The company's 2023 annual report and 2024 quarterly report performance: After deducting non-performance, the 2023 annual report: According to Debon Shares's annual report, the company achieved operating income of 36.279 billion yuan in 2023, an increase of 15.57% over the previous year. Net profit to mother was achieved in 2023 of 746 million yuan, an increase of 13.32% over the previous year. Among them, net profit and loss from changes in the fair value of other non-current financial assets was confirmed to the mother of -95 million yuan, and net profit due to mother was reduced by 93 million yuan. After excluding this effect, net profit to mother was 838 million yuan; realized non-net profit deducted to mother of 568 million yuan, an increase of 76.77% over the previous year. 23Q4 achieved operating income of 10.836 billion yuan, or 26.37% year on year, net profit attributable to mother of 274 million yuan, -17.31% year on year, net profit excluding non-return to mother of 286 million yuan, +34.55% year over year.

24Q1: The company achieved operating income of 9.295 billion yuan, +25.31% year-on-year; net profit to mother was 93 million yuan, +27.74% year-on-year.

Asset situation: At the end of 2023, the company's total assets were 17.577 billion yuan, up 16.91% from the beginning of the year. Mainly as the company's business volume increased and network integration projects progressed in an orderly manner, JD Logistics handed over the transit and transportation links of the original independently operated express shipping business to the company, and total assets increased accordingly.

Focus on core business, more accurate customer management

Express shipping business: In 2023, the express shipping sector's revenue was 32.280 billion yuan, up 18.19% year on year, mainly due to the company actively promoting product service upgrades, continuously improving delivery quality, strengthening sales capacity building, and achieving year-on-year growth in high-kilogram product revenue. At the same time, the orderly progress of superimposed network integration projects promoted further growth in express revenue. The express shipping business accounted for 88.98% of revenue in 2023. The company sorted out the existing product system and adjusted product ownership in various business segments in early 2024, classifying products with low ticket weight such as “standard express delivery” and “express delivery” as express delivery services, and classifying other products such as “bulky express delivery 3.60” and “aviation bulky goods” with high ticket weight into express shipping business. 24Q1 revenue was $8.373 billion, up 29.64% year over year.

Express delivery business: In 2023, the express delivery sector achieved revenue of 2,728 billion yuan, a year-on-year decrease of 11.22%. Express revenue for 24Q1 was 542 million yuan, a year-on-year decrease of 22.04%.

Other business: Mainly warehousing and supply chain business. In 2023, the sector achieved revenue of 1,271 billion yuan, +26.37% year-on-year. By the end of 2023, Debon Supply Chain had 200 warehouses around the world, with a total area of 1,149,500 square meters. In 24Q1, its revenue was 380 million yuan, an increase of 44.45% year over year.

Since 2023, costs have continued to improve, and customer experience has continued to increase labor costs: in 2023, labor costs were 15.107 billion yuan, up 6.79% year on year, accounting for a decrease of 3.42 percentage points in revenue. The main reason is for the company to improve the level of digital intelligence and improve process execution efficiency by adjusting network locations and optimizing personnel layout. After excluding the impact of network integration projects, the ratio of labor costs to revenue continued to improve year over year.

The 24Q1 labor cost was 3.663 billion yuan, up 5.57% year on year, accounting for a decrease of 7.37 percentage points in revenue.

Transportation costs: Transportation costs were 13.288 billion yuan, up 45.74% year on year, accounting for a year-on-year increase of 7.58 percentage points. Mainly due to changes in the business structure, along with the advancement of network integration projects and the increase in the volume of the entire ride-sharing business, which mainly focuses on transportation costs, the ratio of transportation costs to revenue increased year on year. At the same time, in order to enhance customer experience and enhance product competitiveness, the company actively increases investment in transportation resources to ensure transportation timeliness. In 2023, the full link time of the main product was shortened by 5.23 hours, and the full compliance rate increased by 15.1 percentage points over the same period last year.

The 24Q1 transportation cost was 3.823 billion yuan, up 72.93% year on year, accounting for an increase of 11.33 pct year on year in revenue.

Expense situation: The company's expenses for the 2023 period were 2,386 billion yuan, a year-on-year decrease of 13.71%, and the ratio of expenses to revenue for the period decreased by 2.23 percentage points. Among them, sales expenses were 480 million yuan, up 13.76% year on year, and the revenue ratio was basically the same. Mainly, the company strengthened sales capacity building and increased sales staff investment; management expenses were 1,560 billion yuan, a decrease of 19.75% year on year, accounting for a 1.89 percentage point decrease in revenue ratio, mainly for the company to continue to promote technological empowerment and process optimization, and achieved a qualitative decline in management expenses.

The 24Q1 company's expenses for the period were 571 million yuan, an increase of 5.46% over the previous year, and the ratio of expenses to revenue for the period decreased by 1.16 percentage points. Among them, sales expenses were 109 million yuan, an increase of 12.63% over the previous year. The main reason was that the company continued to strengthen sales capacity building through sales enablement to help increase revenue; management expenses were 389 million yuan, an increase of 6.57% over the previous year.

The company's business development continued to improve in 2023. Combined with JD's resource integration, it accelerated collaboration to improve revenue side performance

On the one hand, the company actively promotes product upgrades, continuously improves delivery quality, enhances product competitiveness, and simultaneously strengthens sales capacity building. On the other hand, in the second half of 2023, the company gradually developed business cooperation and resource integration with various divisions of JD Group Co., Ltd.

The company issued an announcement on November 30, 2023. It is estimated that the amount of transactions related to the provision of labor services to JD Group, JD Technology and its control enterprises in 2023 is 3,644 billion yuan, of which the actual amount generated from January to October 2023 is 2,052 billion yuan, accounting for 7.15% of similar business. It is expected that business volume cooperation will continue to be strengthened in 2024, and the total amount (excluding tax) is estimated to be no more than RMB 8.512 billion; of these, the amount of related transactions providing labor services to JD Group, JD Technology and its controlling companies is about 7.8 billion yuan, accounting for 22.44% of similar businesses, +114% compared to 2023, which is expected to increase the company's revenue side performance in 2024.

Profit forecasting

Considering that the company benefits from economic recovery, which drives the profit of the express delivery business to improve in the procyclical cycle, and that the bulky express delivery business still has a high growth rate and may bring more growth after deep integration with JD, we expect the net profit of Debon Co., Ltd. to be 11.4, 15.1, and 1.86 billion yuan respectively for 2024-2026, corresponding to PE of 14.9 times, 11.3 times, and 9.2 times, respectively, maintaining an increase in holdings ratings.

Risk warning

The macroeconomic recovery fell short of expectations, competition in the express delivery market intensified, the growth rate of the bulky express delivery market slowed, and the progress of JD integration fell short of expectations.