Sinolink Securities Co., Ltd. has released a research report highlighting the significant growth potential in China's MRO (Maintenance, Repair, and Operations) procurement market. MRO refers to essential industrial supplies that are not raw materials, characterized by long-tail SKU fragmentation, a high proportion of unplanned purchases, and low per-SKU value but extremely high management and hidden costs. The report emphasizes that consolidation is the industry trend, with digitalization and online platforms accelerating this process. Given the vast and highly fragmented nature of China's MRO market, the brokerage firm holds a bullish outlook on the long-term growth trajectory of domestic MRO consolidation suppliers, recommending attention to leading high-quality enterprises with scale effects and operational efficiency.
Reviewing the North American industry leader Grainger, MRO demonstrates weak cyclicality, and the value of consolidated procurement is clear. The century-long development history of Grainger, founded in 1927 with 2025 revenue of $17.9 billion, validates MRO's ability to navigate economic cycles. From 2009 to 2025, its organic revenue growth averaged 5.7%, significantly outperforming the US GDP growth rate of 2.1% and manufacturing IP growth of -0.1% over the same period. During the 2009 financial crisis, revenue only declined by 9.2%, and during the 2021-2022 public health events, it achieved market share gains through supply chain fulfillment capabilities.
Three core value drivers fuel industry demand. First, cost reduction and efficiency improvement: e-commerce consolidated procurement can save 15-20% in costs, 70% in time, and 50% in labor. Second, compliance and transparency: digital consolidated procurement ensures complete traceability, fair pricing, and auditable processes, particularly meeting the sunshine procurement needs of state-owned enterprises. Third, service deepening: through tiered services, including high-touch for large clients and online platforms for SMEs, suppliers deeply embed into customer procurement and maintenance systems, creating high customer stickiness.
Industrial structure differences determine China's unique MRO development path, offering distinctive growth space. Scale and fragmentation create unique growth opportunities: China's MRO procurement service market is valued at 3.7 trillion yuan, with digital channel penetration at only 9.8%. On the supply side, CR10 is less than 1.5%, compared to 30%-45% in the US. On the demand side, China has over 6 million industrial enterprises, with SMEs accounting for 98%, versus approximately 800,000 in the US. This high fragmentation constitutes a unique long-term growth space for consolidation suppliers. Additionally, the sunshine procurement demand from Chinese state-owned enterprises represents a unique demand driver for the industry.
Profitability differences dictate model differences. The US manufacturing sector's after-tax sales profit margin is approximately 11.37%, while China's above-scale industrial enterprises have an operating profit margin of about 5.3%. Chinese enterprises have thinner profits and are more price-sensitive, leading to a "low margin + high turnover + low expense" platform model in China versus the "high margin + high expense" model in the US. China's unique advantages are expected to accelerate industry development: with world-leading e-commerce infrastructure and digital ecosystems, including platforms like JD.com, the MRO industry can leverage these e-commerce foundations to accelerate consolidation driven by cost reduction.
Regarding the competitive landscape, horizontal platforms emphasize scale efficiency while vertical players focus on service depth. Horizontal platform players such as JD Industrial, ZKH, Colipu, and Comix Group emphasize category breadth, turnover efficiency, and scale effects, operating with relatively low margins and high turnover. JD Industrial, a representative enterprise, has a gross margin of 17.6%, with inventory days of 23.5, receivable days of 2.9, and payable days of 105.4, demonstrating exceptional operational efficiency. Vertical players like Xianheng International focus on specific industries such as power grids, oil and gas, and rail transit, leveraging professional product selection and deep services to achieve high gross margins typically above 30%, following a "high margin + low turnover" approach with deep customer binding and high switching costs.
From an ROE decomposition perspective, JD Industrial achieves a non-recurring ROE of 19.30%, benefiting from high turnover efficiency. Yiheda's ROE of 12.09% is driven by a high net margin of 17.37%. Xianheng International's ROE of 14.80% falls between the two, while overseas Grainger's ROE of 48.10% represents a mature-stage model of high profit, high turnover, and moderate leverage.
Core targets include JD Industrial (HK-listed), China's largest MRO procurement service provider with revenue of 23.952 billion yuan, up 17.4% year-over-year, and adjusted net profit of 1.131 billion yuan. ZKH (US-listed) shows a clear trend of narrowing losses, with revenue of 8.988 billion yuan and shrinking net losses. Xianheng International (A-share) focuses on power grid MRO, with industry expansion becoming a second growth curve, achieving revenue of 4.561 billion yuan, up 26.5% year-over-year. Colipu, which has filed for a Hong Kong listing, is controlled by M&G Stationery, with revenue of 15.048 billion yuan, up 8.8% year-over-year, and MRO category revenue of 4.269 billion yuan, up 19.4%, as it accelerates migration from office supplies procurement to MRO. Comix Group (A-share), a leader in office procurement, generated revenue of 11.965 billion yuan, up 5.0% year-over-year, with MRO industrial products becoming a core extended category. All figures represent 2025 revenue and year-over-year data.
Risk warnings include macroeconomic downturn risks, intensifying industry competition, policy and regulatory risks, and risks of industry development falling short of expectations.