Investment Rating - The report maintains a "Recommendation" rating for the company, indicating an expectation to outperform the benchmark index by 10%-20% over the next six months [18]. Core Insights - The company reported Q1 2025 earnings of 550 million, a year-on-year decrease of 7.4%, while revenue increased by 5.0% to 5.49 billion [1]. - The company is optimizing its air network layout, which is expected to enhance operational efficiency in the long term [8]. Financial Data Summary - **Q1 2025 Financials**: - Total revenue: 5.49 billion, up 5.0% year-on-year - Net profit attributable to shareholders: 550 million, down 7.4% year-on-year - Non-recurring net profit: 500 million, down 5.2% year-on-year [1] - **Segment Performance**: - **Air Express Business**: Revenue of 2.06 billion, up 2.9%, with a gross margin of 17.3%, up 1.8 percentage points - **Ground Integrated Services**: Revenue of 620 million, up 4.7%, with a gross margin of 34.8%, down 4.7 percentage points - **Integrated Logistics Solutions**: Revenue of 2.8 billion, up 6.7%, with a gross margin of 13.8%, up 3.1 percentage points [2] - **Cost Analysis**: - Operating costs for Q1 2025 were 4.53 billion, up 3.0%, resulting in a gross profit of 960 million and a gross margin of 17.5%, up 1.6 percentage points - The period expense ratio, excluding R&D expenses, was 3.1%, down 0.8 percentage points, indicating improved operational efficiency [2] - **Pricing Performance**: - The outbound air freight price index at Pudong Airport was 4333, up 10% year-on-year [2] Financial Forecast - **Revenue Projections**: - 2024A: 24.056 billion - 2025E: 22.349 billion (down 7.1% year-on-year) - 2026E: 23.998 billion (up 7.4% year-on-year) - 2027E: 25.271 billion (up 5.3% year-on-year) [4] - **Net Profit Projections**: - 2024A: 2.688 billion - 2025E: 2.295 billion (down 14.6% year-on-year) - 2026E: 2.713 billion (up 18.3% year-on-year) - 2027E: 2.888 billion (up 6.5% year-on-year) [4] - **Earnings Per Share (EPS)**: - 2024A: 1.69 - 2025E: 1.45 - 2026E: 1.71 - 2027E: 1.82 [4] - **Target Price**: The target price is set at 14.5 yuan, with a current price of 12.15 yuan, indicating a potential upside of 19% [8].