Conclusions and recommendations:
The company is a leading global logistics service provider, positioned in the middle and high-end markets. Its business covers express delivery, express delivery, cold chain, and the same city. Thanks to high capital investment, the company's time-sensitive moat is relatively stable and has significant advantages in terms of timeliness and service quality. Furthermore, after Ezhou Huahu Airport is put into operation, it will help the company build a growth curve for international business. Considering that the company's current valuation is at a historically low level, it is recommended to focus on layout opportunities and give the company investment suggestions to “buy in” this.
The company's time-sensitive parts moat are stable. Since 2024, the price war in the express delivery industry has not stopped. From January to May, the price of a single ticket, which mainly focuses on economic items, fell 10.5% year on year, while the company's single ticket revenue fell by only 5.2% during the same period, mainly because the basic market of the company's express delivery business — time-sensitive parts — has higher bargaining power. Although express delivery companies are speeding up the pace of service classification, such as Zhongtong's upgraded “Zhongtong Feiexpress” and Yuantong's “Yuanzhunda”, etc., all target high-end time-sensitive parts, the company's basic market is still stable. On the one hand, due to the company's huge investment in aviation, road and other transportation resources, the company's cumulative capital expenditure was 64.54 billion yuan from 2019 to 2023. In comparison, Yuantong, Yunda, and Shentong were 23.76 billion yuan, 24.72 billion yuan, and 13.71 billion yuan respectively. The high capital investment ensured the company's leading time efficiency. On the other hand, thanks to the direct management model and digital investment, the company launched services such as door-to-door delivery and pre-delivery reservations earlier. Public satisfaction with express delivery services ranked first for many years in a row, while other express delivery companies' follow-up was constrained by issues such as network pressure and courier guarantees.
International business revenue is picking up, and the driving role of Ezhou Airport will gradually become apparent. Since the beginning of the year, demand for international air and sea freight has stabilized and freight rates have increased year on year. The company's supply chain and international business have reached an inflection point. The cumulative revenue from January to May increased 8.5% year on year. Currently, the cross-border logistics market is still a blue ocean, and will continue to benefit from e-commerce and industry going overseas. Facing cross-border logistics opportunities, the company has continued to expand its fleet size in recent years. It has 87 freighters, ahead of Post (35) and Yuantong (13), and has completed the cargo route transfer at Ezhou International Airport. In the summer and autumn of 2024, Ezhou Airport's capacity share reached 20%. Currently, the pace of opening international routes at Ezhou Airport is accelerating. Since this year, 9 new routes including Moscow and Chicago have been opened. A total of 19 cargo routes have been opened and 22 international destinations have been opened, covering Europe, North America, the Middle East, Asia, and Africa. With the opening of more international cargo routes, the company will further increase the proportion of international capacity invested in the future and promote the development of international express delivery business.
Profit forecast and investment advice: In 2024-2026, the company is expected to achieve net profit of 9.1 billion yuan, 10.2 billion yuan, and 12 billion yuan; YOY is +11%, +12%, and EPS is 1.87 yuan, 2.09 yuan, and 2.46 yuan respectively. The current A share price corresponds to PE 19 times, 17 times, and 14 times, respectively. The company's stock price is in the bottom range of the past 5 years, and the dividend rate is expected to reach 1.9% in 2024. It is recommended to pay attention to layout opportunities and give “buy in” investment suggestions on this.
Risk warning: business growth is slowing down, price competition is fierce, new business development falls short of expectations