Summary content
[Core Conclusion] We believe that Yuantong's digital cost reduction advantage is leading, and the international business is expected to grow into the company's second growth curve. First coverage, giving a “buy” rating. EPS is expected to be 1.27/1.43/1.63 yuan/share in 2024-2026, respectively, and PE corresponding to the 2024-7-1 closing price will be 12.24/10.88/9.54 times, respectively. Under the absolute valuation method, the estimated value of the company is 20.4 yuan per share; under the relative valuation method, it is 15.18 times the average PE value of the company in 2024, giving the company 14 times PE in 2024, and the estimated value per share is 17.8 yuan. We used the average value of the two methods at $19.1 as our target price.
[Report Highlights] We believe that Yuantong, as a benchmark enterprise for the digital transformation of the express delivery industry, achieved the leading edge in the industry in reducing the core cost of a single ticket in 2019-2023 through an effective combination of “digitalization+lean management+execution”. The international business benefits from the booming development of the cross-border e-commerce market and is expected to grow into the company's second growth curve.
China's express delivery industry can be expected to grow for a long time, and the leading market share is expected to increase. In 2024-2027, the volume scale of China's express delivery industry is expected to reach 10% CAGR; we expect the volume of the industry to reach 171.1 billion pieces in 2024, which is about +20% year-on-year.
The regulatory authorities guide the high-quality development of the express delivery industry. At this stage, the cost reduction of e-commerce express delivery companies is slowing down, and price competition in the industry is expected to slow down in stages; under the new express delivery regulations, the market share of leading companies is expected to increase.
Yuantong is in the first echelon of e-commerce express delivery. In 2023, Yuantong Express had a market share of 212 billion units, with a market share of 16.1%, ranking second in the e-commerce express delivery industry; the company's equity structure was stable, the professional management team was professional, efficient and strong execution; the company's revenue and profit margins improved, and cash flow was abundant.
“Digitalization+lean management+execution” creates Yuantong's competitive advantage. Yuantong's capital expenditure pace has continued steadily over the years, and the increase in production capacity and volume scale is the foundation for digital tools to work; “Digitalization+lean management+execution” helped Yuantong's core costs (transportation & sorting costs) rank first in the e-commerce express delivery industry; Project 1 helped franchisees reduce costs and increase efficiency and enhance the stability of the entire network. The results of Yuantong's digital transformation have made Yuantong rank second among e-commerce express delivery companies in terms of market share, single ticket revenue, and single ticket profit.
The development of China's cross-border e-commerce retail market is driving the growth of cross-border logistics services, and the three major businesses of freight forwarding, international express delivery, and aviation are expected to start a second growth curve.
Risk warning: fierce price competition; sharp rise in costs; impact of regulatory policies; macroeconomic growth falling short of expectations.