Core views

In Q3 2024, the company benefited from rising international shipping rates and stable cargo volume and increased demand for international air freight. The company's international freight and agency business revenue achieved a high year-on-year increase of 27.22% year-on-year revenue, driving the company's total revenue to maintain a double-digit increase of 12.1%; multi-network integration and cost control measures achieved good results, with obvious cost optimization, and a gross profit margin of 14.1%. In the off-season this year, it reached the high level of the company's single-quarter net profit in the previous peak season, providing a net profit of 2.81 billion A solid foundation; capital expenditure in a single quarter fell 19% year over year, accounting for the lowest revenue ratio falling to 3.3% in the same period.

occurrences

Financial Information

The company's revenue for the third quarter of 2024 was 72.45 billion yuan, up 12.1% year on year; net profit attributable to shareholders of listed companies was about 2.81 billion yuan, up 34.6% year on year; operating costs increased 9.3% year on year in the third quarter, and gross margin reached 14.14%, up 2.16 percentage points from the same period last year.

Business highlights

The company's total volume in Q3 2024 reached 3.23 billion, a year-on-year increase of 14.37%, penetrating the logistics market in more production and consumption sectors with cost-effective services; benefiting from rising international shipping rates and stable cargo volume, as well as increased demand for international air transport, the company's international freight and forwarding business revenue achieved a high year-on-year increase of 27.22% year-on-year.

Brief review

1. Business volume and price: In Q3 2024, the company completed the express delivery business volume of 3.23 billion units, up 14.3% year on year. The growth rate was lower than the overall level of 30% of the express delivery industry. The market share of the shipment volume fell 1.0 pct to 7.4% year on year; it fell only 0.1 pct from the 2024Q2 peak season.

(1) 2024Q3, the company's express business volume is 3.23 billion units/ +14.2%, and 23Q3-24Q3 achieved five consecutive quarters of growth, but the growth rate lags behind the express delivery industry's Q3 growth rate, which is related to the driving force behind the current high increase in express delivery volume (miniaturization and extreme cost of e-commerce parts).

(2) With excellent service quality and leading product competitiveness, the company's market share of Q3 business volume reached 7.4% in 2024, down 1.0 percentage point year on year. Q3 fell only 0.1 percentage points compared to Q2.

(3) The single ticket price for the Q3 express shipping business. Against the backdrop of the decline in off-season prices in the industry in July-August and price increases in September, the company focused on the core logistics strategy, adhered to the business tone of long-term sustainable and healthy development, maintained a steady and independent pricing strategy, falling 0.2 yuan to 15.9 yuan/piece over the previous year, down 5.9% compared to 2023Q3, maintaining a relatively stable market price level.

2. Revenue: Total revenue of 206.9 billion dollars was achieved in the first three quarters. Among them, the supply chain and international business growth rate increased significantly year-on-year, making up for the low 7.6% growth in core express logistics business revenue, maintaining a healthy product structure and revenue growth rate (1). 2024Q3, benefiting from rising international shipping costs and stable cargo volume, as well as increased demand for international air transportation, the company's international freight and agency business revenue achieved high year-on-year growth, while the company continued to deepen business integration and continue to explore the supply chain and international markets. The company's overall revenue for Q3 was 72.5 billion yuan/ +12.1%. The revenue growth rate has continued to rise for 5 consecutive quarters, and the share of the supply chain and international business revenue has returned to more than 25%.

(2) Looking at the revenue structure, Q3 core express business revenue fell to 50.8 billion yuan/ +7.6%, accounting for 70% of revenue. The main reason was that supply chain and international revenue were affected by the rise in international sea and air freight prices that began in the first half of the year, but the company continued to consolidate its competitiveness in real-time services, expand the customer base and new business scenarios in emerging industries, and infiltrate logistics markets in more production and consumption fields with cost-effective services, helping to expand the scale of the business and achieve results where the growth rate of the express shipping business remained relatively steady.

3. Cost: Benefiting from the good results of lean resource planning and cost control measures, the company's profitability continued to increase. The gross margin for the first three quarters of 2024 was 14%, an increase of 1 percentage point over the same period last year

(1) 2024Q3's operating cost is 62.2 billion/ +9.3%, and the increase was less than on the revenue side, mainly due to the company always adhering to lean resource planning and cost control, continuously optimizing the operating model, optimizing the network structure, improving resource utilization, and achieving a virtuous cycle of business growth and efficiency of scale.

Over the past three years, the company has continued to promote multi-network integration and strengthen the integration of transit, transportation, and terminal resources of multiple business networks. Especially during the low express delivery season in the third quarter, the company strengthened resource collaboration across business sectors, further expanded resource sharing benefits and supplier cost control (capacity outsourcing, space rent, etc.), and enhanced the company's profitability.

