Over 90% of Far Sea International's revenue is heavily tied to Europe: per-group tour value has declined, and the proportion of employees without social insurance and housing fund contributions remains significant

$Hiseas International Tourism Group* (811297.HK)$

Behind the public's preference for European guided tours lies a key destination service provider—Sichuan Far Sea International Travel Service Co., Ltd. (hereinafter referred to as 'Far Sea International'). This company, which specializes in European ground handling and group tours, had long pursued a listing on China's A-share market without success and has now shifted its focus to Hong Kong's capital markets to restart its IPO journey.

As early as 2019, Far Sea International officially launched A-share listing preparations with CICC as its sponsor. However, after completing the full tutoring period, the company never submitted an IPO application to regulators, effectively shelving its A-share listing plan. Several years later, Far Sea International pivoted toward a Hong Kong listing, appointing East Securities (Hong Kong) as its sole sponsor, once again stepping onto the capital markets' examination stage.

Benefiting from the post-pandemic recovery in outbound tourism, this company—focused on European ground handling and group tours—has generated over RMB 2.1 billion in revenue over the past three years and ranks third globally among destination management service providers. Its strong industry ranking and rapid revenue growth form the core highlights of its IPO story—but that’s only side A of the narrative.

On the flip side, a highly concentrated business structure and persistent labor compliance issues have become unavoidable obstacles on the path to listing.

In this IPO, Oceanwide International intends to allocate the proceeds raised toward four key initiatives: expanding its global destination management services network; upgrading its information technology systems and digital operations; driving industry chain integration through strategic acquisitions and investments; and supplementing working capital.

90% of revenue tied to Europe, with gross margin steadily rising

According to the prospectus and Tianyancha, Oceanwide International was founded in 2007 and is primarily engaged in business services. Its core operations include group tours for Asian travelers to Europe, corporate overseas support services, and specialty experiential travel.

Per a Frost & Sullivan report, Oceanwide International is one of the few Chinese destination management service providers with a global footprint, full-service coverage, and digitally driven operations. According to the same source, ranked by 2025 revenue, the company is the third-largest destination management service provider globally and the top-ranked provider serving the Asian outbound market.

Benefiting from the sector’s post-pandemic recovery, Oceanwide International has posted strong financial performance. During the reporting period (2023–2025), the company’s revenue was RMB 788 million, RMB 16.04 billion, and RMB 21.44 billion, respectively—showing substantial year-over-year growth. Net profit amounted to RMB 81.86 million, RMB 492 million, and RMB 611.3 million, respectively. Net profit margins were 1.0%, 3.1%, and 2.9%, while gross margins were 11.87%, 13.34%, and 14.26%, respectively.

From a business structure perspective, the company’s revenue is heavily reliant on a single segment, leaving it with weak risk resilience. During the reporting period, group tours—the absolute pillar of revenue—generated RMB 6.88 billion, RMB 14.72 billion, and RMB 19.76 billion, accounting for 87.3%, 91.7%, and 92.2% of total revenue, respectively. Clearly, nearly all of Oceanwide International’s income stems from this single segment.

By comparison, the company’s two emerging businesses have shown sluggish growth and shrinking revenue shares, falling short of expectations for establishing a second growth curve. Corporate overseas support services generated RMB 642 million, RMB 833.5 million, and RMB 952.9 million during the period, representing 8.2%, 5.2%, and 4.4% of total revenue, respectively. Experiential travel services brought in RMB 308.3 million, RMB 487.8 million, and RMB 719.8 million, accounting for 3.9%, 3.0%, and 3.4% of total revenue—remaining consistently low and failing to provide meaningful earnings diversification.

However, that is only one risk; the second—and more severe—is its heavy geographic concentration.

During the reporting period, revenue from Europe totaled RMB 7.15 billion, RMB 14.67 billion, and RMB 19.06 billion, representing 90.8%, 91.4%, and 88.9% of total revenue, respectively—demonstrating that nearly 90% of the company’s income has been consistently tied to the European market over the past three years.

Revenue from the Asia region amounted to RMB 35.58 million, RMB 79.88 million, and RMB 146 million, accounting for 4.5%, 5.0%, and 6.8% of total revenue, respectively; revenue from the Americas region was RMB 28.60 million, RMB 36.87 million, and RMB 36.48 million, representing 3.6%, 2.3%, and 1.7% of total revenue, respectively. Revenue contributions from all other markets were negligible, indicating the company has virtually no cross-regional market risk hedging capability. With ongoing geopolitical conflicts in Europe and sharply rising regional market uncertainty, the company faces significant underlying risks.

In addition to geographic concentration, the company’s customer base is also highly concentrated. Regarding this pronounced operational risk, Far Seas International frankly acknowledged in its prospectus that its business is highly susceptible to macroeconomic conditions, and the economic and social circumstances of the countries and regions in which it operates could materially and adversely affect its business, operating results, and financial condition.

During the reporting periods, revenue from customers in mainland China amounted to RMB 432 million, RMB 1.078 billion, and RMB 1.393 billion, representing 54.9%, 67.2%, and 65.0% of total revenue, respectively; revenue from customers in other Asian markets totaled RMB 280 million, RMB 420 million, and RMB 580 million, accounting for 35.6%, 26.1%, and 27.0% of total revenue, respectively. The customer base is largely tied to outbound travelers from mainland China and Asia, making it highly vulnerable to adjustments in China’s outbound travel policies and fluctuations in consumer confidence—resulting in insufficient stability in its core customer base.

“Nearly 90% of Far Seas International’s revenue comes from the European market, while its customer base is heavily reliant on outbound travelers from mainland China. This highly concentrated business structure objectively places considerable pressure on the company’s risk resilience,” said Zhang Yi, CEO and Chairman of iiMedia Research, in an interview with Harbour Business Observer.

