Summary of Conference Call on the Express Delivery Industry Industry Overview - The express delivery industry is experiencing a significant regulatory push against price wars, particularly in 2025, with the State Post Bureau collaborating with companies to enforce stricter regulations [1][3] - The industry is expected to see a business volume growth rate of approximately 15% for the year 2025, although future growth may revert to single-digit figures [1][4] Key Points and Arguments - **Regulatory Environment**: The regulatory environment has intensified, with the State Post Bureau's initiatives leading to price increases in various regions, particularly in Guangdong, where a price increase of 0.4 yuan per 0.1 kg was implemented [1][3] - **Price Increase Effects**: The impact of price increases varies by region; Guangdong shows significant results, while places like Yiwu have seen less effective outcomes due to local government hesitance [1][5] - **Market Sentiment**: The market has responded positively to the anti-involution policies, with expectations that these will enhance the profitability of listed companies [1][7] - **Comparison with Previous Year**: The price increase trend in 2025 is more widespread and sustained compared to 2024, where only Guangdong initiated price hikes without broader participation [1][8][9] Company Recommendations - Recommended companies in the express delivery sector include Shentong, YTO, Zhongtong, and Yunda, with Shentong highlighted for its strong elasticity and close integration with Alibaba's retail operations [2][11] - Jitu's profit growth in China is noted as significant, although its primary operations are in Southeast Asia [2][11] Additional Insights - **Labor and Social Security**: The Supreme Court's recent ruling allows workers to sue for unpaid social security contributions, which may lead to increased costs for companies, although these costs have not yet been factored into profit estimates [1][10][12] - **Future Outlook**: The express delivery sector is viewed as having substantial potential for growth, especially given its current low valuation and the thorough implementation of anti-involution measures [1][14]

Investment Rating - The report upgrades the investment rating of the company to "Strong Buy" [1] Core Views - The company is expected to benefit from strong elasticity in performance under the "anti-involution" trend in the industry, with key indicators approaching those of industry leaders [1][3] - The market share gap between the company and the leading competitor is gradually narrowing, with the company achieving the second-largest market share in the industry in 2023 [1][10] - The company's single-ticket net profit margin is closing in on that of its main competitor, with a significant reduction in the profit gap [2][15] Summary by Sections Market Position and Performance - The company surpassed Yunda to become the second-largest player in the industry in 2023, maintaining a business volume growth rate higher than the industry average [1][10] - The market share difference between the company and Zhongtong decreased from 6.8 percentage points in 2023 to 3.5 percentage points in Q2 2025 [1][10] - In Q2 2025, the company's e-commerce express business growth rate was 21.8%, outperforming the industry average of 17.3% [1][14] Profitability and Cost Management - The difference in single-ticket net profit (excluding non-recurring items) between the company and Zhongtong has narrowed to less than 0.1 yuan [2][15] - In Q2 2025, the company's single-ticket net profit decreased by 22.8%, the smallest decline among major competitors [16] - The company's cost efficiency has improved, with the single-ticket transportation and sorting costs decreasing significantly over the years [29][31] Industry Trends and Future Outlook - The report highlights the potential for price and profit improvement in the industry, supported by historical trends from 2021 to 2022 [3][40] - The company is projected to achieve a net profit of 43.6 billion yuan in 2025, with a target price of 25.4 yuan, representing a potential upside of approximately 37% from the current price [48] - The report anticipates that the company will benefit from price elasticity as the industry moves away from "involution" competition [48]

Investment Rating - The report maintains a "Strong Buy" rating for ZTO Express [5][9]. Core Views - The company reported a Q2 net profit of 2.053 billion yuan, a year-on-year decline of 26.8%, with a business volume of 9.847 billion pieces, representing a 16.5% increase year-on-year [1]. - The company has adjusted its full-year business volume guidance to 38.8-40.1 billion pieces, reflecting a year-on-year growth of 14%-18%, down from the previous guidance of 40.8-42.2 billion pieces [1]. - The report highlights that the company is focusing on quality over quantity in a competitive pricing environment, which has led to a decrease in market share by 0.1 percentage points to 19.5% [1]. Summary by Sections Business Performance - In Q2, the company's single-ticket revenue decreased from 1.24 yuan to 1.18 yuan, primarily due to increased incentives and a decline in average weight [2]. - The single-ticket core cost increased by 8.6% year-on-year to 0.89 yuan, while the core cost (transportation + sorting) decreased by 0.07 yuan [2][3]. - The single-ticket gross profit fell from 0.42 yuan to 0.29 yuan, indicating significant pressure from pricing competition [3]. Financial Forecast and Valuation - The projected net profits for 2025-2027 are 8.85 billion, 10.22 billion, and 11.53 billion yuan, with corresponding P/E ratios of 13.0X, 11.2X, and 10.0X [4]. - The company is expected to maintain a relatively stable profit level despite the ongoing price wars, indicating strong safety margins [4]. Company Overview - ZTO Express is a large group company that integrates express delivery, logistics, e-commerce, and printing services, operating a highly scalable network partner model [6]. - The total market capitalization is approximately 120.778 billion HKD, with a circulating market value of 89.595 billion HKD [6].

