Business model of overseas human capital giants:
1. ADP (market value of 94.6 billion US dollars): a service-oriented company with strong technology in essence; business model: compensation service started, and now it has developed into two main businesses: HCM (human capital management solutions) and PEO (professional employer services).
1) HCM: Focusing on compensation (salary calculation and payment), it provides technology-based integrated human capital management cloud solutions to address a series of customer needs related to human resources services. Charging mode: basic pricing includes two modes: 1) collection based on the payroll quantity processed; 2) Collection based on the number of employees served; Additional services will increase the charge.
2) PEO: Similar to labor dispatch (without recruitment). Charging mode: employees' wages+legal fees (payroll tax+social security, etc.)+service fees are recognized as income.
Why can we become bigger: The core lies in the difference between the American capital market and China. The difficulty of salary service in ADP's fortune making business is higher than that in China, and human capital companies are required to have a stronger professional knowledge.
2. Workday (market value: 60.8 billion US dollars): essentially an application-oriented company that provides cloud SaaS ERP services U Business model: SaaS started from HCM and expanded to FM, with subscription services as the main business, supplemented by professional services.
Subscription service: provide customers with access to one or more cloud application products. Charging mode: The pricing is determined by the size of customers, the number of employees, and the price of the application. The subscription contract period is generally three years or more.
Why can we become bigger: the core is that we are more focused (HCM+FM) than other enterprise level SaaS application suppliers, and the establishment time is more appropriate (replacing the traditional localized deployment of ERP software).
Deficiency of U VS ADP: pure SaaS enterprises have heavy initial investment, long profit cycle and weak service ability.
3. Recruit (with a market value of 57.5 billion US dollars): essentially an Internet led platform company ü Business model: campus recruitment advertising business started, and now it has developed into three main businesses, namely, flexible work, human resources technology, matching and solutions; Human resources technology business grew fastest, opening the second curve.
1) Spiritual labor: distributed in Japan and overseas (Europe+America+Australia).
2) Human resources technology: It is composed of two global online recruitment platforms: Independent, which was acquired in 2012, and Glassdoor, which was acquired in 2018. Charging mode: 1) Pay per click: enterprises pay for each click on recruitment posts; 2) Pay by starting application: the enterprise pays when the applicant starts to apply; 3) Pay by application: enterprises only pay when job applicants complete their job applications.
3) Matching and solutions: ① Marketing solutions: provide online matching platforms and cloud SaaS solutions for all industries except human resources. ② HR solution: online recruitment platform mainly for Japan. Charging mode: advertising revenue+transaction commission.
Why can we make it bigger: the offline traditional business is solid and the Internet gene is deep. Through various online platforms, we can break through different market information barriers and promote the continuous improvement of flow liquidity.
4. Randstad (market value: US $10.5 billion): Essentially, a traditional flexible labor company ü Why can it become bigger: global continuous acquisition.
The enlightenment of benchmarking the growth path of overseas leaders for China's human capital enterprises:
1. The overseas human capital market is very large, and almost no giant has gone deep into the whole human capital industry chain. In the future, it is difficult for the leading enterprises to deepen and penetrate the whole human resources industry chain. It is expected to expand to the whole industry chain, but it is still the leading enterprises in the subdivided fields.
2. The three leading state-owned enterprises may be able to benchmark ADP, and their business models are similar, but the workplace and social conditions between China and the United States are quite different.
3. Kerui benchmarking traditional flexible manufacturing enterprises, the path of expansion is acquisition.
4. The Boss and Liepin models have not been compared by large enterprises abroad, while the online recruitment search model has not been successful in China.
5. Human capital enterprises, whether engaged in services, saas, or smart work, need to accumulate enough supply and demand of BC end+continuous technology investment to grow into giants. Digital capability is the core competitiveness of the human capital industry.
During the difficult economic period, the overseas leading performance and valuation performance were reviewed:
1) ADP: The main business is relatively anti cyclical, resulting in weak correlation between performance growth and economic growth. When the US economy was in difficulty (2008-2009), the bottom of PE valuation was 12.4X; After technical efficiency improvement, the bottom of PE valuation is 19.1X when the United States is facing economic difficulties (2020); The valuation hub has moved up. From 2014 to 2023, when the U.S. GDP growth rate was low in single digits, the annual growth rate of ADP revenue/adjusted net profit attributable to parent company was 6.5%/9.4%, and the steady PE valuation was in the 25-35X range.
2) Recruit: The performance growth is highly correlated with the economic growth. When Japan's GDP declined/post epidemic recovery was weak (2020-2022), the bottom of PE valuation was 21-23X. From 2014 to 2018, when Japan's GDP maintained a positive growth, the annualized growth rate of Recruit's revenue/net profit attributable to the parent company was 15.5%/26.3% (corresponding to the reporting period FY2015-FY2019), and the steady-state PE valuation was in the 25-35X range (the technical business enjoyed a valuation premium).
3) Randstad: The business areas are scattered, resulting in weak correlation between performance growth and economic growth. In two difficult economic periods (2008-2009/2020), the bottom of PE valuation is 7-8XPE. From 2014 to 2019 before the epidemic, when the GDP of the Netherlands and the United States maintained positive growth, the annual growth rate of Randstad's revenue and adjusted net profit attributable to the parent company was 6.5%/13.7%, respectively, and the stable PE valuation was in the 10-15X range.
4) Adecco: The business areas are scattered, resulting in weak correlation between performance growth and economic growth. In two difficult periods of French economy (2008-2009/2020), the bottom of PE valuation was 8.5/11.5X. Before the epidemic (2010-2019), when the growth rate of French GDP maintained a positive growth, the long-term annualized growth rate of Adecco's revenue/adjusted net profit attributable to the parent company was low single digits, and the stable PE valuation was in the 10-20X range.
5) Seek: The proportion of consolidated investment income is high, resulting in weak correlation between performance growth and economic growth. During the period of economic growth slowdown in Australia (2009), the bottom of PE valuation was 9.5X; During the normal economic growth period from 2007 to 2022, the long-term annual growth rate of Seek's revenue/adjusted net profit attributable to the parent company was 14%/10.6%, and the stable PE valuation was in the 15-30X range.
6) Hays: There is a strong correlation between performance growth and economic growth. In the difficult economic period of Germany and Britain (2020), the bottom of PE valuation is 10.6X; During the normal economic growth period from 2012 to 2019 before the epidemic, Hays' revenue/adjusted net profit attributable to the parent company grew at an annual rate of 7.5%/12.6%, and the stable PE valuation was in the 15-20X range.
Industry rating and investment suggestions: the human resources industry has fertile ground for cultivating large market value companies, overseas leaders go through the cycle, and China enjoys population advantages and has a natural foundation for growth; With the weak recovery of macro economy, the human resources industry is expected to prosper and give the industry a "recommended" rating for the first time. Focus on Kerui International and Beijing Human Resources. It is suggested to focus on Foreign Service Holdings, Boss Direct, Tongdao Liepin and Beisen Holdings.
Risk warning: the overseas human resources market cannot be fully benchmarking; The domestic human capital leaders have the risk of big customer fluctuations; Risk of intensified industry competition; The economic recovery is not as expected; Domestic and foreign companies do not have full comparability, and the relevant materials and data of benchmarking are only for reference.
