Key topics for investment sub-capital:
Incident: Zhongtong Express announced 2023 and 23Q4 results. In 2023, the company achieved operating revenue of 38.42 billion yuan, up 8.6% year on year, and adjusted net profit of 9 billion yuan, up 32.3% year on year; looking at a single quarter, 23Q4 achieved revenue of 10.62 billion yuan, up 7.6% year on year; adjusted net profit of 2.21 billion yuan, up 4.4% year on year; the company achieved revenue of 89.8, 97.4, 90.8, 10.62 billion yuan, respectively, year-on-year growth: 13.7%, 12.5%, 1.5%, 7.6 %; Net profit attributable to mother was 16.7, 25.4, 23.5 billion yuan, and 2.21 billion yuan, respectively, with year-on-year increases of 84.3%, 40.8%, 21.2%, and 2.2%.
Market share continues to rise, and ASP is under pressure. Volume: The company achieved 30.2 billion express deliveries in 2023, an increase of 23.8% over the previous year, exceeding the growth rate of the industry; its market share was 22.9%, an increase of 0.8 percentage points over the previous year. Looking at 23Q4 alone, the company achieved 8.71 billion express deliveries, a year-on-year increase of 32.0%, exceeding the industry's growth rate; the market share was 25.9%, an increase of 4.3pp over the previous year. The growth rate of the company's express delivery volume remained strong in '23, and achieved significant growth in Q4. Price: The company's revenue from the single ticket express delivery business in 2023 was 1.18 yuan, -12% year on year. Core single ticket revenue decreased by 11.3%, or 0.16 yuan, of which 5 were incremental subsidies; gross profit of express single ticket was 0.45 yuan, up -10.1% year on year. Looking at 23Q4 alone, the company's ASP was 1.12 yuan, -19.4% year over year; gross profit of express single tickets was 0.41 yuan, up -26.3% year on year.
Dividends have increased, and repurchases continue to be expanded. In 2023, adjusted net profit was 9 billion yuan, up 32.3% year on year, and the growth rate increased significantly; adjusted net profit for 23Q4 was 2.21 billion yuan, up 4.4% year on year. Looking at the single ticket situation, the company's net profit from a single ticket in 2023 was 0.29 yuan/ticket, +3.8% year-on-year, of which net profit from a single ticket in 23Q4 was 0.25 yuan/ticket, or -22.6% year-on-year. Due to the combined impact of revenue growth and cost productivity, the company's annual profit increased slightly. The operating cost in 2023 was 26.76 billion yuan, and the growth rate was +1.6% year-on-year. Among them, trunk line transportation costs benefited from improvements in economies of scale, optimization of main line route planning, and reduction in fuel prices; distribution costs benefited from investment in automation, with a net increase of 6 sets of automated sorting equipment in 2023. Additionally, the company announced a cash dividend of $0.62 per share for fiscal year 2023, an increase of 68% over the previous year, and a dividend ratio of 40%. At the same time, the company adopted a semi-annual regular cash dividend policy starting in 2024, totaling no less than 40% of the company's profits for the fiscal year, and expanded the share repurchase plan to 2 billion US dollars. Based on current market conditions and operating conditions, the company expects the number of express deliveries to be between 34.73 billion and 35.64 billion units in 2024, an increase of 15% to 18% over the previous year.
Profit forecasting and investment advice. The company has the strongest scale effect, and has a strong and balanced franchise network. Under industry competition, it continues to achieve profit growth with management advantages and scale effects, increasing dividends to give back to shareholders, increasing market confidence, and adjusting the company's 2024/25 net profit forecast to be 10.5 billion yuan and 12.1 billion yuan (previous value: 10.7 billion yuan, 12.3 billion yuan) to add 14 billion yuan in 2026. We maintain the company's PE 18 times PE in 2024, corresponding to a target price of HK$254.03, maintaining a “buy” rating.
Risk warning: The volume of express deliveries has slowed sharply; the risk of rising labor costs; the risk of cultivating new business.