China Logistics_ Cut express industry profit on competition; Cautious on freight forwarders; YTO & Sinotrans-H down to Sell

Summary of China Logistics Conference Call Industry Overview - The express delivery industry in China is experiencing intensified competition in 2025, with ZTO shifting back to a market share gain strategy after focusing on profitability in 2024 [6][24] - The industry concluded 2024 with a 22% year-over-year (YoY) volume growth and a 6% YoY decline in average selling price (ASP) [24] - Preliminary data for early 2025 shows a 38% YoY increase in parcel volume during the Chinese New Year period [24] Key Company Insights - ZTO: - Expected to regain market share with a flexible pricing strategy implemented in Guangdong in 4Q24, to be rolled out nationwide in 2025 [24] - Anticipated to drive an improvement in valuation multiples in 1H25 [25] - YTO: - Downgraded to Sell due to risks of valuation multiple derating amid price competition and narrowing EBIT per order premium compared to peers [2][6] - Current market cap per parcel has dropped from US$0.27 in 2024 to US$0.20 [26] - Sinotrans-H: - Downgraded to Sell as export-driven businesses contribute over 75% of EBIT, with expectations of lower freight rates due to overcapacity and tariff headwinds [2][6] Financial Estimates and Changes - Revenue estimates for various express delivery players in FY25E revised by -3% to +3% [6] - Adjusted net income for Yunda and YTO cut by 9-17% [6] - Anticipated muted YoY profit growth for ZTO and moderated margin recovery for STO [6] - Sinotrans' net profit for 2024-26E cut by -1% to -9% and Kerry Logistics' core profit by -14% to -31% [6] Competitive Landscape - The express delivery sector is characterized by: 1. Double-digit YoY growth in parcel volume, moderating from 22% in 2024, driven by a shift towards value-for-money eCommerce platforms [24] 2. Ongoing ASP decline due to trade-down themes and competitive pricing strategies [24] 3. Decline in EBIT per order as asset utilization improvements diminish [24] 4. A changing competitive landscape with ZTO's return to market share gain strategy [24] Risks and Considerations - Key risks include higher or lower-than-expected industry growth, the duration of intensive pricing competition, and cash deployment for logistics capacity expansion [7][42] Stock Recommendations - Buy Ratings: - SF Holding, JD Logistics, ZTO [2][25] - Neutral Ratings: - STO, Yunda, J&T [2][25] - Sell Ratings: - YTO, Sinotrans-H [2][25] Conclusion - The express delivery industry in China is facing significant challenges due to increased competition and pricing pressures, leading to cautious outlooks for certain players while others are positioned to capitalize on market share gains.