Shentong Express announced its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 40.92 billion yuan, up 21.5% year on year, realized net profit of 340 million yuan, up 18.4% year on year, achieved operating income of 10.13 billion yuan in the first quarter of 2024, an increase of 15.8% year on year, and realized net profit of 190 million yuan, an increase of 43.2% year on year.

In 2023, the company's production capacity was released at an accelerated pace, the 24Q1 market share continued to increase, and single ticket revenue was relatively stable month-on-month.

In 2023, the company achieved 17.51 billion pieces, a year-on-year increase of 35.2%, achieving a market share of 13.3% and a year-on-year increase of 1.6 pcts. Among them, 23Q4 achieved 5.19 billion pieces, an increase of 43.3% over the previous year, and achieved a market share of 13.3%. The company continues to upgrade the transit center and expand and adjust the capacity of key nodes, and its normal throughput capacity exceeded 60 million orders per day throughout the year. In 2023, single-ticket express revenue was 2.23 yuan, a year-on-year decrease of 0.28 yuan, mainly due to product restructuring and a decrease in the average weight of each item. Of these, 23Q4 single-ticket express revenue was 2.17 yuan, a year-on-year decrease of 0.37 yuan. 2024Q1 achieved 4.59 billion pieces, a year-on-year increase of 36.7%. According to the new caliber, it surpassed the industry growth rate by 11.5 pcts, achieving a market share of 12.4%, and an increase of 1.04 pcts over the previous year. The 2024Q1 single express delivery revenue was 2.17 yuan, a year-on-year decrease of 0.31 yuan, and an increase of 0.01 yuan month-on-month.

With the release of scale effects, costs were continuously optimized, and costs were improved during the single ticket period. 1) On the cost side, in 2023, the company continued to optimize costs in various aspects. In terms of sorting capacity, by the end of the year, it had a total of 240 sets of automated sorting equipment; in terms of transportation capacity, the number of direct routes on the entire network reached 3117 by the end of the year, an increase of 10.1% over the previous year. At the same time, its own fleet reached 5,992 vehicles, and the scale of its own capacity continued to expand. In 2023, the cost of express delivery for a single ticket was 2.15 yuan, down 0.26 yuan from the previous year. Among them, the transit cost for a single ticket was 0.78 yuan, down 0.11 yuan from the previous year, and the cost of single ticket delivery was 1.35 yuan, down 0.15 yuan from the previous year, and the scale effect was gradually unleashed. 2024Q1's single express delivery cost was 2.05 yuan, down 0.31 yuan year on year and 0.03 yuan month on month, mainly benefiting from scale growth and cost optimization. 2) On the cost side, the fee for the 2023 single ticket period was 0.07 yuan, down 0.01 yuan from the previous year, and the 2024Q1 single ticket period fee was 0.08 yuan, down 0.01 yuan from the previous year. 3) On the profit side, the net profit for a single ticket in 2023 was 0.02 yuan, the same as the previous year. The net profit for a single ticket for 2024Q1 was 0.04 yuan, which was the same as the previous year, with an increase of 0.02 yuan over the previous year.

Investment advice. On the industry side, industry volume growth in the first quarter exceeded expectations. It is expected that the growth rate of parts will improve throughout the year, and industry price competition will ease somewhat. In 2024, Shentong will continue to build production capacity. The company's normal throughput capacity is expected to increase to more than 75 million orders per day during the year, and the market share is expected to increase further.

At the same time, the company continues to improve the digital intelligent management capabilities and refined operation level of transit centers, and there is still room for optimization of costs and expenses. The company's net profit for 24-26 is estimated to be 8.1/10.1/1.16 billion yuan respectively, corresponding to PE 17.5x and PB 1.5x for 24, maintaining a “highly recommended” rating.

Risk warning: The macroeconomy falls short of expectations, market competition exceeds expectations, the franchise network is unstable, and core costs have risen sharply.