2023 earnings miss our expectation; 1Q24 earnings slightly beat our expectation
Yunda Holding announced its 2023 results: Revenue fell 5.17% YoY to Rmb44.983bn, net profit attributable to shareholders rose 9.58% YoY to Rmb1.625bn, and recurring net profit attributable to shareholders grew 0.07% YoY to Rmb1.39bn. In 4Q23, the firm's revenue fell 0.34% YoY to Rmb12.147bn, net profit attributable to shareholders dropped 37.47% YoY to Rmb461mn, and recurring net profit attributable to shareholders fell 39.28% YoY to Rmb0.42bn, missing our expectation due to industry-wide price competition in 2H23.
Per-parcel data: In 2023, the firm's per-parcel cost fell by Rmb0.29 YoY to Rmb2.16 thanks to economies of scale and effective cost control, with per- parcel delivery expenses declining by Rmb0.13 YoY, per-parcel transportation and operating costs dropping by Rmb0.11 YoY, per-parcel gross profit falling by Rmb0.02 YoY to Rmb0.23, per-parcel net profit staying roughly flat YoY at Rmb0.09, and per-parcel recurring net profit falling by Rmb0.01 YoY to Rmb0.07.
The firm also announced its 1Q24 results: Revenue rose 6.50% YoY to Rmb11.156bn, net profit attributable to shareholders grew 15.02% YoY to Rmb412mn, and recurring net profit attributable to shareholders grew 11.50% YoY to Rmb385mn.
Per-parcel data: In 1Q24, the firm's parcel volume rose 29.1% YoY to 4.942bn units and its market share rose 0.4ppt YoY to 13.3%, implying per-parcel revenue of Rmb2.26 (falling by Rmb0.48 YoY). Per-parcel transportation and operating costs fell by Rmb0.24 YoY to Rmb0.76, improving notably. Per-parcel net profit and per-parcel recurring net profit were both Rmb0.08, which remained almost flat QoQ, slightly beating our expectation.
Trends to watch
Industry: Express delivery service demand data continued to improve; parcel volume growth may continue to beat expectations. Data from the State Post Bureau shows that domestic express delivery parcel volume grew 25.2% YoY in 1Q24, beating market expectations. We expect growth rate of full-year parcel volume to exceed previous expectation of 10-15% driven by live-streaming-based e-commerce, smaller parcels, and returned parcels.
Limited downside potential in unit price. We think the express delivery industry's capex has passed its peak and is in a downward trend, and industry-wide competition is manageable. Given regulatory guidance for the industry's high-quality development, we see limited downside potential in prices in the industry and we think cost of the industry has room for optimization in 2024. In 1Q24, Yunda's per-parcel revenue rose by Rmb0.08 QoQ.
Looking ahead, we suggest watching the firm's possible profit recovery if its parcel volume maintains rapid growth, capacity utilization rate increases, and cost control proves effective. We expect the firm's earnings to recover amid rapid growth in parcel volume, improving product and service capabilities, and better cost control, mainly due to three factors. First, the firm's capex is in a downward trend. Second, the firm's per-parcel cost continues to improve thanks to economies of scale and refined cost control. Third, the firm's per-parcel expenses continue to be optimized, and we think its financial expenses are likely to keep falling along with improving balance sheet. The firm's shareholder returns are improving steadily, and it plans to pay a dividend of Rmb493mn for 2023 with dividend payout ratio at 30%, dividend per share at Rmb0.17 (+227% YoY) and total stock dividends and buybacks at Rmb513mn.
Financials and valuation
Given the firm's better-than-expected parcel volume growth, modest QoQ growth in its service prices, and a weaker-than-expected YoY increase in per-parcel earnings, we lower our 2024 and 2025 earnings forecasts by 10.8% and 18.2% to Rmb2.32bn and Rmb2.79bn. The stock is trading at 9.8x 2024e and 8.1x 2025e P/E. As parcel volume growth may boost the firm's earnings growth, we maintain our OUTPERFORM rating and target price of Rmb10.8, implying 13.5x 2024e and 11.2x 2025e P/E, offering 37.6% upside.
Risks
Express delivery parcel volume disappoints; competition intensifies.