Core Insights - The recent price increase in major grain-producing areas across the country ranges from 0.1 to 1 yuan, impacting the logistics and e-commerce sectors significantly [1] - The long-standing low express delivery fees have allowed e-commerce businesses to adopt low-price strategies, but the recent price hikes are forcing these businesses to reconsider their pricing models [4][10] Group 1: Impact on E-commerce - E-commerce businesses are facing pressure to either raise prices or sacrifice profits due to rising costs, as even a small price difference can determine a seller's survival in a highly competitive market [2] - Many small and medium-sized businesses are reluctant to increase prices, leading to a potential decline in product quality as they attempt to absorb rising costs [10] - The shift in express delivery pricing is seen as an opportunity for the e-commerce industry to upgrade and move away from a low-cost, low-quality model [7][8] Group 2: Express Delivery Industry Dynamics - The express delivery industry has been under pressure due to the low pricing strategies of e-commerce businesses, which have transferred operational cost burdens onto delivery companies [7] - The recent price increases in express delivery are viewed as a necessary step for the high-quality development of the logistics sector, promoting a more rational competitive environment [4][8] - The overall trend of rising prices across the industry is expected to eliminate the competitive advantage of ultra-low-priced sellers, leading to a healthier market ecosystem [8][10] Group 3: Future Outlook - The ongoing price adjustments in the express delivery sector are part of a broader effort to combat the "involution" phenomenon that has plagued both the logistics and e-commerce industries [8] - As the industry moves towards a more sustainable model, there is hope for a positive transformation, especially with the upcoming peak season [10] - The call for breaking the "free shipping" model and implementing product tiering is gaining traction, although challenges remain due to platform and consumer resistance [10]

Investment Rating - The report maintains a "Buy" rating for the company [6]. Core Views - In Q2 2025, the company's revenue was 12.64 billion yuan, a year-on-year increase of 4.5%, while the net profit attributable to shareholders was 210 million yuan, a year-on-year decrease of 66.9% [2][4]. - The second quarter saw intensified industry competition, leading to a decline in the company's net profit per parcel, which fell by 0.07 yuan to 0.03 yuan year-on-year and decreased by 0.02 yuan quarter-on-quarter [2][10]. - The ongoing "anti-involution" trend in the express delivery industry is gradually restoring prices in regions such as Guangdong, Zhejiang, and Fujian, suggesting potential recovery in the company's performance in the second half of the year [10]. Summary by Sections Financial Performance - For the first half of 2025, the company reported total revenue of 24.83 billion yuan, up 6.8% year-on-year, and a net profit of 530 million yuan, down 49.2% year-on-year [4]. - In Q2 2025, the company handled 6.65 billion parcels, a year-on-year increase of 11.2%, but its market share decreased by 0.7 percentage points to 13.2% [10]. - The average revenue per parcel dropped by 0.11 yuan to 1.91 yuan, with the gross profit margin under pressure due to increased price competition [10]. Cost Management - The company has been optimizing its cost structure, with the per-parcel operating expenses decreasing by 0.01 yuan to 0.07 yuan [10]. - Despite the cost optimization, the net investment income fell by 260 million yuan year-on-year due to a high base from the previous year [10]. Future Outlook - The report anticipates that the company's net profit attributable to shareholders will be 1.51 billion yuan, 1.86 billion yuan, and 2.06 billion yuan for the years 2025, 2026, and 2027, respectively, with corresponding price-to-earnings ratios of 15.3, 12.5, and 11.3 times [10].

