As China's economic development enters the stage of steady growth, the improvement of logistics quality and efficiency has become an important development direction, and the importance of the less than one-load industry with a market scale of more than one trillion is highlighted. In this report, we will analyze the current competition pattern of the less-than-truckload industry, the prospect of market growth, the differences between different operation modes, and the network construction of different express enterprises. and a specific analysis of the business changes of Anneng logistics and its advantages in the market competition.

The trillion-load market continues to grow steadily, and the industry enters a period of accelerated integration. According to iResearch Consulting, China's truckload transport market will reach 1.74 trillion yuan in 2022. Benefiting from demand growth and its own flexible transport characteristics, the truckload market is expected to maintain steady growth. According to iResearch Consulting, the industry scale CAGR will reach 6.49% from 2021 to 2025. The concentration of the industry is low, with CR5 and CR10 (income caliber, the same below) only 4.03% and 5.73% in 2021. The leading enterprises in the less than-loaded industry are mainly based on the whole network mode, with high barriers to entry, obvious service advantages and partial price advantages. the market share is expected to increase gradually in the future, leading the industry to enter a period of accelerated integration. In the whole network express, the joining network accounts for 69% of the freight volume of the whole network express market because of its flexible mode and faster network expansion. In view of the widespread homogenization of franchised express products, the current industry competition is changing from a single scale to comprehensive service competition, and high-quality service enterprises under industry integration are expected to continue to grow.

Aneng joins the Ladyload leader for the whole network and focuses on the steady development of express transportation. Aneng created the freight cooperation platform model in 2012, that is, the franchise system of "central direct operation + network joining", which expanded rapidly, and became the largest express network in China's less-than-truckload market in 2016, with 136 distribution centers and nearly 10,000 self-operated fleets. Dawei Capital holds 24.6% of the shares, which contributes to the development of the company and is the largest shareholder of the company. The company's total freight volume CAGR from 2017 to 2021 is about 8.8%. From 2020 to 2021, it occupies the first place in the joining mode, and the freight volume accounts for 16.8% of the total express freight volume of the whole network in 2021. The company's product differentiation matches the time limit and price demand, fully covering the 0-10 ton kg section, and there is a large market demand for MINI e-commerce series, timing and precision products. In 2022, the company's revenue and profits were under short-term pressure due to the disturbing demand of the epidemic, industry competition and the adjustment of the company's strategy.

From the strategic transformation of "volume is king", reducing costs and increasing profits is just around the corner. In the early development process of Anneng, the terminal layout was promoted by the strategic planning of "cargo volume is the king". The scale of the company's cargo volume expanded rapidly, and the fast freight volume exceeded 10 million tons in 2020. From 2021 to 2022, the external market environment changed, the impact of the epidemic and changes in the industry pattern slowed the growth of the company's cargo volume, and some of the problems implied in the rapid expansion of the company gradually appeared. Therefore, in September 2022, the company determined a new strategic direction of "supporting sustainable growth of effective scale with quality and profit", turning to internal intensive cultivation to improve management capacity. By upgrading and optimizing the management structure, price channel, network ecology and operation system, H2 unit revenue and unit cost improved in 2022, gross profit was initially repaired, and H2 gross profit increased by 22% in 2022. Looking to the future, with the continuous improvement of the company's price system, the continuous optimization of network ecology, and the improvement of product quality brought about by the improvement of operation, the company is expected to achieve long-term growth.

Network advantage + mode innovation + science and technology empowerment + fine management, four aspects to build the core barrier of Anneng. 1) Anneng ploughed the industry for many years, accumulated abundant network construction, maintained market leadership in network scale indicators such as the number of distribution centers, trunk vehicles and outlets, and had a low terminal network turnover rate, with strong network advantages. 2) the company has the change gene and has innovated many business models, price matrices and pricing mechanisms of the express industry. In 2023, the company launched the pricing 4.0 mechanism, which further refined the product pricing, divided the weight segment more accurately, and further enhanced the comprehensive competitiveness of the product by allocating to allocating pricing. 3) focusing on the efficiency improvement brought by digital tools, the company independently developed several sets of IT systems to promote the combination of scientific and technological innovation and operation, and built a scientific and technological moat. Relying on the deep integration of digital technology and operation management, we will constantly optimize and reduce the cost of trunk transportation and distribution centers, and improve the service quality and product transportation efficiency of the network. 4) the management of the company has been ploughing the industry for many years, has rich management experience, communicates closely with grass-roots employees, makes omni-directional and fine management based on the front-line fleet, and gradually builds a moat with cost advantage.

Investment advice:

For many years, the company has strong competition barriers in network scale, business model, digital accumulation and manager management. Under the strategic transformation, the company is expected to achieve cost reduction, efficiency and profit reversal. Under the improvement of service, we are optimistic about the company's long-term development space. We estimate that the company's adjusted net profit for 2023-2025 will be 5.24x7.30 / 855 million yuan respectively, corresponding to the current share price PE of 11.6x8.3x7.1 times, giving a buy-An investment rating for the first time. Taking into account the long-term growth of the company, the company is valued at 13 times in 2024, corresponding to a 12-month target price of HK $8.92.

Risk tips: 1) macroeconomic fluctuations lead to lower-than-expected growth of transport volume; 2) rising fuel prices lead to lower-than-expected cost control; 3) intensified market competition leads to share loss; 4) related assumptions and profit forecasts fall short of expectations.