[Core Conclusion] Considering the company's leading position in Southeast Asia, China and the new market share and profitability have improved, covered for the first time, and given a “buy” rating. We expect the company's revenue for 2024-2026 to be 10.904/12.753/14.762 billion US dollars, respectively, and the PS corresponding to the 2024-9-27 closing price will be 0.65/0.56/0.48 times, respectively. Comparable to the 2024 PS level average value of a comparable company, the average PS level of comparable companies excluding Zhongtong is 0.60 times that of a comparable company. Taking into account Jitu's leading position in Southeast Asia and growth in China and new markets, the company's revenue CAGR for 2023-2026 is expected to be 19%, which is higher than the average of comparable companies of 13%. At the same time, considering the impact of Hong Kong stock market liquidity on the company's valuation level, we gave the company 0.9 times PS in 2024, corresponding to a target price of 7.73 yuan (HK$8.58). First coverage, giving a “buy” rating.

[Report Highlights] We believe that the market underestimates the development potential of the company's regional agency business model and global localization strategy.

The company has the ability to respond flexibly to competition and maintain a leading edge in the Southeast Asian market on the basis of share, service quality and management barriers established in Southeast Asia. As an important part of Jitu's global landscape, the Chinese region is expected to improve profits by combining the effects of scale and optimization of operational efficiency. In the long run, China is expected to become a growth point for the Group's profits.

The express delivery industry in Southeast Asia, China and new markets is expected to maintain rapid growth. 1) Market size: According to Frost & Sullivan, the CAGR for express parcels in Southeast Asia, China and new markets will be about 15.5%, 10%, and 17.6% in 2023-2027. 2) Competitive pattern: Jitu has been ranked first in the Southeast Asian express delivery market for four consecutive years (in terms of package volume, same below); in China, Jitu has become the 6th largest express delivery service provider in the market; in the new market, the company ranked in the top five express delivery markets in Brazil, Mexico, Saudi Arabia and Egypt in 2023.

Package volume and revenue are growing rapidly, and profitability has improved. 1) Looking at the revenue structure, Southeast Asia accounts for about 30% of revenue, China accounts for about 60%, and new markets and cross-border markets account for about 10%. 2) Shareholding structure: Li Jie, the founder of the company, holds 11.11% of the shares and 55.56% of the voting rights, and is the company's largest shareholder and actual controller. 3) In 2020-2023, the Group's package volume CAGR was 29%, revenue CAGR was 79.3%. In 2023, the company adjusted EBITDA to the right.

The company established market share, service quality and management barriers in Southeast Asia, and improved its share and profitability in China and new markets. 1) The company's unique regional agency model helps the company's regional expansion and revenue growth. 2) The company has established market share, service quality and management barriers in Southeast Asia. 3) In China and new markets, market share and single ticket efficiency have improved markedly.

Risk warning: Overseas business progress falls short of expectations; price competition is fierce; costs have risen sharply; the impact of regulatory policies; macroeconomic growth falls short of expectations; exchange rate risk.