He further noted that, from a macro perspective, on one hand, ongoing geopolitical tensions in Europe are fueling exchange rate volatility, which directly undermines the company’s core operational foundation; meanwhile, the absence of meaningful operations on other continents leaves the company with no buffer against potential disruptions in the European market. On the other hand, the domestic market remains subject to shifts in outbound travel policies and changes in Chinese consumers’ confidence in overseas spending, leaving the stability of its customer base uncertain.

Operating within a single business segment also introduces risks related to upstream supply chain instability. Negotiating power among cooperative suppliers—such as hotels and transportation providers—is strong, and their supply costs are prone to increase, continuously driving up operating expenses. If the company fails to effectively and sustainably develop a second growth curve overseas, it will struggle to hedge its existing operational risks, leading to pronounced cyclical volatility in its financial performance—a key concern for capital market investors.

Shen Meng, Director at Chanson Capital, also candidly stated that Far Seas International’s business and customer structure is extremely concentrated, and any policy changes by either the European Union or China could significantly impact the company’s financial performance.

Shift toward smaller group tours reduces per-group value, while industry-wide intensifying competition drives up operating costs

To align with evolving market consumption trends, the company proactively pursued a strategic shift toward smaller, premium group tours, which directly led to a continuous decline in per-group profitability.

During the reporting periods, the number of tour groups served by the company increased from 3,454 to 7,683 and then to 11,500, reflecting continuous expansion in group volume but a persistent decline in per-group quality. Over the same periods, the average number of tourists per group dropped from 32.7 to 28.4 and then to 24.1, while the average revenue per group declined from RMB 199,200 to RMB 191,600 and further to RMB 171,200.

In response, Far Seas International explained that market traveler preferences are gradually shifting toward niche, personalized, and premium small-group tours. The company proactively adjusted its business strategy by reducing group sizes and enhancing itinerary experiences, resulting in a temporary decline in both per-group scale and per-group revenue—a deliberate outcome of this strategic realignment. However, this model also means that customer acquisition, operational, and service costs continue to be spread thinner, further increasing the difficulty of achieving profitability.

To counter intense industry competition and capture market share, Far Seas International has continuously ramped up marketing investments, keeping sales expenses persistently high. During the reporting periods, the company’s sales and distribution expenses amounted to RMB 48.99 million, RMB 94.59 million, and RMB 135 million, representing 6.2%, 5.9%, and 6.3% of total revenue, respectively. Meanwhile, administrative expenses stood at RMB 46.59 million, RMB 64.08 million, and RMB 77.78 million, accounting for 5.9%, 4.0%, and 3.6% of total revenue, respectively—continuously eroding the company’s profit margins.

While under pressure on the profit front, Far Seas International also experienced significant volatility in operating cash flow. Net cash generated from operating activities fluctuated sharply during the reporting periods, registering at -RMB 16.505 million, RMB 5.03 million, and RMB 69.13 million, respectively.

The company’s operating cash flow returned to net inflows from 2024 to 2025 alongside industry recovery. This improvement was primarily driven by the recovery of pre-tax profits and adjustments from non-cash items such as depreciation, financial expenses, foreign exchange gains/losses, and impairment provisions, as well as passive increases in trade payables and contract liabilities that positively contributed to cash flow. However, cash flow in each year has been consistently dragged down by substantial growth in trade and other receivables, indicating that significant capital is tied up across the supply chain. This exposes structural weaknesses in the company’s operations, including heavy reliance on accounting adjustments for profitability, weak underlying cash-generating ability, and persistent working capital pressures.

At the end of each reporting period, the company’s trade and other receivables continued to climb—from RMB 144 million to RMB 210 million and further to RMB 283 million—reflecting ongoing expansion in accounts receivable and a gradual accumulation of bad debt risk. Meanwhile, trade and other payables stood at RMB 125 million, RMB 164 million, and RMB 182 million during the same periods, rising further to RMB 210 million by the end of May 2026, indicating a continuous increase in operating liabilities.

More critically, the company’s debt burden has expanded rapidly. During the reporting periods, bank loans and overdrafts surged from RMB 20.056 million and RMB 20.324 million to RMB 77.602 million, further increasing to RMB 92.709 million by the end of May 2026, significantly heightening short-term debt pressure.

Due to industry characteristics, ground handling services for tourism require full prepayment to overseas hotels, transportation providers, and local service partners, while customer payments are collected with a lag—resulting in persistent liquidity strain. Although the company’s debt-to-asset ratio declined from 82.11% to 71.25% and further to 65.16% during the reporting periods, it remains relatively high. Its current ratios stood at just 0.51, 1.31, and 1.43, respectively—indicating that at the start of the reporting period, current assets were insufficient to cover current liabilities, highlighting acute short-term solvency risks. As of the end of 2025, the company held only RMB 191 million in cash and cash equivalents, inadequate to cover its substantial interest-bearing debt, leaving minimal financial buffer.

In terms of ownership structure, controlling shareholder Wang Wei exercises control over approximately 53.70% of Far Seas International’s issued shares through a combination of direct holdings, wholly owned holding platforms, employee stock ownership platforms, and concert party arrangements. Wang Wei personally holds approximately 43.00% of the company’s equity directly, making him the largest shareholder and de facto controller with absolute authority over board decisions and corporate strategy.

Additionally, the company has long-standing labor compliance deficiencies. During the reporting periods, its arrears in social insurance and housing provident fund contributions rose annually to RMB 43 million, RMB 55 million, and RMB 101 million, accumulating to a total of RMB 199 million over three years. These persistent compliance issues reflect inadequate internal controls and significant gaps in the company’s human resources compliance framework.(Produced by Harbor Financial)

Zhang Ranqi, Harbor Business Observer

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