Incidents:

On August 28, 2024, Yunda Co., Ltd. released its 2024 semi-annual report:

On the financial side, 2024H1 Yunda Co., Ltd. achieved operating income of 23.252 billion yuan, up 7.78% year on year; achieved net profit of 1.041 billion yuan, up 19.80% year on year; net profit after deducting non-return to mother of 0.832 billion yuan, up 5.42% year on year; of these, 2024Q2 Yunda shares achieved operating income of 12.096 billion yuan, an increase of 8.98% year on year; achieved net profit of 0.628 billion yuan, up 23.15% year on year ; Net profit after deducting non-return to mother was 0.447 billion yuan, up 0.70% year over year.

In terms of operation, the business volume of 2024H1 Yunda Co., Ltd. reached 10.924 billion votes, an increase of 30.02% over the previous year, and a single ticket revenue of 2.13 yuan, a decrease of 17.11% over the previous year. Among them, the 2024Q2 business volume reached 5.982 billion tickets, up 30.75% year on year, and single ticket revenue was 2.02 yuan, down 16.65% year on year.

Investment highlights:

Benefiting from the trend of small express delivery, the company has abundant production capacity, leading the growth rate of the 2024H1 industry's express delivery business volume by up to 23.11%, far exceeding expectations (the National Post Office estimated an 8% growth rate in 2024 at the beginning of the year). The trend of miniaturization is the key to the industry's growth rate exceeding expectations (the trend of miniaturization, where the value of a single package fell 6.49% year on year), and the same sales contributed more units. 2024H1 Yunda Co., Ltd. has plenty of room to climb in production capacity. The company fully enjoyed the growth dividends brought by small express delivery. The growth rate led the industry. 2024H1 increased 30.02% year on year (higher than the growth rate of the express delivery industry by 23.11%), and the market share increased by 0.72 pct; of these, 2024Q2 increased 30.75% year on year (far higher than the 21.33% growth rate of the express delivery industry), and the market share increased by 1.00 pct.

The scale effect was achieved by reducing costs and fees to hedge the impact of price declines and achieving a sharp rise in volume profit by 2024H1. Under industry price competition and the trend of miniaturization, the company's single ticket revenue was 2.13 yuan, down 0.44 yuan (yoy -17.11%) from the previous year (yoy -17.11%). However, by gradually optimizing and adjusting the transportation resource structure, the company increased the proportion of self-operated vehicles, optimized vehicle loading and tandem connections, and strengthened vehicle standardization management. As the benefits of scale are realized, transportation costs have gradually declined. At the same time, the company uses intelligent sorting equipment and digital tools to improve sorting efficiency. As production capacity climbed, sorting costs were also reduced. In the end, the company's core operating costs for a single ticket in 2024Q2 fell 24.58% year on year and 15.28% month on month. The company's 2024H1 single ticket operating cost was 1.90 yuan, down 0.38 yuan from the previous year (yoy -16.76%), relieving price competition pressure and achieving a gross profit margin of 10.57%, which is basically stable year on year.

In terms of expenses, 2024H1 continued to strengthen its core express delivery position through reasonable contraction of peripheral business and resource optimization. The total cost of the four items was 1.044 billion yuan, a year-on-year decrease of 14.35%, and the total cost rate of the four items was 4.49%, a year-on-year decrease of 1.16pct (sales/management/R&D/finance expense ratios -0.29/-0.17/-0.37pct, respectively). In the end, the company achieved a net profit of 1.041 billion yuan, an increase of 19.80% over the previous year. Profit was 0.10 yuan, down 0.01 yuan year on year, and the net profit margin to mother was 4.48%, up 0.45 pct year on year; due to confirmed net investment income of 0.329 billion yuan in the current period, the company ultimately deducted 0.08 yuan of non-return net profit from a single vote, down 0.02 yuan year on year. After deducting the net profit of non-return to mother, the net profit margin was 3.58% year on year, down 0.08 pct year on year.

2024Q2 price competition continued, and the company's revenue per ticket was 2.02 yuan, a year-on-year decrease of 0.40 yuan (yoy -16.65%). However, the company's volume continued to grow rapidly, and cost improvement measures continued to advance. The operating cost of a single ticket fell 0.35 yuan year on year, hedging the impact of some price competition. The company achieved gross profit of 0.22 yuan per ticket, a decrease of 0.06 yuan over the previous year, and a gross profit margin of 10.79%, a year-on-year decrease of 0.49 pct. At the same time, the company's four expenses totaled 0.517 billion yuan, a year-on-year decrease of 19.26%, a year-on-year decrease of 4.27%, and a year-on-year decrease of 1.49 pct (sales/management/R&D/finance expense ratios -0.28/-0.16/-0.74pct, respectively). In the end, the company achieved net profit of 0.628 billion yuan to the mother, an increase of 23.15% year-on-year, and a net profit margin of 0.11 yuan per ticket. 0.60 pct; due to the confirmed net investment income of 0.3 billion yuan in the current period, the company ultimately deducted 0.07 yuan in net profit from a single vote, down 0.02 yuan from the previous year, and the net interest rate after deducting 3.70% from the non-return mother, a decrease of 0.30 pct from the previous year.

With the continuous promotion of the company's cost reduction and fee reduction measures, production capacity climbed downhill and cost reduction after business volume resumed growth. Cost savings hedged some of the impact of price competition, and achieved a sharp rise in the company's volume profit.

There is still room for cost optimization, and the express delivery industry's growth rate in 2024 is still resilient, and demand is strong, pending the restoration of pricing capacity. On the supply side, the company's expansionary capital expenditure has basically ended since 2022, and has entered the rebalancing stage. The company will make full use of the scale effect and intensity effect, continue to reduce depreciation costs and variable costs of a single ticket, and expand marginal advantages. The company's costs and expenses are expected to continue to be optimized; in addition to costs and expenses, the company will continue to optimize its network, improve service capabilities, increase price elasticity under continuous improvement of the customer structure, and wait for the company's single ticket profitability to be repaired.

Profit forecast and investment rating We expect the 2024-2026 operating income of Yunda Co., Ltd. to be 53.158 billion yuan, 59.15 billion yuan and 65.276 billion yuan respectively, with net profit attributable to mother of 1.803 billion yuan, 2.215 billion yuan and 2.626 billion yuan respectively. The corresponding PE for 2024-2026 will be 11.29 times, 9.19 times and 7.75 times, respectively. The business volume growth rate will lead the decline in production capacity Optimize costs and expenses, wait for the company's premium capacity to improve, performance flexibility brought about by single-ticket profit restoration, and maintain a “buy” rating.

Risks indicate the risk of increased price competition, the risk that industry sentiment falls short of expectations, the risk of changes in regulatory policies, the risk of cost control falling short of expectations, and the risk of express delivery franchisees breaking out of positions.