaged in flexible employment services.

In addition to these, there are various small and medium-sized human resource enterprises offline that provide flexible employment human resource services for enterprises.

In the fierce market competition, Quhuo pressed the "brake button," significantly reducing its attractiveness to food delivery couriers. In the first half of this year, Quhuo's average monthly active worker count was 54,700, a year-on-year decrease of 8.4%. During the period from 2022 to 2023, the company's average active worker count also showed a decline.In comparison, Quhuo's competitors have achieved significant performance growth.

In the first half of this year, Korail International's flexible staffing business revenue increased by 18.70% year-on-year, ManpowerGroup's flexible staffing revenue in Mainland China rose by approximately 21.5% compared to the same period last year, and Renrui Talent's comprehensive flexible staffing employee count grew by 13.1% to about 38,300.

Faced with persistently high labor costs and intense competitive environments, Quhuo must take more robust measures to turn around its predicament. To enhance the company's diversified business capabilities, Quhuo has frequently ventured into new areas in recent years, entering the mobility service solutions sector, including shared bicycle maintenance, ride-hailing, and car export services, as well as the housekeeping and accommodation sectors.

Mobility service solutions saw a rapid increase in the first half of the year, with revenue soaring by 71.7%, mainly due to the growth of the company's vehicle export solutions. However, this business is still small in scale, with revenue of only 100 million yuan in the first half of the year. Revenue from housekeeping and accommodation solutions and other services also amounted to only over 20 million yuan, a decrease of 27.8% year-on-year.

Looking at the overall business, although Quhuo has made efforts in diversifying its revenue, the proportion of revenue from emerging businesses is still small. To achieve a "multi-wheel drive" development model, Quhuo has a long way to go.