Key points of investment

As the company's volume regains its growth rate and capital expenditure peaked and fell, the increase in production capacity utilization is expected to drive simultaneous improvements in fixed costs and variable costs for a single ticket, and large-scale benefits will continue to show.

Yunda Co., Ltd.: An established domestic express delivery service company

The Yunda Express brand was founded in Shanghai in August 1999 and is an established domestic franchise express delivery company. The company's shareholding structure is concentrated. Nie Tengyun and Chen Liying are the actual controllers, and Ali is currently the company's third largest shareholder. The compound annual growth rate of the company's revenue in 2019-2023 was 6.9%. The company's profitability improved month-on-month, and cost reduction and efficiency gradually became apparent. The company's gross margin and net profit margin to mother increased by 0.42 pct and 0.49 pct year-on-year in 2023.

Industry prospects: Online consumption is still resilient, and overall price competition is manageable. In the first half of 2024, China's social zero and physical network zero growth rates were 3.7% and 8.8% respectively. Online consumption resilience still exists. At the same time, changes in consumption patterns drive continuous rapid growth in express delivery business volume. The compound annual growth rate of the national express delivery business from 2010 to 2023 was 36.4%, and the year-on-year growth rate in the first half of 2024 was 23.1%. On a comparable scale, the industry's single ticket price fell 6.5% year on year in the first half of the year, and overall price competition was moderate and limited to a certain region.

Industry CR8 fluctuates around 85. As of the end of June 2024, the company's market share was 13.6%.

Resurgence: The restoration of production capacity utilization will drive continuous improvement in profits in 2022. Affected by the cluster epidemic, network management issues were compounded by problems with the operation of some of the company's outlets, causing disruptions to business volume. Since 2023, thanks to flexible adjustments to the company's business strategy and based on a good asset base at the bottom, the company's business level and business scale have been double repaired. In the first half of 2024, the company's business volume growth rate outperformed the industry by about 10 percentage points, and the strong scale effect gradually became apparent. In the first quarter of 2024, the company's core cost of a single ticket fell 24.0% year on year, and single ticket expenses fell 29.4% year on year. As the company's capital expenditure peaked and fell, the increase in capacity utilization promoted the optimization of the internal supply and demand structure, and large-scale benefits are expected to continue to show.

The return of high growth in business volume led to a steady recovery in performance. The company's 2024-2026 revenue is expected to be 52.352/58.739/63.621 billion yuan, respectively, with year-on-year growth rates of 16.38%/12.20%/8.31%, respectively; net profit to mother was 2.12/2.559/2.947 billion yuan, respectively, with year-on-year growth rates of 30.47%/20.71%/15.16%; 3-year CAGR was 21.95% and EPS respectively 0.73/0.88/1.02 yuan Comparatively, the average PE of the company in 2024 was 13.0 times. In view of the steady improvement in the company's operations, the regaining high growth in business volume led to a steady recovery in performance. The comprehensive relative valuation method covered it for the first time, giving the company a “buy” rating.

Risk warning: macroeconomic recovery falls short of expectations; price competition in the express delivery industry exceeds expectations; cost control results fall short of expectations; risk of selecting comparable companies across markets.