The Zhitong Finance App learned that Huatai Securities released a research report saying that the 1Q24 volume performance was outstanding and achieved high year-on-year growth, mainly due to strong e-commerce demand. In the short term, in terms of volume, I am optimistic that the May-June e-commerce promotion will support the high year-on-year growth rate of express delivery volume; in terms of price, price competition starts seasonally. In the off-season, leading companies compete for market share through price reduction strategies in order to benefit from the month-on-month increase in prices and increase profits during the peak season, and industry price competition may continue for 24 years. The impact of the implementation of the new express delivery regulations on the market is not obvious, but it is expected to ease the intensity of price competition. In the medium to long term, leading express delivery companies are expected to move upward by increasing market share, optimizing costs to withstand the impact of price competition, and being optimistic about the economies of dominant leaders in terms of scale and efficiency to hedge against downward price pressure.

The main views of Huatai Securities are as follows:

The number of items increased year-on-year, and e-commerce demand is strong

The express delivery industry increased 25.2% year on year in 1Q24, mainly due to strong e-commerce demand. Online retail sales of physical goods nationwide in 1Q24 were +11.6% year-on-year, and e-commerce GMV grew significantly; e-commerce penetration rate rose 1.4 pct to 23.3% year on year in 1Q24, and e-commerce penetration rate maintained an upward trend. Industry prices still follow the seasonal changes of rising month-on-month during the peak season and price competition during the off-season. The first quarter was affected by Spring Festival factors, but the demand side increased significantly year-on-year. We believe that strong demand is expected to continue until 2Q24, and volume growth will improve. In the medium to long term, dominant leaders are expected to increase their market share, reduce single ticket costs through economies of scale, hedge against the negative impact of price competition, and achieve an increase in single ticket profits. The main recommendation is Zhongtong Express (H/US), which maintains the largest share and has a significant scale advantage; Yuantong Express, which has excellent service quality and continuous improvement in operating efficiency.

E-commerce GMV increased significantly year-on-year, and the online shopping penetration rate increased steadily

In March, retail sales of social consumer goods nationwide were +3.1% year-on-year, and online retail sales of physical goods (e-commerce GMV) were +6.8% year-on-year. In 1Q24, online retail sales of social consumer goods/ physical goods were +4.0/ +11.6% year-on-year respectively. Social Zero maintained steady growth, and e-commerce GMV showed impressive growth in 23 years.

In terms of e-commerce penetration rate, e-commerce GMV accounted for 25.2% of the total amount of social zero in March, up 0.9 pct from the previous year.

The 1Q24 e-commerce GMV accounted for 23.3% of the total amount of social zero, up 1.4 pct from the previous year. The e-commerce penetration rate continues to grow, once again confirming the upward trend of e-commerce penetration in the medium to long term. (Data source: National Bureau of Statistics) Express delivery volume increased significantly year-on-year, and downward pressure on prices continued

In terms of volume, the number of express deliveries nationwide was +20.1% year-on-year in March and +25.2% year-on-year in 1Q24. Benefiting from strong e-commerce demand, the number of shipments increased year-on-year. In terms of price, the average price of items in the express delivery industry was -5.7% to 8.15 yuan in March, and -6.2% to 8.40 yuan in 1Q24. Prices are still showing a downward trend, but the level of competition is expected to ease. In 1Q24, the cumulative estimated volume of delivery/delivery volume of the national postal express industry was +23.6%/+19.2%. As of April 14, the cumulative daily collection/delivery volume of the national postal express industry was +25.9%/+24.1% (March: +24.0%/+22.3%), and the volume growth rate continued to improve. (Data source: National Post Office, Ministry of Transport)

Yuantong has a clear advantage in volume and price, and Yunda has achieved leading volume growth in price in exchange for volume

By enterprise, Shentong/Yuantong/Yunda/SF Express volume in March was +31.5%/+22.4%/+32.6%/0.0%; the average item price was 2.10/2.35/2.08/15.66 yuan, respectively, -12.9%/-4.1%/-17.8%/+3.3%; 1Q24 volume was +36.7%/+24.9%/+29.1%, respectively. In the Tongda series, Shentong and Yunda adopted a competitive strategy of price reduction, and their market share increased significantly over the same period last year; Yuantong's price drop was minimal, but the number of pieces still increased significantly, and the market share increased the most, reflecting the company's excellent service brought customer stickiness. SF Express's volume remained the same year on year, but its market share declined from month to month, mainly due to the large price reduction of access products, and the rapid return of e-commerce products. (Data source: company announcement)

Risk warning: Industry growth is lower than expected; impact on social security costs; worsening price competition.