TD Holdings: An Underestimated Chinese Commodities Service Provider

Significant Earnings Growth in the 2nd Quarter

TD Holdings (NASDAQ: GLG) achieved total revenue of $59,839,600 in the 2nd quarter of 2021, compared to $1,942,400 in the same quarter last year, an increase of nearly 30 times year-over-year. Viewing the performance over the previous few quarters, TD Holdings has seen visible growth in income. In total, it achieved annual revenue of $89,421,900 for the year ending June 2021, up 2,714% year-over-year and gained net income of $357,800, a turnaround that compared to a loss of $5,462,400 for the same period last year.

The cost of purchasing non-ferrous metal products covered a big part of the company’s cost of revenue. For the 3 months ending June 30, 2021, it bought $57.93 million of non-ferrous metal products from 15 third-party suppliers and $1.53 million from 5 related suppliers.

According to the announcement, the increase in the company’s revenue in the 2nd quarter was primarily the result of the booming global commodities market, which had propelled an increase in demand and a subsequent rise in price.

The Undervalued Commodity Supply Chain Industry

According to Frost & Sullivan, the Chinese commodities market grew from $3.7 trillion to $9.05 trillion from 2009 to 2019. The actual market size will be even larger as commodities trade from upstream to downstream and the sector expands to include businesses such as commodity procurement, sales, logistics and finance. According to the China Federation of Logistics and Purchasing (CFLP), the total sales of commodities in China reached around $12.356 trillion in 2020, with an average growth rate of 5.9% over 5 years.

The demand for commodities in China’s manufacturing sector is huge, and the transaction volume is sizable. However, owing to different commodities having varied reserves and outputs, a supply-demand mismatch could affect some commodities. It takes time for this imbalance to be reflected in the market, which makes the existence of an effective commodity trading platform necessary.

Acting as a way to connect buyers and sellers, commodity trading platforms can facilitate the flow of commodities. However, traditional commodity providers have been trapped by low profit margins, poor cash flow, high leverage and a lack of uniform standards for warehousing data and operations, as well as inefficient use of corporate resources.

In recent years, TD Holdings and other Chinese companies have launched digital transformation campaigns to fix the dilemma. By using digital platforms focused on streamlining the commodity industry chain, transactions between upstream suppliers and downstream buyers become simpler and more efficient. The initiative provides solutions to end-to-end integrated bulk commodity logistics, which help companies gain steady logistics service fees.

The out-of-date image of Chinese commodity service providers may still exist in the current market, but in reality, things have changed. Firms like TD Holdings have removed the barriers between upstream and downstream channels with digital platforms, expanding industrial chains by acquisitions and other means to build a 1-stop chain to integrate purchasing, marketing, logistics and finance. As the enterprises that lead the way grow, they will garner more attention from the market and can look toward a promising future.

TD Holdings’ Development Awaits Market Test

Through mergers and acquisitions, TD Holdings is gradually transforming itself into an entity that facilitates commodity transactions at the source. As a segment of its globalization strategy, it has expanded its business model to include global mineral resource development. It plans to gradually acquire non-ferrous metal mining rights around the world in the next 5 to 10 years, enriching the company’s commodities category and strengthening its pricing power over global commodities.

In addition, TD Holdings has successfully entered the unmanned logistics and new energy automobiles industry through the acquisition of 2 Chinese new energy vehicle companies, Guangdong Jinbochuang Special Purpose Vehicle Co., Ltd and Hunan Jinmeike New Material Co., Ltd. It is also about to strengthen its presence in the logistics sector with the launch of GLG brand driverless light-weight trucks for bulk commodities.

Apart from the efforts to continue its basic commodity supply chain services, TD Holdings also continues to expand into new businesses through mergers and acquisitions and other means, which are expected to bring sustainable revenue and net profit improvement to the company. As such, the company’s performance over the next 12 to 24 months is worthy of attention because it has the potential to become the next-generation giant of China’s commodity supplier.

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