Key points of investment:
Incident: Yuantong Express released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 57.68 billion yuan, up 7.7% year on year; net profit to mother was 3.72 billion yuan, down 5.0% year on year. 2024Q1 achieved revenue of 15.43 billion yuan, up 19.5% year on year; net profit to mother was 940 million yuan, up 4.1% year on year. The company's 2023 annual report was in line with expectations, and the 2024 quarterly report was slightly lower than expected due to the impact of air freight forwarders.
The 24Q1 volume increased at an accelerated pace, and express delivery profits grew steadily. In 2023, the company achieved a business volume of 21.24 billion units, an increase of 21.3% over the previous year; 2024Q1 achieved a business volume of 5.568 billion units, an increase of 24.9% over the previous year, and the growth rate increased. In the first quarter, the net profit of the company's express delivery business was 990 million yuan, up 11.9% year on year, and net profit of a single ticket was 0.18 yuan, which was the same as the 23-year average. While the business volume grew rapidly, the company maintained stable profit per ticket, driving steady profit growth in the express delivery business.
The 23Q4 and 24Q1 aviation international business continues to lose money due to falling demand and freight rates in the region. Currently, the company operates a fleet of 13 aircraft, and the overall cost is limited. We believe that this part of the loss is manageable, and internationalization is the general trend in the long run, and it is expected to become a new growth point in the future. (Data from company announcements)
The quality of operations continues to improve, and we continue to pay attention to shareholder returns. According to the company's annual report, the company's service quality improved markedly during the performance period, and the overall time period was reduced by 5.63 hours over the same period; all false signatures, loss and damage were greatly improved. The customer experience has also improved significantly. The customer complaint rate decreased by nearly 14% year on year, and the repeat entry rate dropped by more than 50% compared to the initial period. We are optimistic that the company will continue to improve its B-side and C-side brand image to achieve further improvement in pricing power. At the same time, the company's shareholder returns increased steadily. According to the dividend plan and historical repurchase announcements, the 2023 cash dividend+repurchase amount reached 1,574 billion yuan.
The overall strength is expected to be further enhanced in 24 years, and industry improvements may resonate with the company's growth. Demand for express delivery has maintained a high growth rate this year, while supply-side differentiation continues to intensify, and the industry pattern is becoming more and more clear. Yuantong's digital capabilities continue to rank at the forefront of the industry, and infrastructure construction and investment have continued to expand in recent years. We are optimistic that the company will achieve high-quality growth in multiple dimensions such as market share, service quality, and profit.
The profit forecast was lowered and the “buy” rating was maintained. Since the loss situation in the air freight forwarding business exceeded previous expectations, we lowered our profit forecast. The company's net profit for 24-26 is 43.53/53.59/6.116 billion yuan, respectively (the original 24-25 value was 47.2/5.41 billion yuan, with an increase of 16.9%/23.1%/14.1%, respectively), corresponding to the current PE multiples of 13x/10x/9x. The company's main express delivery business has maintained good growth. While order volume has maintained a high growth rate, single ticket profit has remained stable. The current market value is only 13x the 24-year valuation, which is lower than the historical average valuation level, and the aviation international business is expected to contribute to long-term performance. Current losses do not affect the value of the main business and maintain a “buy” rating.
Risk warning: The degree of price competition in the industry has exceeded expectations; the macroeconomic economy is declining, demand for express delivery has declined; the industry pattern has changed significantly; and labor costs have risen.