Key Takeaways:
Wuwanshengxin Group, operator of the Aihuishou electronics recycling platform, reported a 79.6% surge in first-quarter adjusted net profit as its strategic pivot to direct-to-consumer sales of refurbished devices paid off.
"The results validate our transition from a lightweight marketplace to a full-chain circular retailer," a company representative said in the earnings release. "We are capturing more value by controlling the entire lifecycle of used electronics."
For the quarter ended March 31, Aihuishou reported total revenue of 6.16 billion RMB, a 32.4% year-over-year increase. The growth was almost entirely fueled by its 1P (self-operated) business, where revenue climbed 34.4% to 5.73 billion RMB, accounting for over 93% of the total. Platform (3P) services grew a slower 10.4%.
The profit surge is a direct result of bypassing intermediaries. Sales from its "compliant refurbished" business to consumers (ToC) skyrocketed nearly 150%, boosting the ToC retail share of product revenue to 45.1% from 33% a year ago. This shift lifted the company's non-GAAP operating margin to 3.1% from 2.4%.
Aihuishou's earnings demonstrate a significant shift in its business model. Previously reliant on a B2B wholesale model with thin margins, the company has successfully built a vertically integrated system. By acquiring used electronics, performing in-house refurbishment, and selling directly to consumers through its network, it captures a much larger portion of the product's residual value.
This strategy appears to be working despite rising costs associated with physical expansion. The company grew its offline store footprint to 2,156 locations from 1,886 a year prior. However, its ability to control fulfillment and sales expenses suggests that the increased density of its network is creating operational scale and reducing costs related to logistics and quality control disputes common in mail-in programs.
The company is also using its extensive physical store network to expand into new recycling categories. As of the first quarter, 966 of its stores now accept multi-category items, including gold and luxury goods. This segment saw an 81.5% increase in gross merchandise value (GMV), with gold trading volume up 83.3% and second-hand luxury goods up 58.8%.
While these new categories help increase store efficiency, they present different challenges. Gold recycling is a high-volume, low-margin business, while luxury goods are highly non-standardized and require significant expertise in authentication and inventory management.
The strong quarterly performance and 1.72 billion RMB in cash reserves provide Aihuishou with a solid foundation. The results show a clear path to improved profitability by focusing on the high-margin, direct-to-consumer refurbished market. Investors will watch to see if the company can maintain this momentum and successfully apply its model to newer, more complex recycling categories.
This article is for informational purposes only and does not constitute investment advice.