(2) 2024Q3's gross profit reached 10.24 billion yuan, achieving a significant year-on-year increase of 32.3%. The Q3 gross profit margin was 14.1%, up 2.1 pct from the same period in 2023, only lower than the previous quarter and 2021 Q4. In this year's off-season, it reached the company's high profit level in a single quarter during the peak season range of previous years.

4. Net profit: Thanks to the promotion of refined internal management and cost control management, etc., the company's overall cost rate decreased year-on-year; multi-network financing and cost reduction efficiency continued to release profits, achieving 7.62 billion net profit in the first three quarters of 2024, reaching 21.6% (1) 2024Q3. The company's overall period expenses were 6.48 billion yuan, an increase of 13.9% over the same period in 2023; due to the steady increase in revenue scale, the management rate was raised to 8.8% year on year, up 0.1 percentage points year on year. The comparison is 0.4 percentage point optimization. As the Q4 business season changes, the benefits of resource collaboration and sharing will be further reflected, and quarterly rates are expected to continue to fall.

(2) Net profit attributable to 2024Q3 was 2.81 billion yuan/ +34.6%, and net profit attributable to mother reached 3.9%. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 2.595 billion yuan, an increase of 40.98% over the previous year.

5. Capital expenditure and cash flow: Net operating cash flow maintained steady growth, up 23.5% from the same period last year; asset capital expenditure was 7.57 billion yuan, down 19.1% year on year, accounting for the lowest revenue ratio of 3.3% over the same period in history (1) The company's daily operating cash flow and overall financial structure remained steady. The net operating cash flow of 2024Q3 was 8.83 billion yuan/ +23.5%.

(2) 2024Q3 asset capital expenditure of 1.77 billion yuan/ -41.1%, accounting for a revenue ratio of 2.4%, the lowest in a single quarter. The basic judgment is that the company has reached the peak of capital expenditure. At the same time, it also reflects the company's business strategy of focusing on core logistics business, lean resource planning, and strengthening the efficient management of resource investment and production.

Profit forecast and valuation: Revenue for 2024-2025 is estimated to be 287 billion yuan and 321.7 billion yuan, up 11.1% and 12.1% year-on-year, and net profit attributable to shareholders of listed companies is 10.22/12.82 billion yuan; corresponding to 2024-2025 PS is 0.74/0.66, and PE is 20.8/16.6 times, respectively. Therefore, it was given a “buy” rating.

Risk analysis

(1) The volume and profit margin growth of the time-sensitive express delivery business fell short of expectations: the company's core profit source was the time-sensitive express delivery business. The overall economic environment affected the commercial activity of many offline customers slowed down this year, affecting the growth of documents and industrial products in time-sensitive goods. Although the company expanded consumer time-sensitive express delivery services through initiatives such as developing e-commerce platforms in reverse return business, the year-on-year increase in time-sensitive express delivery revenue in the first half of 2024 was only a single digit. Whether the company's time-sensitive express delivery business can return to a growth rate of 10% + in the future requires the company not only to strengthen its core time-sensitive express delivery capabilities, but also depends on the recovery of the boom. If it falls short of expectations, it may lead to less elastic demand for time-sensitive express delivery, and if competition in the e-commerce return market intensifies, it may also lead to a decline in the demand side of e-commerce returns in time-sensitive express delivery. Furthermore, the SF Express Hubei Ezhou hub transit center was officially put into operation in 2023. There is still uncertainty about whether the axle and spoke networks can significantly reduce costs and drive component volume growth through improved timeliness in the next 3 years.

(2) Deterioration of the international geographical environment and weak cross-border e-commerce exports: If international trade is still affected by factors such as inflation and international geopolitical conflicts between Europe and the US, international logistics demand weakens. In addition, international air and shipping prices continue to fluctuate, there is some pressure on the stability of the company's international freight forwarding and supply chain business revenue and gross margin.

(3) Rising labor costs and imbalance between supply and demand: The logistics industry is also a labor-intensive industry, and the trend of population aging is becoming more obvious. The natural result is a decrease in the supply of the additional labor population in the logistics industry. In particular, heavy labor processes such as transportation, warehousing and handling, etc., are under high pressure to recruit workers. Furthermore, flexible employment industries such as takeout are also robbing the logistic industry of school-age labor, so how to balance the relationship between labor costs and efficiency has become a major uncertain issue for the company to stabilize profits in the future.

(4) The cost reduction and efficiency improvement of the four internal networks fell short of expectations: The company began in 2021 to improve the operational efficiency of all aspects of operation through measures such as continuous promotion of multi-network integration and investment in automation equipment. However, the country involved many regions, routes, and links, and has now entered its fourth year. There is some uncertainty about the subsequent progress and integration effects.