Courier company with a “global vision”

Jitu is an express delivery company with a “global vision”. After only 9 years of establishment, the express delivery network covers 13 countries. The company started in Southeast Asia in 2015, moved to the Chinese market in 2020, and moved into new international markets (mainly including the Middle East and Latin America) in 2022.

Among them, the Chinese market contributed the most to revenue. 2024H1 achieved EBIT correction, and profits continued to improve; the Southeast Asian market had significant advantages and was the company's profit base; the growth momentum of the new market was strong, and 2024H1 drastically reduced losses. The correction of the company's cash flow and gross profit in 2023 means successfully achieving self-hematopoiesis and dispelling market concerns about the company's liquidation. The company follows the management model of the “Backgammon” team to promote the rapid establishment of a global logistics network: 1) agent operation model, where GeTu regional agents own headquarters shares and part of the shares of regional operating entities. The headquarters provides incentives to regional agents based on performance to enhance team execution and cohesion; 2) Focus on offline channel development. OPPO's downfall helps Goku establish a network; 3) Focus on marketing and brand image building.

Chinese market: entering the market at an accelerated pace, reversing losses at a fast pace

Jitu was the latest express delivery company to enter the Chinese market. With its high product cost performance ratio and excellent agent model, it quickly opened up the Chinese market and achieved rapid development. 2024H1 has an average daily volume of more than 48 million units/day in China, with a market share of 11.0%.

Since 2023, Jitu has adjusted its business strategy in China in a timely manner, shifting from scale to profit first. In 2023, EBITDA in China was corrected, mainly because: 1) in 2023, Jitu China broke through 42 million units/day and entered a flat range of the cost curve; 2) with Getu successfully entering the Hong Kong stock market, it became more and more urgent to raise the company's profit level; 3) The high growth in price in exchange for volume was unsustainable. Tactically, the company expanded production capacity in a timely manner, rapidly increased the amount of support parts, and accelerated cost improvement.

Although the company's production capacity investment is relatively insufficient, due to snobbery methods using a combination of light and heavy assets, heavy assets purchase capacity and automated sorting equipment. Land and housing construction are mainly leased, achieving maximum cost optimization with less capital costs.

Overseas markets: leading Southeast Asia and opening up new markets

For 4 consecutive years, Jitu ranked first in Southeast Asia's express delivery share. 2024H1's Southeast Asia package volume reached 2 billion, a year-on-year increase of 42.0%, and its market share increased from 16.4% in 2020 to 27.4% in 2024H1. The Southeast Asian express delivery market is still growing, and the compound growth rate of e-commerce in Southeast Asia is expected to exceed 20% in 2023-2025. With its unique agency model, the company has built a localized network according to local conditions, and continues to lead the Southeast Asian market. The company exports mature Chinese experience to the Southeast Asian market, maintains a competitive pricing strategy, and is expected to accelerate the emergence of underdeveloped enterprises and further increase its market share. At the same time, as international e-commerce platforms such as TikTok Shop and Temu enter the market, the Southeast Asian e-commerce industry pattern is expected to be reshaped. The Southeast Asian platform's self-built logistics traffic advantage may gradually diminish, and Jitu's advantages as an independent third-party logistics scale effect are highlighted. In 2022, the company launched networks in new markets and countries one after another. As the new market network continued to expand, operating efficiency improved significantly. 2024H1, the company's volume increased 63.9% year-on-year to 0.14 billion units, reaching 6.1% of the market share, and the EBITDA loss in the new market fell sharply to -7.8 million US dollars.

Investment advice: The inflection point of profit is evident, and the advantages of a global layout highlight that the company is the express delivery company with the most overseas genes, and the agent model promotes the rapid development of overseas business. In 2024, business conditions in all regions improved, and profit inflection points were evident. In the short term, profits in the Chinese market continue to improve; the Southeast Asian market has significant advantages, and flexible competitive strategies and scale effects are expected to increase rapidly; the new market maintains strong growth momentum and is expected to achieve continuous loss reduction.

In the medium to long term, we are optimistic about the company's ability to expand its global logistics network and growth value. The company's net profit for 2024-2026 is expected to be 0.15/0.39/0.5 billion US dollars, respectively, and PE is 41.4/16.4/12.7X, respectively, covered for the first time, giving it a “buy” rating.

Risk warning

1. Price competition in China exceeds expectations; 2. Risk of overseas policy fluctuations; 3. Overseas e-commerce platforms' self-built logistics growth exceeds expectations; 4. Express delivery demand growth falls short of expectations; 5. Risk that profit forecasting assumptions are untrue or fall short of expectations.