Incident: The company released its 2024 quarterly report. The company achieved a business volume of 7.17 billion units, an increase of 13.9% over the previous year, and its market share fell to 19.3% from 21.2% in the same period last year. Adjusted net profit was $2,224 million, up 15.8% year over year.
The company insisted on not losing money, and its single ticket revenue remained stable, but its market share declined: in the first quarter, the company rarely experienced a year-on-year decline in market share, and the decline was quite obvious. This is related to the company's insistence on not losing money and abandoning some low-price customers in its strategy.
The 24Q1 industry volume growth rate reached 25.2%, exceeding market expectations. Among these, the rapid growth and increase in the share of low-priced parts has had a great impact on the competitive trend of the industry. In order to compete for incremental demand, price competition in the field of low-priced parts is also more intense than in other price segments.
The company chose not to participate in the price war in the field of low-priced parts from a profit perspective, so it lost that portion of the increase, resulting in a lower business volume growth rate than the industry average. However, thanks to this, the company's core single ticket revenue fell by only 2.5%, which is far below the industry average. In comparison, Yuantong, Yunda, and Shentong's single ticket revenue declined by 4.9%, 15.9%, and 12.4%, respectively.
Cost control continued to be strengthened. The cost reduction was greater than the revenue decline, and single ticket profit increased: the company's single ticket cost in the first quarter was 0.94 yuan, down 0.06 yuan from the previous year, and the decrease was greater than the revenue drop of 0.04 yuan. Among them, the transportation cost of a single ticket was reduced from 0.51 yuan to 0.47 yuan, and the cost of sorting a single ticket was reduced from 0.32 yuan to 0.30 yuan. Benefiting from lower costs, the company's profit per ticket (after adjustment) increased from $0.30 to $0.31.
Price competition is expected to slow down in the second half of the year, and the company's share is expected to gradually pick up: we think the decline in company share is temporary. On the one hand, the fierce price war in the field of low prices has put serious pressure on the revenue of franchisees and couriers of related companies, making it difficult to sustain for a long time; on the other hand, the industry is in a period of declining capital expenditure, and continued high growth will challenge the production capacity of various companies. The first quarter is a low season for the industry, and production capacity is not saturated, but if the peak season continues to maintain a high growth rate, the production capacity problem may gradually become prominent. If the “price for volume” model is gradually blocked in the second half of the year, competition is expected to slow down, and the company's market share will rise accordingly.
Profit forecasting and valuation suggestions: Zhongtong has always adhered to the strategy of increasing service quality, business scale, and profit level in a balanced manner. Relying on diversified products and services, first-class operational efficiency, and the most stable franchise network, Zhongtong successfully built high brand awareness and customer satisfaction, thereby obtaining a revenue premium, preventing the company from falling into the plight of industry costs. This is why we continue to recommend Zhongtong.
We expect the company's 2024-2026 net profit to be 102.0, 121.1, and 13.86 billion, respectively, and the corresponding PE is 13.9X, 11.7X, and 10.2X, respectively. The company's position as a leader in access is stable. The company's profit is strong, PE valuation is low, and it has a strong margin of safety. If the price war eases, profits and stock prices will have greater upward elasticity, maintaining a “highly recommended” rating.
Risk warning: There have been major changes in industry policies, the intensity of the price war has exceeded expectations, and the macroeconomic growth rate has declined.