Summary of Conference Call on the Express Delivery Industry Industry Overview - The express delivery industry is entering a recovery phase in profitability, with price increases expected to be implemented gradually starting in September 2023, aligning with price hikes in Guangdong province [1][2] - The structure of express delivery volumes is shifting towards lighter and smaller packages, which, while increasing volume, also adds pressure on profitability for both network points and headquarters [1][4] Key Points and Arguments - **Profitability Recovery**: The anticipated price increases are expected to alleviate competition in the industry, particularly during the peak season in Q4, leading to improved profitability [1][2] - **Impact of Price Increases**: The average price increase across the industry is approximately 0.4 yuan, with specific regions like Guangdong extending price lock periods to ensure sustainability [2] - **Historical Context**: The express delivery industry experienced significant price increases in 2021 and maintained stability in 2022. However, 2023 and 2024 saw targeted price adjustments, with a new round of anti-competition measures expected in 2025 [3] - **Pressure on Franchisees**: The net profit of express delivery companies has declined year-on-year, particularly in grain-producing areas like Yiwu and Guangzhou, where prices have dropped to historical lows, squeezing franchisee profitability [6] - **Social Security Costs**: A new judicial interpretation regarding social security contributions, effective September 1, 2023, is expected to increase labor costs for franchise networks, potentially adding 0.11 to 0.23 yuan to the cost per package [7][8] - **E-commerce Impact**: The average order value for e-commerce is around 75 yuan, with logistics costs accounting for less than 5%. A price increase of 0.50 yuan in express delivery costs would have a minimal impact on overall e-commerce operating costs [9] Additional Important Insights - **Franchisee Challenges**: The new social security regulations may further strain franchisee operations, especially if profitability pressures persist [7][8] - **Future Profit Projections**: Profit growth for major companies in 2026 is projected to be significant, with estimates of 21% for Zhongtong, 26% for Yuantong, 30% for Yunda, and 31% for Shentong, with potential seasonal increases during peak periods [9] - **Investor Recommendations**: Investors are advised to closely monitor the implementation of pricing policies and the ongoing anti-competition measures, as the overall profitability of the industry is expected to improve in the latter half of the year [10]

Core Insights - J&T Express reported a total revenue of $5.5 billion for the first half of 2025, marking a year-on-year increase of 13.1% [1][2] - The adjusted net profit reached $156.3 million, a significant rise of 147.1% compared to the previous year [1][2] - The total parcel volume for the first half was 13.99 billion, reflecting a growth of 27%, with Southeast Asia showing a remarkable increase of 57.9% [1][2] Financial Performance - Revenue for the first half of 2025 was $5,498.7 million, up from $4,861.7 million in 2024, representing a 13.1% increase [2] - Express service revenue was $5,341.4 million, a 12.7% increase year-on-year [2] - Adjusted EBITDA was $435.6 million, showing a 24.2% growth compared to the previous year [2] Market Dynamics - In the Chinese market, J&T Express's market share increased to 11.1%, with parcel volume growing by 20% to 10.6 billion [4][6] - The average revenue per parcel in China decreased by 13% to $0.30 due to intense market competition [3][4] - The company is dynamically adjusting pricing strategies to maintain market share amid ongoing price declines in the industry [3][4] Cost Management - The company reported a decrease in single parcel costs, with transportation and sorting costs down by $0.1 and $0.13 respectively [6] - Management indicated that there is still room for improvement in cost efficiency, particularly in transportation and sorting costs compared to competitors [6] Strategic Initiatives - J&T Express has invested over 900 unmanned delivery vehicles in the Chinese market, aiming to enhance operational efficiency [4][6] - The company is focusing on developing reverse logistics and single-item delivery services to mitigate the impact of competitive pricing [7] - In Southeast Asia, J&T Express's market share rose to 32.8%, with a revenue increase of 29.6% to $1.97 billion [8][9] International Expansion - The new markets (Saudi Arabia, UAE, Mexico, Brazil, and Egypt) generated $362.4 million in revenue, a 24.3% increase year-on-year [9][10] - The company is adopting a franchise model in overseas markets, with 30% of the Southeast Asia network operated by partners [10] - Future strategies include leveraging automation and digital management experiences from China to reduce costs in Southeast Asia [10]

