Core views:

Private express delivery pioneers, and share recovery is being accelerated. Shentong Express was founded in 1993. At the beginning of the development of the e-commerce industry, the company rapidly expanded with a large franchise-light asset model and established a first-mover advantage. Although subsequent reforms have lagged behind, the company has actively sought change in recent years. In recent years, the company has successively completed the direct marketing transformation of the transit center, cooperated with Ali to narrow the gap, and narrowed the gap by expanding production. 24H1's market share increased by 1.1 pp compared to 22 years, and the profit from a single ticket was restored to 4 points.

Industry supply and demand have reversed, and industry returns have increased. The industry experienced growth before and after the pandemic, and the profit center changed gears to reduce capital expenditure. The industry's capital expenditure peaked in '21. Leading express delivery companies have basically completed direct management and automation transformation, and the industry has entered a period of climbing capacity. Against the backdrop of strong demand growth, it is estimated that it will take 4 years to rebalance supply and demand. Capacity utilization will peak in 2025. The profit center of the industry will gradually move from shock to stability, and Shentong will also usher in a strategic opportunity to overtake cars at corners.

The positive cycle of capital and profit is accelerating, and market capitalization is expected to achieve a steep upward curve. Since '22, the company has continued to interpret the growth path of “network expansion - market share repair - cost optimization - single ticket revenue increase”, and has now recovered to the cost optimization stage. In the short term, due to the acceleration of the quantitative and profit cycle, the company's profit recovery has already begun, and the marginal reversal of single-ticket profits has accelerated. In the medium term, with the implementation of this round of capacity expansion, the company's network competitiveness has been replenished. Single ticket revenue has opened up space under future product stratification, and the return on performance is expected to reach the harvest period. The ROE and dividend rate are expected to increase further in the future, and the market value is expected to achieve a steep upward curve.

Profit forecasting and investment advice. Continued deepening of digital intelligence operations and the implementation of 10 billion dollars of production are expected to jointly help the company achieve a steep upward curve in market value. EPS is expected to be 0.60, 0.83, and 1.04 yuan/share in 24-26, respectively. Referring to comparable companies, the company will be given a 25-year PE valuation of 14 times, corresponding to a reasonable value of 11.66 yuan/share, maintaining a “gain” rating.

Risk warning. Industry demand growth falls short of expectations, industry price competition has deteriorated again, franchise network operations are unstable, production capacity investment falls short of expectations, policy impact is uncertain, and macroeconomic environment is under pressure.