Core Viewpoint - The recent price increase in the express delivery industry is seen as a crucial attempt to break the "low-price dependency" and reconstruct the value logic of the industry, with 22 provinces already raising delivery prices [1][3][4]. Price Increase Background - The price increase began in Yiwu, Zhejiang, with a new minimum price of 1.2 yuan per ticket, followed by Guangdong raising the average price to over 1.4 yuan [1][2]. - Major express companies have raised prices for e-commerce clients by 0.3 to 0.5 yuan for packages under 1 kilogram [2]. Industry Challenges - The express delivery industry has faced a long-standing dilemma of "price for volume," leading to unsustainable profit margins, with the average price per ticket dropping to 7.52 yuan, a 7.7% year-on-year decrease [2][3]. - Complaints about service quality have surged, with issues like violent sorting and delivery delays becoming common [3]. Regulatory Environment - The price adjustments are largely driven by policy guidance aimed at correcting irrational competition and promoting rational market behavior [2][3]. - The National Postal Administration has emphasized the need for improved industry regulations and quality standards [3]. Industry Dynamics - The price increase has led to a restructuring of interests within the supply chain, with e-commerce platforms, merchants, and consumers needing to find a balance in cost-sharing [4][5]. - Small online shops that rely on low shipping costs face significant pressure, often needing to adjust their pricing strategies to maintain profitability [5]. Sustainable Profit Models - The express delivery industry is transitioning from chaotic competition to rational pricing, with a focus on technological innovation and infrastructure investment [6][7]. - Leading companies like JD Logistics are investing heavily in automation and technology to enhance efficiency and reduce costs [6]. Future Outlook - The industry is expected to deepen its focus on value rather than just price increases, aiming to create a sustainable ecosystem where merchant costs are manageable, consumer experiences are improved, and company profits are stable [8].

Summary of Conference Call on the Express Delivery Industry Industry Overview - The express delivery industry is experiencing intensified competition, leading to price and profit per shipment declines, particularly noted in July 2023 [1][3] - The market's expectations for Q3 performance did not fully account for the pressures from July, resulting in adjustments to performance forecasts [3] Key Insights and Arguments - **Price Increases**: A second round of price increases is being implemented in various regions, such as Guangdong, which is expected to raise prices again in October. This is aimed at benefiting franchisees and stabilizing networks [1][4] - **Profitability Outlook**: Despite a downward revision of Q3 earnings, the profitability for Q4 and 2024 remains robust, with major companies like YTO and ZTO expected to maintain high growth rates [1][7] - **Valuation Metrics**: Companies like YTO and Shentong are currently trading at an implied valuation of approximately 10 times PE, which is at the historical low end, indicating limited downside risk and significant upside potential [2][8] - **Regulatory Environment**: Increased regulation is expected to lead to a concentration of market share among leading companies, which will improve profitability margins and support long-term growth [7] Important but Overlooked Aspects - **Discriminatory Delivery Fees**: There is a significant disparity in delivery fees across different regions, which could hinder the establishment of a unified national market. Addressing these discrepancies is crucial for maintaining price stability and reinforcing anti-competitive measures [1][6] - **Market Dynamics**: The decline in growth rates is attributed to rising logistics costs impacting low-cost e-commerce, extreme weather affecting clothing sales, and stricter regulations on fraudulent practices. A projected growth rate of 5%-10% for the second half of the year is considered normal and not detrimental to overall valuations [7] - **Investment Timing**: The current market conditions present a favorable opportunity for investors to increase their allocation to the express delivery sector, given the attractive valuation and potential for recovery in earnings [8]

Group 1 - The core point of the article highlights the upcoming e-commerce promotional events, with JD.com starting on October 9 and Tmall on October 15, indicating a competitive landscape in the logistics and e-commerce sectors [1][3] - The promotional periods have been extended, reflecting a slowdown in growth within the e-commerce sector, leading to a focus on pricing strategies rather than sheer volume growth in the logistics industry [1][5] - The peak delivery volume during the 2024 Double 11 event is expected to reach 7.01 billion packages, a 9.7% year-on-year increase, with the total volume during the promotional period projected at 127.83 billion packages [3] Group 2 - The logistics industry is shifting its focus from volume growth to maintaining price increases, especially after a nationwide price hike, with emphasis on sustaining these gains during the off-peak season [5][6] - There are challenges in implementing price increases in certain regions, particularly in key agricultural areas, while other regions may see more successful price adjustments during the peak season [6] - Recent legal actions against collusion among logistics companies highlight the need for fair competition and the potential impact of price manipulation on e-commerce businesses, particularly smaller players [7][9]

