Key topics for investing in subsidiary qualifications:
Incident: Zhongtong Express announced 2024Q1 results. In 2024Q1, the company achieved operating income of 9.96 billion yuan, up 10.9% year on year, realized net profit of 1.45 billion yuan, -13.0% year on year, and adjusted net profit of 2.2 billion yuan, up 15.8% year on year. The company's package volume in the first quarter of 2024 was 7.17 billion, an increase of 13.9% over the previous year.
Value drives healthy development, focuses on high-quality profitable products, and the market share has declined slightly. Volume: The company achieved 7.17 billion express deliveries in the first quarter of 2024, an increase of +13.9% over the same period, with a market share of 19.3%, a year-on-year market share of -4.1pp. The company actively responded to changes in the consumption structure, increased the proportion of spare parts, and focused on effective competition, and its market share declined. Just look at 23Q4. Price: The company's 2024Q1 single ticket express delivery business revenue was 1.29 yuan, -3.3% year on year. Core single ticket revenue decreased by 4 cents, a decrease of 2.5%; cost: single ticket sorting cost was 0.30 yuan, down 2 cents year on year; single ticket transportation cost was 0.47 yuan, down 4 cents year on year; gross profit of express single ticket was 0.52 yuan, up +1.8% year on year.
The cost of a single ticket continues to decline, and profitability has increased. Net profit of 2024Q1 was 1.45 billion yuan, -13.0% year-on-year, mainly due to the transient impact of the sale of Cainiao shares; adjusted net profit of 2.22 billion yuan, up 15.8% year on year; adjusted net profit for 23Q4 was 2.21 billion yuan, up 4.4% year on year. Looking at the single ticket situation, the company's net profit after the 24Q1 single ticket adjustment was 0.31 yuan/ticket, +1.7% year-on-year. The company adheres to the bottom line of “no loss-making express shipments” and has maintained healthy profit growth. Despite a decline in scale, profitability has improved. The 24Q1 operating cost was 6.96 billion yuan, and the year-on-year growth rate was +7.7%. Among them, trunk line transportation costs benefit from improvements in economies of scale, optimization of main line route planning, and increased loading rates; distribution costs benefit from automation investment. 24Q1's operating cash flow was 2 billion yuan, and capital expenditure was 1.7 billion yuan. Based on current market conditions and operating conditions, the company expects the number of express deliveries to be between 34.73 billion and 35.64 billion units in 2024, an increase of 15% to 18% over the previous year.
Profit forecasting and investment advice. The company has the strongest scale effect and has a strong and balanced franchise network. As industry demand continues to exceed expectations, the company adheres to a high-quality management strategy and achieves high-quality profits. The company's net profit forecast for 2024/25/26 remains unchanged at 105, 121, and 14 billion yuan, maintaining 18 times the company's PE in 2024, corresponding to a target price of HK$256.54, and maintaining a “buy” rating.
Risk warning: The volume of express deliveries has slowed sharply; the risk of rising labor costs; the risk of cultivating new business.