Summary content

[Core Conclusion] Management improvements go hand in hand with production capacity increases, and the company is in a continuous improvement channel. The company's net profit for 24-26 is estimated to be 0.92/1.37/1.83 billion yuan, and the corresponding EPS is 0.60/0.89/1.20 yuan.

We believe that since the expected growth rate of the company's net profit to mother is significantly higher than the average of comparable companies, the company's PE valuation is higher than that of comparable companies, which is reasonable to a certain extent. From the perspective of the market value of a single ticket, we believe that it is reasonable for the company to raise the market value of a single ticket to about 0.82 yuan/ticket, and the corresponding target price is 11.80 yuan. Covered for the first time, a “gain” rating was given.

[Report Highlights] Since 2022, the company has achieved an increase in market share (from 10.2% in 21 to 13.3% in 23) and continuous improvement in net profit after deduction (from -0.94 billion yuan in 21 to 0.34 billion yuan in 2023), proving the company's ability to respond to market changes through management improvements and capacity expansion. We believe that the possibility that the company will continue to achieve these results is not low.

[Main logic] Actively introduce professional managers and continue to promote the “flattening” of franchisees. The company introduced core executives with experience in Ali, such as Wang Wenbin, and strengthened incentives for core executives and business backbone through employee shareholding plans. At the same time, it continued to flatten franchisees, and the share of shipments from the top ten franchisees dropped from 36.6% in 2017 to 15.8% in 2023. These changes will help improve the company's management level in terms of both headquarters governance and improving franchisee management, and it is expected that they will continue to play a positive role in the future.

Promote direct management and automation of transit centers, and launch a three-year 10 billion plan in 2022 to expand production capacity. Starting in 2018, direct management and automation of transit centers will be strengthened. By 2023, the company will have 71 direct transfer centers and 240 sets of automation equipment. Since the launch of the 10 billion production capacity expansion plan, normal production capacity will reach 50 million units/day and 60 million orders/day in 2022 and 2023, respectively, and is expected to reach 75 million units/day in 2024.

Shareholders' empowerment and cooperation are expected to continue. There is no small possibility that Ali's empowering or achieving cooperation with Shentong in the five areas of talent, capital, resources, technology, and business will continue in the future.

Risk warning: fierce price competition; sharp rise in costs; impact of regulatory policies; macroeconomic growth falling short of expectations.