Event: The company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 206.861 billion yuan, a year-on-year increase of 9.44%, and realized net profit to mother of 7.617 billion yuan, an increase of 21.59% over the previous year. In Q3, the company achieved revenue of 72.451 billion yuan, a year-on-year increase of 12.07% and a month-on-month increase of 4.90%; realized net profit to mother of 2.81 billion yuan, an increase of 34.59% year-on-year and a decrease of 2.92% month-on-month.

Seize development opportunities to achieve increased revenue growth and year-on-year profit growth in 24Q3. In the first three quarters of 2024, the company seized development opportunities and achieved both revenue and profit increases. In terms of revenue, the company's total volume in the third quarter of 2024 reached 3.229 billion, up 14.37% year on year, and revenue reached 72.451 billion yuan, up 12.07% year on year. Among them, the express logistics sector's revenue increased 7.57% year on year, mainly due to the company continuing to consolidate its competitiveness in efficient services, expand customer groups in emerging industries and new business scenarios, and penetrate logistics markets in more production and consumption fields with more cost-effective services to help expand the scale of business; revenue from the supply chain and international sectors increased year on year 27.22%, mainly 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, and the company continued to deepen business integration and continuously explore the supply chain and international markets. In terms of gross margin, 24Q3 continued to optimize the operating model, adjust the network structure, improve resource utilization, and achieve a virtuous cycle of both business growth and scale efficiency. The gross margin was 14.14%, an increase of 2.16 pct over the previous year. The company's expense ratio declined steadily. The company's sales, management, R&D, and finance expense ratios were 1.1%, 6.5%, 0.9%, and 0.7% respectively in the first three quarters of 24, with year-on-year changes of -0.1, -0.3, +0.04, and -0.1 pct, respectively.

Cash flow is abundant, and the company launched a special dividend plan and a 24-year mid-term dividend plan. The company's cash flow was abundant. In 24Q3, the net cash flow from the company's operating activities reached 8.83 billion yuan, an increase of 23.5% over the previous year. In terms of the special dividend plan, the company plans to implement a one-time special cash dividend for all shareholders before the current issuance and listing. The specific plan is to distribute a cash dividend of RMB 10 (tax included) to all shareholders for every 10 shares based on the total share capital returned to shareholders on the share registration date of the implementation of the special dividend plan minus the number of shares repurchased by the company in the special account.

According to preliminary estimates, the total amount of special dividends returned to shareholders is estimated at about 4.8 billion yuan. In terms of the mid-term dividend plan, the company plans to increase the frequency of cash dividends and implement mid-year dividends for all shareholders. The specific plan is to distribute a cash dividend of RMB 4 (tax included) to all shareholders for every 10 shares based on the total share capital of the share registration date of the implementation of the mid-term dividend plan minus the number of shares repurchased by the company in the special account. According to preliminary estimates, the total dividends in mid-'24 are estimated to be about 1.92 billion yuan, accounting for about 40% of the company's 24H1 net profit.

Profit forecast, valuation and rating: Considering the declining economic growth rate, we maintained the company's profit forecast for 24 and lowered the profit forecast for 25-26. We expect the company's net profit to mother for 24-26 to be 103.3/113.2 (down 7.3%)/134.8 (4.2% reduction) billion yuan, respectively. The company's time-sensitive parts business continues to grow rapidly, and multi-network integration frees up resource collaboration efficiency. We are optimistic about the future development of the company and maintain the company's “buy” rating.

Risk warning: The risk of macroeconomic fluctuations led to a decline in express delivery demand; industry competition exceeding expectations led to a decline in single ticket revenue, which in turn affected the company's profit level; and innovative business expansion dragged down the company's profit level.