Description of the event

Yuantong Express disclosed the three-quarter report for 2023: the company achieved operating income of 40.76 billion yuan in the first three quarters, an increase of 5.0% over the previous year; realized net profit of 2.66 billion yuan, a year-on-year decrease of 4.1%; and realized net profit of 2.54 billion yuan, a year-on-year decrease of 4.8%. In 2023Q3, the company achieved operating income of 13.76 billion yuan, the same as the previous year; realized net profit of 8.0 billion yuan, a year-on-year decrease of 20.0%; and realized net profit of 760 million yuan, a year-on-year decrease of 21.2%.

Incident comments

Q3 shares fluctuated, and revenue remained the same year over year. In 2023Q3, the company's volume increased 14.1% year on year to 5.24 billion units. The growth rate was slightly weaker than the general market. The market share fell 0.4 pct to 15.6% year on year, and the share declined. In 2022Q3, the company achieved express delivery revenue of 12.22 billion yuan, an increase of 5.1% over the previous year, and achieved total revenue of 13.76 billion yuan, the same level as the previous year.

Freight forwarding & aviation performance is under pressure, and the main business is resilient. 2023Q3, weak demand for cross-border transportation combined with the gradual return of air capacity, increased losses in freight forwarding and aviation services dragged down profits. In 2023Q3, the company's single gross profit was 0.25 yuan, down 0.07 yuan from the previous year and 0.04 yuan from the previous month. The main business strongly supported the resilient performance of the performance.

Restrain competitive strategies and dig deeper into cost control. In 2023Q3, price competition in the industry intensified. The company's single ticket revenue fell by 0.20 yuan to 2.33 yuan year on year, down only 0.02 yuan from month to month. The off-season competition strategy was relatively restrained. 2023Q3, the company dug deep into lean management. The company's single ticket cost decreased by 0.30 yuan year-on-year, and increased by only 0.02 yuan month-on-month against the backdrop of rising oil prices, demonstrating the effectiveness of digital management. In 2023Q3, the company's single ticket period fee decreased by 0.01 yuan to 0.06 yuan year on year, and the period fee control was good. In the end, the net profit deducted from a single ticket was 0.14 yuan, down 0.06 yuan from the previous year and 0.03 yuan from the previous month.

Capital expenditure is stable and cash flow is abundant. 2023Q3, the company's capital expenditure is estimated at 1.38 billion yuan, an increase of 6.5% over the previous year, and the company's production capacity investment is relatively stable. In 2023Q3, the company's net operating cash flow was 1,300 million yuan, a year-on-year decrease of 20.0%. It can basically cover the company's capital expenses, and the cash flow is relatively abundant.

Leaders have strong competitiveness and focus on medium- to long-term allocation value. 2023Q3, the industry has entered a low season, the pace of market competition has accelerated, and Yuantong's share has fluctuated. However, under challenges such as increased competition and international business pressure, Yuantong's performance remains strong, and the profits of leading companies are expected to be ahead of share differentiation. At the same time, Yuantong uses digitalization as a starting point to improve timeliness and service, and empower the franchisee network. Overall competitiveness is expected to continue to improve. Currently, the company's valuation is at a historically low level, and it has medium- to long-term allocation value.

The company's net profit from 2023-2025 is estimated to be 38.1/42.6/5.23 billion yuan respectively, corresponding to PE 12.3/11.0/9.0 times, reaffirming the “buy” rating.

Risk warning

1. Industry price competition intensifies;

2. The recovery in macro-demand fell short of expectations;

3. Labor and oil prices have risen sharply.