Description of the event

Shentong Express disclosed its 2023 annual report and 2024 quarterly report: In 2023, the company achieved operating income of 40.92 billion yuan, an increase of 21.5% over the previous year, and achieved net profit of 340 million yuan to mother, an increase of 18.4% over the previous year. With 2023Q4, the company achieved operating income of 11.59 billion yuan, an increase of 20.8% over the previous year, and achieved net profit of 120 million yuan to mother, an increase of 55.9% over the previous year. With 2024Q1, the company achieved operating income of 10.13 billion yuan, an increase of 15.9% over the previous year, and achieved net profit of 190 million yuan to mother, an increase of 43.2% over the previous year.

Incident comments

Shares increased at an accelerated pace, and profit growth was steady. In 2023, the company's volume increased 35.2% year-on-year to 17.51 billion units, and its share increased 1.5pct to 13.3% year-on-year. In 2023, the company's single-ticket express delivery revenue fell 11.2% year on year to 2.23 yuan (down 0.28 yuan year on year), and single ticket delivery cost/single ticket transit cost decreased 10.0%/12.6% year on year (down 0.15/0.11 yuan year on year). Despite intensifying market share competition, the company promoted a three-year increase in production capacity of 10 billion dollars, increased investment in node production capacity and automation equipment, and promoted refined management and route optimization in transit centers. Single ticket sorting costs/single ticket trunk line costs decreased by 12.9%/12.4% year on year (down 0.05/0.06 yuan year on year), and the cost optimization effect was outstanding. Cost optimization effectively hedged competitive price pressure. Net profit per ticket fell 12.4% year on year (down 0.003 yuan year on year) to 0.019 yuan, and ultimately net profit to mother increased 18.4% year on year.

Q4 There was a high increase in volume, and single ticket profit improved month-on-month. 2023Q4's component volume increased by 43.3% year on year, and its share increased by 1.5pct to 13.3% year over year. Prices rebounded month-on-month during the peak season, and the company's single ticket price increased 2.3% month-on-month, but fell 15.2% year on year, and price competition is still fierce. However, thanks to excellent cost control, the company's net profit from a single ticket increased 2 points month-on-month to 0.02 yuan, an increase of 8.8% year-on-year (corresponding to 0.002 yuan). The high volume increase and the improvement in single ticket profit jointly contributed to a year-on-year increase of 55.9% in Q4 net profit to mother.

Q1 Volume growth led, and single ticket profit continued to improve. 2024Q1's component volume increased 36.7% year on year, leading the industry in growth rate.

Q1 The price of a single ticket is about 2.17 yuan, which is basically the same from month to month, which means that price competition in the industry is relatively restrained. The company's cost optimization continued to advance. The gross profit per ticket was basically the same year on year, expenses decreased 15.2% year on year, and the corresponding net profit per ticket increased 4.8% year on year (down 0.002 yuan year on year). In the end, the company's Q1 net profit to mother increased by 43.2% year over year.

Improve operating cash flow and strengthen production capacity construction. In 2023Q4/2024Q1, the company's net cash flow from operating activities was 1,43/570 million yuan respectively, up 47.3%/44.7% year-on-year respectively. High business volume growth and profit growth drove continuous improvement in cash flow. In 2023Q4/2024Q1, the company's capital expenditure was 72/84 million yuan, or -45.4%/+56.9% year-on-year, respectively. The capital expenditure remained high. The company's production capacity will exceed 60 million pieces/day in 2023, and will continue to invest in infrastructure construction to strengthen production capacity supply at key nodes. It is expected that normal throughput capacity will increase to more than 75 million pieces/day within 2024.

Competitiveness is steadily improving, and the business trend is improving. The company strives for digital and intelligent transformation, empowering franchisee outlets, comprehensively improving timeliness and user experience, steadily improving overall competitiveness, and achieving a sharp increase in quantitative profit. As the company's business trends improve, operating capacity steadily increases, and price competition in the superposition industry is moderate, profit flexibility is expected to gradually be released. The company's net profit for 2024/2025/2026 is estimated to be 7.3/13.2/1.51 billion yuan, respectively, corresponding PE of 19.5/10.7/9.3 times, maintaining the “buy” rating.

Risk warning

1. E-commerce express delivery demand falls short of expectations;

2. Increased competition in the express delivery market;

3. Oil prices and labor costs have risen sharply.