ZKH Group Q2 Earnings Call Highlights

ZKH Group said second-quarter growth accelerated as demand from small and medium-sized enterprise customers, state-owned enterprises and several industrial sectors increased, while operating leverage helped the company post its first quarterly operating profit. Gross merchandise value, or GMV, rose 18.9% year over year to RMB2.9 billion in the second quarter, while net revenue increased 12.8% to RMB2.4 billion. Both figures represented their fastest growth in recent quarters. GMV on the ZKH platform rose 23% year over year. The company expects GMV growth to accelerate again in the third quarter and said it is targeting full-year GMV growth of 15% to 20%, based on current order trends.

Regional SME customers remained a major contributor to growth, with GMV in that segment increasing 30% from a year earlier. The segment offers higher gross margins and reflects improving product coverage and service capabilities. SME customers accounted for about 30% of total GMV, while larger key accounts and state-owned enterprises represented roughly 60%. Business with state-owned enterprises, including centrally administered SOEs, returned to growth of more than 20% year over year following adjustments made last year. The company also reported double-digit GMV growth among central SOEs and industry key accounts.

Performance varied across industrial sectors, with steel and ferrous metals GMV doubling year over year. Communications and electronics, fine chemicals and pharmaceuticals, and utilities each posted GMV growth of more than 30%. Non-ferrous metals grew more than 103%, utilities increased 57%, fine chemicals and pharmaceuticals rose 37%, food and agricultural products increased 37%, and communications and electronics grew 35%.

ZKH also continued to build its electrical automation business. GMV from electrical automation customers rose 160% year over year, while GMV from semiconductor customers increased more than 100-fold. The company expanded its automation offerings across sensors, programmable logic controllers, industrial safety, industrial internet of things and robotics, and it has broadened collaboration with Intel in edge control, visual inspection and industrial-control solutions.

Gross profit increased 20.3% year over year to RMB430 million, outpacing GMV growth. Gross profit as a percentage of GMV rose to 14.9%, compared with 14.8% a year earlier and 14.4% in the first quarter. The improvement was attributed to a more favorable customer and product mix, as well as a larger contribution from private-l.