Incidents:
On January 18, 2024, Eneng Logistics announced the 2023 annual results forecast: In 2023, the company is expected to record a non-Hong Kong financial reporting standard profit of no less than 500 million yuan, and a non-Hong Kong financial reporting standard loss of 218 million yuan for the same period in 2022, turning a loss into a profit over the previous year. Among them:
The company expects to record revenue of 9.895 billion yuan in 2023, +6% year on year; record gross profit of 1,242 million yuan, +70% year over year; record operating profit of no less than 565 million yuan. In the same period of 2022, it recorded an operating loss of 171 million yuan, turning a year-on-year loss into a profit.
Investment highlights:
The strategic adjustment has begun to bear fruit, and the product structure continues to be optimized. The 2023H1 unit price has risen sharply, and the company is currently in a transition period of development strategy from “scale led” to “quality priority”. 2023H1 completed a total LTL freight volume of 5.33 million tons, -1.1% YoY; the total number of LTL tickets completed was 56.522 million, +14.6% YoY; the average weight of the tickets was 94 kg, -13.8% YoY. The decrease in the weight of single tickets was mainly due to the optimization of the product structure: the company's small ticket volume (under 70 kg) and small ticket weight (70 to 500 kg) increased by 17.5% and 5.8%, respectively, while the volume of large small tickets (500 kg or more) decreased by 17.4%. The unit price and profit margin of small tickets is higher than that of large tickets, and the requirements for service quality and value-added services are higher. Thanks to the optimization of the product structure and the implementation of a new cost price mechanism, the company's 2023H1 LTL shipping unit price reached 854 yuan/ton, +13.1% over the same period last year.
Operational efficiency and service quality have both improved, the competitiveness of the company's products has been enhanced, and bargaining power is expected to improve
Small ticket LTL with high profit margins places higher demands on the company's operating efficiency and service quality. With the implementation of the high-quality growth strategy, the company continuously improves product competitiveness to meet the requirements of end customers. In terms of timeliness, the average delivery time of 2023H1 company was -10.1% year-on-year, and the time-to-delivery rate reached 72.1%, +11.5pcts year-on-year. In terms of service quality, the 2023H1 company's loss rate dropped from 1.2 pieces/100,000 pieces per 100,000 pieces in 2023H1 to 0.8 pieces/100,000 pieces in 2023H1, and the damage rate dropped from 50.4% in 2023H1 to 36.0% in 2023H1.
Overall, the competitiveness of the company's products has increased significantly. The number of complaints per 100,000 votes dropped from 1,268 votes in 2022H1 to 532 in 2023H1, or -58.0% over the same period last year. A high-quality growth strategy has been implemented.
Refined management reduces costs and increases efficiency significantly, helping high performance growth
Under the company's multiple measures and refined management, cost reduction and efficiency have increased significantly. The company continues to promote distribution center network optimization — lengthening trunk transportation routes, strengthening the role of core hubs, and optimizing the abolition of small distribution centers. 2023H1 has a total of 94 distribution centers, of which 34/22/38 core hubs, transit hubs, and other distribution centers are respectively +22/-21/-43 compared to the end of 2022. 2023H1 company's unit transportation cost/unit distribution center cost was +0.3%/flat, respectively, and +1.3%/+1.1% year over year, respectively, and the growth rate slowed. Taken together, 2023H1's unit operating costs were +6.4% year-on-year, and the growth rate was less than revenue (YoY +13.1%). 2023H1 gross profit per unit reached 104 yuan/ton, +108.0% year-on-year.
On the revenue side and cost side, the company is expected to achieve a high increase in performance in 2023. It is expected to record gross profit of $1,242 million, +70% over the same period last year. It is expected to record operating profit/non-Hong Kong financial reporting standards profit of not less than $565/- 500 million yuan, respectively, a significant increase over last year (-1.71 to 218 million yuan).
Profit forecast and investment rating We estimate that Eneng Logistics's revenue for 2023-2025 will be 99.05 billion yuan, 10.989 billion yuan and 12.146 billion yuan, respectively, and net profit to mother will be 396 million yuan, 584 million yuan and 712 million yuan, respectively. The corresponding PE is 11.33 times, 7.69 times and 6.31 times, respectively. As a leading domestic franchise express company, the company has initially shown results in strategic adjustments and management improvements in the short to medium term. In the medium to long term, it is expected to benefit from the growth space brought about by the accelerated penetration of LTL. Covered for the first time, a “gain” rating was given.
Risks suggest that economic growth falls short of expectations; the share of road freight has declined; price wars have resumed and industry competition has intensified; labor and oil price costs have risen sharply; related policies have affected uncertainty; and the company's performance has fallen short of expectations.