Core Viewpoint - YTO Express reported a revenue of 35.883 billion yuan for the first half of 2025, marking a year-on-year growth of 10.19%, while net profit attributable to shareholders decreased by 7.90% to 1.831 billion yuan [1] Group 1: Company Performance - YTO Express completed a total express delivery volume of 14.863 billion pieces, representing a year-on-year increase of 21.79%, surpassing the industry average growth rate by 2.5 percentage points [1] - The company is focusing on digitalization and intelligent development, expanding its logistics ecosystem, and enhancing international market presence [1] Group 2: Industry Trends - The State Post Bureau held a meeting in late July to address "involution" competition in the express delivery industry, promoting high-quality development and addressing issues like illegal charges in rural areas [2] - As the industry moves towards "anti-involution," express delivery prices are expected to stabilize and recover, potentially improving the profitability of leading express companies [2] Group 3: International Expansion - YTO Express is advancing its international development strategy by leveraging trends in cross-border e-commerce and the Belt and Road Initiative, actively expanding into emerging markets [2] - The company is optimizing its cross-border logistics product matrix and enhancing its global service capabilities through a well-established overseas network and diverse fleet [2]

Core Viewpoint - The express delivery industry in China is experiencing a "volume increase and price drop" trend, prompting companies to focus on international markets for higher profits amid intensified domestic competition [1][4]. Industry Overview - The express delivery sector is a crucial part of the modern circulation system, connecting various industries and integrating online and offline services [3]. - In the first seven months of this year, China's express delivery volume reached 1,120.5 billion pieces, marking an 18.7% year-on-year increase [4]. Market Dynamics - The industry is projected to exceed 2.5 trillion pieces by 2030, with a compound annual growth rate of 8%-10%, leading to a market size surpassing 2.8 trillion yuan [4]. - Despite revenue growth, express delivery companies face declining per-package income, indicating a significant challenge in the industry [5][6]. Company Performance - In July, SF Express reported revenue of 24.847 billion yuan, a 9.95% increase, but with a 14.02% drop in per-package income [5]. - YTO Express, Yunda, and Shentong also reported revenue growth, but with continued declines in per-package income, highlighting the "volume increase and price drop" issue [5]. Competitive Landscape - The industry is shifting from a "low-price competition" model to a focus on service quality and efficiency, as companies aim to break the cycle of negative profit margins and declining service quality [6][7]. - Regulatory bodies are actively promoting measures to combat "involution" in competition, encouraging companies to enhance service quality rather than engage in price wars [6][7]. International Expansion - The global cross-border logistics market is expected to grow from 13.3 trillion yuan in 2020 to 18.6 trillion yuan by 2024, with a compound annual growth rate of 8.75% [8]. - Chinese express companies are accelerating their international expansion, with significant increases in their international development index [8][9]. - Companies like Cainiao and JD Logistics are enhancing their international logistics capabilities, establishing new routes and partnerships to improve service efficiency [9][10]. Future Outlook - The express delivery industry is expected to continue its internationalization, driven by the growth of cross-border e-commerce and international trade [10].

Core Viewpoint - The recent increase in express delivery fees in key e-commerce regions like Guangdong and Zhejiang is causing significant anxiety among small e-commerce businesses, as it directly impacts their profit margins and pricing strategies [1][2][3]. Summary by Sections Impact on Small E-commerce Businesses - Many small e-commerce merchants are feeling the pressure from the increase in delivery fees, with some reporting that even a small increase of 0.1 yuan can significantly erode their profits [3][5]. - For instance, a small business owner in Guangzhou noted that a 0.4 yuan increase in delivery fees has led to a 3% drop in profit margins, which is critical for low-margin products priced around 9.99 yuan [6][8]. - Another seller in Dongguan reported a more severe increase of 0.7 yuan per order, resulting in an additional monthly cost exceeding 12,000 yuan, effectively halving her monthly profit [8][9]. Cost Management Strategies - In response to rising costs, small merchants are seeking ways to cut expenses, such as switching to generic packaging and eliminating promotional discounts [9][10]. - The inability to pass on costs to consumers due to price sensitivity in the low-cost product segment is forcing these businesses to absorb the increased delivery fees [4][9]. Industry Context and Trends - The express delivery industry in Guangdong handled 42.5 billion packages last year, accounting for 24% of the national total, with a revenue of 304 billion yuan [12]. - Despite the increase in delivery fees, many express delivery workers have not seen a corresponding rise in their compensation, as their income remains tied to the volume of deliveries and service commissions [19]. - The current trend of rising delivery fees is seen as a response to the long-standing issue of "internal competition" within the industry, which has led to unsustainable pricing practices [20][24]. Future Outlook - Experts suggest that the recent price adjustments may signal a shift from a low-price competition model to one focused on service quality, potentially leading to further price increases in the future [24]. - The industry may undergo consolidation, with weaker players exiting the market, which could enhance overall market stability and profitability [24].