Key points of investment
Born in the OV department, the global layout is progressing rapidly. Jitu Express has been online in Indonesia since 2015. Founder Li Jie was the founder and CEO of OPPO's first overseas exclusive sales agent. With its success in Indonesia, it expanded to other countries in Southeast Asia and became Southeast Asia's No. 1 logistics service provider in 2022, with a market share of 22.5%. In 2020, the company expanded its business to Singapore and China; in 2022, the company became the first large-scale Asian express delivery operator to expand its business into new markets such as Saudi Arabia, the United Arab Emirates, Mexico, and Egypt. Over the past eight years, the company has rapidly expanded its network through an efficient regional agency model, and its business has spread across many countries and regions.
China's business accounts for the largest share of revenue, and new businesses such as cross-border businesses are growing rapidly. 2020/2021/2022/2023H1 achieved a global express package volume of 32/105/146/8 billion pieces, of which Southeast Asia's 2020-2022 package volume was 11.5/21.6/2.51 billion pieces, respectively. As of 2022, Polar Rabbit's share of package volume in the Southeast Asian market was 22.5%; China's 2020/2021/2022/2023H1 package volume of 20.8/83.3/120.3/6.45 billion pieces, 2020-2022 The CAGR is 140.2%. In 2020-2022, the company achieved operating revenue of US$15.4/48.5/7.27 billion, of which Southeast Asia's revenue in 2020-2022 was 68.2%/49%/32.8%, respectively, and China's revenue share in 2020-2022 was 31.2%/45%/56.4%, respectively. Relying on deep cooperation with low prices and e-commerce platforms, the combined acquisition of Baishi and JiTu, which officially started business in China in March 2020, has reached Jitu's market share in the Chinese market as of September 2023 12.6%
Although the overall industry growth rate in the Chinese market has slowed, the rise of an emerging model of e-commerce has injected momentum into the upstream business flow.
Volume: The growth rate of express delivery volume in China in 2022 was only 2.1%; the 2023H1 volume was only 7.1% under the natural growth rate excluding the impact of the low base in 2022 (assuming 10% H1 growth rate in 2022), and the industry has entered the inventory development stage. However, emerging e-commerce, represented by Pinduoduo, relied on low prices, social networking, and live streaming to rapidly fission in the sinking market, opening up the consumption power of low-tier cities, increasing the penetration rate of online shopping in the sinking market while also speeding up the decline in the value of a single package, thus leading to an increase in the number of packages. Price: With the support of the price policy, vicious price wars may no longer occur, but the off-season or local healthy price competition may cause prices to fluctuate, and the industry will gradually enter a stage of healthy competition and high-quality development.
The rapid development of e-commerce and cross-border business in Southeast Asia and new markets has made merchants more demanding for high-quality express delivery services. According to the Jitu Express prospectus, Southeast Asia is one of the fastest growing regions in the world. The transaction volume of the Southeast Asian e-commerce retail market increased from US$38.3 billion in 2018 to US$154.8 billion in 2022, the CAGR was 41.8%, and the number of packages increased from 3.36 billion in 2018 to 11.15 billion in 2022, with a CAGR of 36.0%. The company began cross-border logistics business in 2021. The Southeast Asian cross-border e-commerce retail market is expected to grow from US$64.9 billion in 2023 to US$155.1 billion in 2027, with a compound annual growth rate of 24.3%, and is expected to become a growth point for the overall e-commerce retail market in Southeast Asia in the future.
Under the regional agency model, the company has outstanding competitive advantages. It is different from the franchisee model (network partner and) of SF Express's direct management model. Jitu uses a regional agency model, which means that a regional operating entity jointly established by the headquarters and regional agents is responsible for the key part of the express delivery process, that is, sorting and main line transportation; the terminal package and delivery business is managed directly by a local regional agent or by a network partner (franchisee). The interests between the company headquarters and regional agents are consistent, and at the same time, it is highly flexible and adaptable, making it more suitable for Goku to lay out global business. At the same time, the company's self-developed JMS system assists in allocating transportation and network resources, tracking and monitoring the entire life cycle of packages, optimizing costs, and enabling operations.
Costs are in a downward channel, and profits in the Chinese market can be expected to improve. As the number of pieces increased, cost improvements brought about by the scale effect were also gradually reflected. Polar Rabbit's operating costs for 2020, 2021, 2022, and 2023H1 were US$17.97/75.38/US$38.37 billion, respectively. 2021-2023H1 operating costs changed 200.3%/39.7%/10.6% year on year, respectively, and the cost increase narrowed markedly. Polar Rabbit generated net profit of $6.64/-61.92/15.73/667 million in 2020-2022, respectively. 2023H1 Looking at the cost of a single ticket, with the expansion of volume, continuous optimization of transit operation efficiency, and improvement of the technical system, the company's average single ticket cost has dropped significantly, particularly in the Chinese market. The 2020-2023H1 single ticket express delivery cost has dropped from 3.42 yuan to 2.38 yuan, and the compound annual deceleration rate is 13.5%. Compared with the transportation system, transportation and sorting costs are still about 0.15-0.25 yuan. Geku is also gradually narrowing the gap with the transit system.
Profit forecasting and valuation
Jitu Express is benefiting from the rapid growth in overseas express delivery business and actively developing cross-border e-commerce business. The company's revenue is expected to grow rapidly, the combined scale effect is expected to increase, and profitability is expected to increase. The estimated revenue for 2023-2025 is US$89.80, 105.18, and 12.235 million US dollars, respectively, and net profit to mother is -13.24/-3.35/164 million US dollars, respectively. The corresponding PS is 2.0, 1.7, and 1.4 times, respectively. The first coverage gave it a “gain” rating.
Risk warning
Economic downturn risks, industry growth is lower than expected, express delivery price war worsens, overseas business progress falls short of expectations