Key points of investment

The company's 2024 semi-annual report performance: Q2 net profit to mother +41.1% YoY

2024 semi-annual report: According to Debon Co., Ltd., the company achieved operating income of 18.446 billion yuan in the first half of 2024, an increase of 17.54% over the previous year. The company's net profit to mother for the first half of 2024 was 0.333 billion yuan, up 37.08% year on year. After deducting non-recurring profit and loss, net profit to mother was 0.198 billion yuan, up 51.03% year on year. Among them, 24Q2 achieved operating income of 9.151 billion yuan, or 10.58% year-on-year, and realized net profit of 0.24 billion yuan to mother, +41.1% year-on-year.

Focus on the bulky goods delivery market and continuously improve the competitiveness of core business

Express business: In the first half of 2024, the company's express business achieved revenue of 16.635 billion yuan, an increase of 21.13% over the previous year, accounting for 90.18%. Express's core business (excluding vehicle business and express freight volume with network integration) achieved a cargo volume of 6.0336 million tons, an increase of 7.67% over the previous year. At the same time, network integration projects are progressing steadily to jointly promote further growth in the scale of the express shipping business. During the reporting period, the company paid attention to customer experience, continuously improved delivery service quality, timeliness, and reduced cargo damage, etc., to provide customers with better transportation services for large items and enhance product competitiveness.

Express delivery business: The 2024H1 express delivery segment achieved revenue of 1.073 billion yuan, a year-on-year decrease of 23.90%, accounting for 5.81%. The company is deeply involved in the express delivery business, focusing on the large-scale express delivery business, involving a small number of small express delivery services, mainly to meet the needs of some customers to “send large and small items together”, providing standard express delivery services for small goods with low ticket weight, and achieving continuous layering of the kilogram segment and full coverage of multiple products.

Other businesses: Other businesses are mainly warehousing and supply chain businesses, with revenue of 0.739 billion yuan, up 34.28% year on year, accounting for 4.01%. By the end of the reporting period, Debon Supply Chain had 177 warehouses worldwide, with a total area of 1.1074 million square meters. It had provided integrated warehousing and distribution services and supply chain transformation services to many well-known domestic and foreign companies.

Labor efficiency in all areas has been steadily improved, and transportation costs are continuously optimized

Labor costs: 2024H1 labor costs were 7.186 billion yuan, up 0.86% year on year, accounting for a year-on-year decrease of 6.44 percentage points. The main reason is for the company to continue to promote various lean management initiatives, promote steady improvement in human efficiency in operations such as payment, transfer, etc., and continue to promote the transformation of frontline civilian personnel by improving the level of digital intelligence and process execution efficiency. At the same time, the business structure has changed, network integration with high freight rates and low labor, and the volume of businesses such as vehicles has increased, further reducing labor costs as a share of revenue.

Transportation costs: Transportation costs were 7.501 billion yuan, up 54.16% year on year, accounting for a year-on-year increase of 9.66 percentage points. It was mainly affected by two aspects: on the one hand, changes in the business structure, network integration with high freight costs and low labor, and the increase in the volume of complete vehicles, etc., which contributed to the year-on-year increase in transportation costs as a share of revenue. At the same time, the company continued to increase investment in transportation resources and continuously improve the stability of transportation timelines. During the reporting period, the full compliance rate of its main products increased by 3.8 percentage points over the same period last year. On the other hand, the company continues to promote cost reduction and efficiency measures such as route optimization, model upgrades, and capacity collection to control excessive growth in transportation costs.

Expense situation: The company's expenses for the 2024 H1 period were 1.127 billion yuan, a year-on-year decrease of 3.57%, accounting for a year-on-year decrease of 1.34 percentage points in revenue. Among them, sales expenses were 0.273 billion yuan, up 19.80% year on year, accounting for a year-on-year increase of 0.03 percentage points, mainly because the company continued to strengthen sales capacity building, continuously expand the sales team, and sales numbers increased year on year; management expenses were 0.699 billion yuan, a decrease of 9.50% year over year, accounting for a 1.13 percentage point decrease in revenue ratio. On the one hand, the company increased sales team resource support, and some business functions switched to sales positions; on the other hand, the company continued to promote technological empowerment, process optimization, and functional organization Flattening to achieve continuous improvement in management efficiency.

The network layout continues to be improved to accelerate collaboration to improve revenue side performance

In the second half of 2023, the company promoted a network integration project and fully took over some of the assets of JD Logistics's 83 transit centers through asset acquisitions to further expand the express network. In 2024, the company will continue to increase its business volume cooperation with the JD Group in various sectors. Among them, the amount of transactions related to the provision of labor services to JD Group, JD Technology and their control companies was about 7.8 billion yuan, +114% compared with 2023, of which 24H1 actually incurred 2.65 billion yuan.

Service quality: As of 24H1, the company's business township coverage rate reached 93.73%, the upstairs complaint rate decreased by 75.9% year on year, and the settlement rate increased 6.2 percentage points year on year. In the transportation sector, 144 main routes were straightened, and the overall fulfillment rate of the main business increased by 3.8 percentage points over the same period last year. The company put into use 48 automated equipment sites and 97 ready-to-load and unload equipment sites. The damage rate of the main business decreased by 28.3% over the same period last year.

Profit forecasting

Considering the company's continuous improvement of its network layout, focusing on its core business, the bulky express delivery business is highly competitive, and may bring more growth after deep integration with JD, we expect the net profit of Debon shares to the mother for 2024-2026 will be 1.02, 1.3, and 1.53 billion yuan respectively, corresponding to PE of 12.8 times, 10.1 times, and 8.6 times, respectively, maintaining an increase rating.

Risk warning

The macroeconomic recovery fell short of expectations, competition in the express delivery market intensified, the growth rate of the bulky express delivery market slowed, and the progress of JD integration fell short of expectations.