Key points of investment

Company's 2023 performance report: Net profit after deduction of +76.85%. According to the 2023 performance report of Debon Shares, the company is expected to achieve operating income of 36.279 billion yuan, an increase of 15.57% year on year; achieve net profit of 746 million yuan, up 13.32% year on year. Among them, it was confirmed that the profit and loss from changes in fair value of other non-current financial assets was -95 million yuan, reducing net profit to mother of 93 million yuan. After excluding this impact, net profit to mother was 838 million yuan; achieving 5.68 million yuan in non-net profit deducted from mother 100 million yuan, a year-on-year increase of 76.85%.

The company's business development continued to improve in 2023. Combined with JD's resource integration, it accelerated collaboration to improve revenue side performance

On the one hand, the company actively promotes product upgrades, continuously improves delivery quality, enhances product competitiveness, and simultaneously strengthens sales capacity building. On the other hand, in the second half of 2023, the company gradually developed business cooperation and resource integration with various divisions of JD Group Co., Ltd.

The company issued an announcement on November 30, 2023. It is estimated that the amount of transactions related to the provision of labor services to JD Group, JD Technology and its control enterprises in 2023 is 3,644 billion yuan, of which the actual amount generated from January to October 2023 is 2,052 billion yuan, accounting for 7.15% of similar business. It is expected that business volume cooperation will continue to be strengthened in 2024, and the total amount (excluding tax) is estimated to be no more than RMB 8.512 billion; of these, the amount of related transactions providing labor services to JD Group, JD Technology and its controlling companies is about 7.8 billion yuan, accounting for 22.44% of similar businesses, +114% compared to 2023, which is expected to increase the company's revenue side performance in 2024.

As early as June 30, 2023, the company announced that it plans to sign an “Asset Transfer Agreement” with JD Logistics. It will use a total of no more than 106 million yuan of its own capital to purchase part of the assets of JD Logistics and its holding subsidiary's 83 transit centers, accelerate resource integration with JD Logistics, promote collaborative business development between the two parties, and achieve complementary advantages.

Since 2023, there has been significant cost optimization. Continued refined management has improved the company's sales expense ratio for the first three quarters of 2023 was 1.40%, -0.15 pct year on year, management expense ratio was 4.56%, -4.1 pct year on year, financial expense ratio 0.34%, and -0.35 pct year on year. Expenses continued to improve during the period. The company continues to explore various lean management initiatives, continuously improve personnel efficiency, asset efficiency, and reasonably and effectively control costs and expenses.

On the one hand, the company improves operational efficiency in delivery and sorting through measures such as adjusting the location of outlets, optimizing the structural layout of couriers, and more accurate personnel delivery; improving vehicle transportation efficiency through measures such as “small cars for large cabinets”, branch line integration, and line straightening; improving resource utilization efficiency and effectively controlling excessive growth in business operating costs through measures such as rational allocation of assets and site integration.

On the other hand, the company continues to promote technological empowerment and process optimization, improve the level of digital management intelligence and process execution efficiency, promote the flattening of the functional organizational structure, and achieve a qualitative reduction in management costs.

Profit forecasting

Considering that the company benefits from economic recovery, which drives the profit of the express delivery business to improve in the procyclical cycle, and that the bulky express delivery business still has a high growth rate and may bring more growth after deep integration with JD, we expect the net profit of Debon Co., Ltd. to be 7.46, 12.14, and 1,608 billion yuan respectively, corresponding to PE of 19.31 times, 11.86 times, and 8.95 times, respectively, maintaining an increase in holdings ratings.

Risk warning

The macroeconomic recovery fell short of expectations, competition in the express delivery market intensified, the growth rate of the bulky express delivery market slowed, and the progress of JD integration fell short of expectations.