{"text":[[{"start":7.18,"text":"First it got a lesson in the pitfalls of ignoring government regulators. Now, trucking app operator Full Truck Alliance Co. Ltd. (YMM.US) is getting a new lesson in basic economics."}],[{"start":20.66,"text":"That’s our major takeaway from a brief announcement by the company on Friday warning of potential fallout from a rate hike for its freight brokerage services, its second-largest revenue source. Full Truck Alliance acknowledged the move was almost certain to scare off some of its customers, who consist mostly of truckers and shippers in need of trucking services."}],[{"start":44.35,"text":"The move is just one of the latest adjustments by Full Truck Alliance as it navigates an increasingly bumpy road in a slowing Chinese economy. Other changes include layoffs over the past year, and a rapid buildup of its lending to the small businesses that are Full Truck Alliance’s core clients and often require short-term financing to run their operations."}],[{"start":69.58,"text":"Such moves look necessary to keep Full Truck Alliance’s business humming, but also come with their own risks. At the same time, those actions also look proactively aimed at avoiding bigger problems down the road. That’s the kind of management investors like to see, and may be one reason why 11 of the 13 analysts polled by Yahoo Finance rate the company a “buy” or “strong buy.”"}],[{"start":96.88,"text":"Full Truck Alliance said its latest rate hikes are necessary to “ensure sustainability” of its freight brokerage business, which helps to match shippers with the most suitable truckers. Its earlier reports show that part of its business was a big recipient of government support that appears to be winding down. Such government grants to the company totaled 467 million yuan ($65 million) in this year’s first quarter, down 41% from 795 million yuan a year earlier."}],[{"start":132.28,"text":"“The company expects that, starting from the quarter ending Sept. 30, 2025, the transaction volume of its freight brokerage service will significantly decline, resulting in a decline in revenue from freight brokerage service, while the cost of revenue for such service will increase, which may adversely affect the company's profit to a certain extent,” the company said."}],[{"start":156.86,"text":"Full Truck Alliance’s shares fell 7.7% during the Friday trading day before the announcement, suggesting rumors of the move were already in the market during the day. The stock is roughly flat since the start of the year, though it’s up 50% over the last 52 weeks."}],[{"start":176.3,"text":"The company looks relatively attractive due to its asset-light business model centered on its two apps, Huochebang and Yunmanman, that provide a range of services to link truckers and shippers. The lone exception to that asset light model is the company’s small loans business, which Full Truck Alliance runs using its own funds."}],[{"start":197.38,"text":"That business is experiencing growing demand as truckers and shippers feel the pressure of China’s slowing economy. The company had 4.5 billion yuan in small business loans on its balance sheet at the end of March, up 25% from 3.6 billion yuan in such loans a year earlier. At the same time, the company’s non-performing loan (NPL) ratio crept up to 2.2% at the end of March from 2.0% at the end of 2023."}],[{"start":229.88,"text":"Regulatory run-in"}],[{"start":231.47,"text":"The move to put its freight brokerage business on stabler footing is just the latest big adjustment by Full Truck alliance. Three years ago, the company faced a much bigger challenge when it received a major slap on the wrist for failing to undergo a required data security review by China’s cybersecurity regulator before its listing in New York."}],[{"start":255.06,"text":"As part of its punishment, the company was banned from signing up new customers for its two main apps for about a year between 2021 and 2022. It ultimately completed the review and was allowed to resume signing up new users."}],[{"start":271.86,"text":"It also reportedly was considering a second listing in Hong Kong in 2022 as tensions flared between the U.S. and Chinese securities regulators over the sharing of audit records for Chinese companies listed in New York. But the U.S. and China ultimately settled that dispute with a landmark information-sharing agreement, leading Full Truck Alliance to abandon the Hong Kong listing plan."}],[{"start":299.45,"text":"The company’s business has been relatively immune to China’s slowing economy, even as the latest fee increase and our previously mentioned rise in its loans and NPL ratio hint at growing pressures. Its revenue rose 19% in the first quarter of this year to 2.7 billion yuan, though the growth was quite uneven across its three main business segments."}],[{"start":326.33,"text":"Its core transaction services rose 51.5% year-on-year to 1.05 billion yuan, passing freight brokerage services to become the company’s biggest breadwinner. Full Truck Alliance credited the big jump to greater activity on its platform, as the number of fulfilled orders on its apps rose 22.6% year-on-year to 48.2 million, and the number of monthly active shippers on its platform rose 28.8% to 2.76 million."}],[{"start":363.32,"text":"By comparison, freight brokerage services in the first quarter were roughly flat at about 966 million yuan. Following the new price hike, that revenue stream is likely to start contracting – possibly by a lot – starting in the third quarter. The company’s third major revenue source, freight listing services, grew 10% during the quarter to 235 million yuan, making up a relatively small 10% of its revenue pie."}],[{"start":395.5,"text":"Full Truck Alliance’s margins look quite attractive due to its asset-light model. Its gross margin was already high at 54.6% last year, and jumped to 69.2% in the first quarter thanks to a decrease in the government’s value added tax – another form of relief from Beijing targeted at small businesses that are struggling to pay their bills."}],[{"start":421.94,"text":"The company’s bottom line also benefitted from a 5% reduction in its workforce last year, which helped to drive a 30% reduction in its general and administrative costs in the first quarter. Its profit for the quarter more than doubled to 1.28 billion yuan, and its cash and other investments also remained quite high at 29.3 billion yuan. All this seems to point to a company that’s good at proactively tackling issues before they become major problems, even as Full Truck Alliance faces an increasingly bumpy road with growing risks associated with China’s slowing economy."}],[{"start":467.97,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1754435088_9868.mp3"}