Profits are growing rapidly, and market share is steadily increasing
The company announced its 2023 results: In terms of financial results, the company achieved operating income of 38.419 billion yuan, an increase of 8.6% over the previous year; adjusted net profit of 9.06 billion yuan, an increase of 32.3% over the previous year.
23Q4 achieved operating income of 10.619 billion yuan, up 7.6% year on year; adjusted net profit of 2,214 billion yuan, up 4.4% year on year. In terms of operating performance, the company completed a business volume of 30.202 billion units in '23, up 23.8% year on year, and completed 8.705 billion units of business in 23Q4, up 32.0% year on year, all higher than the industry's growth rate of 19.4% and 27.4% over the same period; as a result, the company's market share ratio increased to 22.9%, +0.8 pcts year on year, taking a leading position in the industry, while the share gap with later-tier companies continued to widen. According to the company's component volume guidelines, the company is expected to achieve a volume growth rate of 15% to 18% in 24 years, and the market share is expected to increase steadily.
Price pressure, fine management and scale effects strengthen cost advantages In terms of single ticket prices, industry price competition intensified in '23, and industry single ticket prices fell 4.3%; the company's single ticket price was 1.18 yuan, down 12.0% year on year, mainly due to the combined effects of a 37.3% drop in direct customer revenue (including payment revenue) and incremental subsidies. In terms of single ticket costs, the company's single ticket cost in '23 was 0.84 yuan, down 0.17 yuan from year on year (YOY -17.1%); among them, single ticket transportation costs were 0.45 yuan, down 0.06 yuan year on year; single ticket center operating costs were 0.27 yuan, down 0.05 yuan year on year. Looking back at 23, the company continued to optimize route planning on the main line transportation side, and implemented standardized operations, optimized talent assessment systems, and increased investment in automated equipment at the distribution center level. The combined effects of scale enabled the company to continue to optimize single ticket costs for trunk line transportation and central operation, which decreased by 12.1% and 15.0%, respectively. In terms of single ticket profit, the company's net profit from a single ticket was 0.29 yuan, an increase of 0.01 yuan over the previous year. Despite front-end price pressure, the company's solid scale advantage, continuous increase in production capacity, and a stable sales and management fee structure all offset the negative impact of the price decline, and achieved a steady increase in profitability.
By increasing dividends and increasing repurchases, investor returns are expected to increase steadily in 2023. The company distributed a cash dividend of 0.62 US dollars per share, an increase of 68% over the previous year. The dividend payment rate was 40%, compared to 31% in the same period in '22. The dividend ratio increased dramatically. At the same time, it is proposed that the dividend payment rate for 2024 should not be less than 40%. In addition, the board of directors also authorized the approval of an additional 500 million US dollars to the original 1.5 billion US dollar repurchase plan to extend the validity of the repurchase plan for one year. Benefiting from the long-term growth prospects of the Chinese economy and logistics industry, the company may steadily increase investor returns by adding to the company's competitive advantage and free cash flow accumulation.
Industry differentiation may accelerate, and leading enterprises are expected to be strong
The newly revised “Administrative Measures on the Express Delivery Market” by the Ministry of Transport will come into effect on March 1, 2024, to further increase the protection of consumers' rights and interests, and clearly put forward the requirements for terminal delivery of express delivery and the fine mechanism for illegal delivery. Also, at the National Post Office meeting in January of this year, the issue of social security for couriers was once again emphasized.
We believe that the idea of express delivery supervision may shift from direct price intervention to intervention in the process. Regulatory measures such as terminal delivery and courier social security are expected to increase terminal costs, while enterprises with insufficient terminal infrastructure construction and poor franchisee profits will face greater operating pressure, and the competitive landscape of the industry is expected to accelerate differentiation. In this context of development, the company, as a leader in franchise-based express delivery, first focuses on terminal production capacity investment and differentiated service capacity building, further promoted product hierarchical service upgrades in 24 years, and is committed to improving long-term pricing capabilities; at the same time, adhering to standardized operation and digital intelligent management, the company's scale and cost efficiency are expected to be further demonstrated, and we are optimistic about the continuous optimization of its profitability.
Added 2026 profit forecast and reaffirmed “Buy” rating
Based on the 23-year decline in industry and company prices, the increase in dividend ratios, and related taxes generated from buybacks, we lowered our 24-25 profit forecast and added a 26-year profit forecast. We expect the company to achieve adjusted net profit of 100, 121, 144 billion yuan in 24-26 (10.7 billion yuan, 13.2 billion yuan before 24-25), up 10%, 21%, and 19% year over year. The corresponding PE is 12x, 10x, and 9x, reaffirming the “buy” rating.
Risk warning: The growth rate of industry demand is slowing down, the rate of cost reduction is slowing down, price competition is intense, and labor costs have risen sharply.