Core Viewpoint - The recent price increase by express delivery companies in key e-commerce regions like Guangdong and Zhejiang has caused significant anxiety among e-commerce operators, with many expressing that the situation feels dire for their businesses [1][10]. Group 1: Price Increase Details - Several express delivery companies in Guangdong and Zhejiang have raised prices for e-commerce clients, with Guangdong seeing increases of 0.3 to 0.7 RMB per package and a new minimum price set at 1.4 RMB per package [1]. - The price adjustments are a response to the national postal authority's call to combat "involution" in the industry, which emphasizes the need to eliminate low-price competition [1][5]. Group 2: Impact on E-commerce Operators - E-commerce operators are facing additional monthly costs of at least 30,000 RMB due to the price increases, leading to widespread concern and frustration within the community [1]. - Some e-commerce businesses are relocating their warehouses and logistics operations to regions with lower delivery costs to mitigate the impact of rising logistics expenses [10]. Group 3: Challenges for Delivery Networks - Despite the price increases, delivery networks have not seen a corresponding rise in delivery fees, with reports indicating that delivery fees are actually declining [2][4]. - The disconnect between rising collection prices and stagnant or falling delivery fees highlights a significant issue within the express delivery business model, particularly for franchise-operated networks [5][9]. Group 4: Industry Dynamics and Future Outlook - The current situation reflects deeper systemic issues within the express delivery industry, particularly the misalignment between corporate goals and the operational realities faced by delivery networks [9][13]. - There is a call for a more unified approach to pricing across the industry to prevent regional imbalances and ensure that delivery networks do not bear the brunt of the financial pressures alone [14].

Core Insights - The express delivery industry is experiencing a wave of price increases, starting from regions like Guangdong and Yiwu and gradually spreading nationwide [1] - The industry has been trapped in a vicious cycle of "low-price for volume" competition, leading to a situation where increased volume does not translate into increased revenue [1] - Rising operational costs, including labor, fuel, and rent, have severely compressed profit margins, making it difficult for companies to absorb these cost pressures internally [1] Group 1 - The dilemma for express companies, primarily operating on a franchise model, is whether to enforce price increases, risking the loss of price-sensitive customers, or to maintain low prices, which could lead to franchisee losses [1] - Many franchisees are already on the brink of losses due to prolonged low-price competition, highlighting the challenge of balancing corporate interests with market demand [1] Group 2 - The direct result of price increases is an increase in consumer spending, with many consumers noticing the gradual disappearance of free return insurance and higher thresholds for free shipping [2] - Consumers are generally accepting of price increases as long as they perceive value in the service, but initial feedback indicates no significant improvement in service quality post-price hike, leading to dissatisfaction [2] - The industry needs to build a sustainable and balanced ecosystem that aligns the interests of merchants, express companies, and consumers, ensuring that every additional cost is justified and perceived as valuable [2]

Group 1 - The core point of the article is that starting from August 4, the minimum price for express delivery in Guangdong Province has been raised by 0.4 yuan per ticket, with the average price per ticket exceeding 1.4 yuan [1] - The price adjustment is mandated by relevant authorities, and companies are prohibited from collecting below the cost price of 1.4 yuan, or they will face severe penalties [1] - As of August 5, major express delivery companies in the Tongda system (Shentong, Yuantong, Zhongtong, Yunda) have begun implementing the price increase [1] Group 2 - The current price increase primarily affects low-priced items from e-commerce, particularly packages weighing 0.3 kilograms or less [1] - Industry observers and e-commerce practitioners have been consulted regarding the price adjustment, but as of the report's publication, no responses have been received from the contacted express companies [1]

Investment Rating - The report maintains an "Overweight" rating for the transportation sector [8] Core Views - The express delivery sector is expected to see significant profit recovery due to an early price increase trend, while the aviation sector is still at the bottom of the economic cycle, with potential for mid-term improvements in supply and demand [1][2][3] Summary by Sections Express Delivery - In June, the retail sales and express delivery volumes showed year-on-year increases of 5.3% and 15.8% respectively, although the growth rate has slowed compared to May [3] - The price increase trend has started in core grain-producing areas, which could lead to significant profit recovery for express delivery companies if this trend spreads across all price ranges [3][10] - Key companies recommended include ZTO Express, YTO Express, and Shunfeng Express [10] Aviation - The summer travel season has shown weak performance, with domestic ticket prices declining by 7.5% year-on-year, despite a slight increase in passenger load factor [2][16] - The aviation sector is currently at a low point, but improvements in supply growth and demand could enhance profitability in the medium term [26] - Recommended stocks include China National Aviation and Huaxia Airlines, which are expected to benefit from supply-demand improvements [26] Logistics - The logistics sector is experiencing an early price increase in express delivery, and the bulk supply chain is expected to recover alongside rising commodity prices [3][65] - The cross-border e-commerce logistics sector is showing resilience as tariff impacts diminish [3] Shipping and Ports - In July, shipping rates for container shipping and oil transport declined, while dry bulk shipping rates increased due to seasonal demand [35][36] - The report anticipates stable supply-demand dynamics in August, with shipping rates expected to remain volatile [35] Road and Rail - The road transport sector is under pressure due to rising risk preferences and potential impacts from upstream industry dynamics [5] - Rail transport is expected to see flat growth in passenger traffic during the summer, with ongoing observations needed for the impact of upstream industry changes [5]