Incidents:
In 2023, the company achieved annual revenue of 38.419 billion yuan, an increase of 8.6% over the previous year, and achieved net profit of 8.749 billion yuan to mother, an increase of 28.5% over the previous year. Among them, the fourth quarter of 2023 achieved revenue of 10.619 billion yuan, a year-on-year increase of 7.6%, and realized net profit of 2.92 billion yuan to mother, an increase of 1.4% over the previous year. The company paid out $0.62 per share in 2023, with a dividend rate of approximately 41.4%.
The company's express delivery business volume increased 24% year on year, and the market share increased to 22.9% in 2023. The company completed express delivery business volume of 30.2 billion units throughout the year, up 23.8% year on year. The market share was 22.9%, up 0.8 pct year on year, and the leading position was stable. Among them, the company completed the express delivery business volume of 8.71 billion units in the fourth quarter, an increase of 32.0% over the previous year. According to current market conditions and operating conditions, the company expects a package volume of about 34.73 billion to 35.64 billion pieces in 2024, with a year-on-year growth rate of about 15% to 18%.
The 17% year-on-year decline in single ticket costs led to a 4.6% increase in gross profit per ticket, which was affected by industry price competition. In 2023, the company's single-ticket core express delivery business revenue fell 0.16 yuan to 1.24 yuan year on year, a decrease of 11.3%. In 2023, the company's single ticket cost decreased by 0.18 yuan to 0.86 yuan year on year, a decrease of 17.0%. Among them, the transportation cost of a single ticket decreased by 0.06 yuan to 0.45 yuan, a decrease of 12.1%; the cost of sorting a single ticket decreased by 0.05 yuan to 0.27 yuan year on year, a decrease of 15.0%. Thanks to the company's good cost control effect to offset the negative impact of falling prices, the gross profit of a single ticket increased by 0.02 yuan to 0.38 yuan year on year in 2023, and the gross margin of a single ticket was 31.0%, an increase of 4.7 pct year on year.
The company's dividend rate was raised to 40%, and the amount of the share repurchase plan was expanded. The company will implement a semi-annual regular cash dividend policy starting in 2024. The total dividend for each year is not less than 40% of the company's dividend for the fiscal year. At the same time, the company expanded and extended the share repurchase program, and the board of directors approved the expansion of the share repurchase plan of 500 million US dollars to 2 billion US dollars. The effective period was extended until June 30, 2025. The double increase in the dividend ratio and the amount of the repurchase plan shows the importance the company attaches to shareholder returns.
Profit Forecasts, Valuations, and Ratings
The company's revenue for 2024-2026 is estimated to be 442.40/503.87/55.860 billion yuan, respectively, with corresponding growth rates of 15.15%/13.89%/10.86%, respectively; net profit to mother is 105.97/120.38/13.547 billion yuan, with year-on-year growth rates of 21.12%/13.60%/12.53%, respectively, and a 3-year CAGR of 15.69%. EPS was $13.04/14.81/16.67 per share, respectively. In view of the steady operation of the company and the significant advantage of its leading position in the industry, based on comparable company valuations, we gave the company 16 times PE in 2024, with a target price of 208.64 yuan (HK$225.73 based on 1HKD=0.9243 CNY), maintaining a “buy” rating.
Risk warning: macroeconomic recovery falls short of expectations; price competition in the express delivery industry exceeds expectations; cost control results fall short of expectations; risk of selecting comparable companies across markets.