High expenses erode gross profit margins as Kaisi Times continues to report losses

Kaiser Times, which focuses on China's automotive aftermarket, plans to go public in Hong Kong with CICC as the sole sponsor.

Key points:

Last year saw revenue and gross profit growth, but the performance still recorded a loss.

Shareholders include Shunwei, which is held by Lei Jun, and Germany's Bosch.

Author of this article: Bai Xinrui

Entering 2026, there are signs of improvement in auto stocks, especially$BYD COMPANY (01211.HK)$and$GEELY AUTO (00175.HK)$with standout stock prices, coupled with continued strong sentiment in the new stock market. Kaiser Times, which focuses on China's automotive aftermarket,Kaisi Era Holdings Limitedhas also recently submittedits listing application documents, with CICC as the sole sponsor.

Kaiser Auto began operations in 2015 and launched its computer-based 'Kaiser Auto Parts' and 'Workshop No. 1' platforms the following year. Currently, the platform offers a set of AI-powered digital infrastructure to help participants in the automotive aftermarket intelligently and efficiently distribute products and provide services. Existing shareholders include Shunwei Fosun International, which is held by Lei Jun, the founder of Xiaomi, and Bosch of Germany.

The automotive aftermarket refers to the services and transaction activities provided after the sale of a car during its lifecycle, primarily including car repairs, maintenance, detailing, modifications, and auto parts sales. From 2021 to 2025, this market is expected to have an annual compound growth rate of 4.8% in mainland China, faster than the global average of 2.1%. With the increasing penetration rate of new energy vehicles (NEVs), the market size is estimated to reach 2.2 trillion yuan by 2030.

Compared with internal combustion engine vehicles, NEVs have a faster update iteration speed and shorter product lifecycle. Additionally, the number of stock keeping units (SKUs) for auto parts has surged, requiring auto configuration dealers to stock more components to adapt to rapid market changes. Moreover, NEVs are centered on the 'three-electric system' (i.e., battery, motor, and electronic control systems), not only possessing traditional internal combustion engine vehicle attributes but also featuring technological iteration typical of electronic products. Coupled with natural battery degradation and advancements in vehicle intelligence, this leads to continuous expansion of SKUs for auto parts, indirectly increasing handling complexity.

According to the listing application documents, last year the top five players in China’s automotive aftermarket had a gross merchandise value (GMV) of 16.5 billion yuan, with Kaiser Auto being the largest leader in the market. By 2025, Kaiser Auto's GMV is expected to reach 7.6 billion yuan, capturing a market share of 19.1%, surpassing the second-largest player whose market share is 5.8%—a difference of 13.3 percentage points. Additionally, Kaiser Auto has registered 37,500 auto service stores, with accumulated SKUs reaching 48 million. The platform records approximately 3.6 million monthly visits and generates 22.5 million intention orders and 11.3 million completed orders.

High revenue, low gross margin

Kaiser Auto’s revenue mainly comes from three segments: Kaiser Select (F2B), Kaiser Auto Parts (B2b), and value-added services. 'Kaiser Select' primarily sources auto parts from manufacturers and sells them to distributors. 'Kaiser Auto Parts' is a one-stop B2b auto parts trading platform that instantly matches suppliers for auto service shops based on their past purchasing behaviors and geographical regions, charging commissions after completing transactions. As for value-added services, they mainly include subscription fees for the smart auto service shop management system 'Workshop No. 1' and logistics service commissions.

Last year, the main revenue for Kaiser Auto came from Kaiser Select, accounting for 70.8% of the group’s 2025 income, while Kaiser Auto Parts and value-added services accounted for 23.1% and 6.1% of total group revenue respectively. However, Kaiser Select had a low gross margin of just 3.1% last year, compared to the significantly higher 92% and 80.3% for Kaiser Auto Parts and value-added services respectively. Consequently, the largest contributors to gross profit, in order, were Kaiser Auto Parts, value-added services, and Kaiser Select, at 200 million yuan, 45.3 million yuan, and 20.25 million yuan respectively.

Expenses far exceed gross profit

Overall, both revenue and gross profit for Kaiser Auto grew last year, increasing by 25.3% and 19.4% year-on-year to reach 930 million yuan and 260 million yuan respectively. The overall gross margin decreased by 1.4 percentage points year-on-year to 28.3%, but the group still incurred a loss last year, nearly 400 million yuan. Combined sales and marketing expenses, administrative expenses, and R&D expenses totaled nearly 310 million yuan—already exceeding gross profit—and were further impacted by the fair value change of convertible bonds issued to investors, resulting in a 340 million yuan loss.

Although the shareholder base of Kaisi Times is star-studded, its financial performance has yet to turn profitable. Coupled with the launch of Anthropic's new enterprise legal AI tool in February, which shook the world, global software stock valuations have remained under pressure, significantly reducing market interest in related shares.

Based on similar software stocks listed in mainland China and Hong Kong, including those listed in Hong Kong, $WEIMOB INC (02013.HK)$ 、 $KINGDEE INT'L (00268.HK)$and$KINGSOFT (03888.HK)$their current price-to-sales ratios are 3.4x, 3.8x, and 2.9x respectively. Without profitability, it would be advisable for Kaisi Times to list at a price-to-sales ratio of around 3x. Otherwise, an overly high valuation at IPO may result in an inevitable drop in share price, especially given that overall expenses still exceed gross profit. The key focus after listing should be how to drastically cut costs.

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