The Zhitong Finance App learned that CICC released a research report stating that it maintains Aneng Logistics's (09956) “outperforming the industry” rating, and that the profit forecast for 2024 and 2025 remains unchanged, with a target price of HK$7.5. The bank believes that cost savings provide strong competitiveness and flexibility in the company's pricing. At the same time, joining the express shipping industry may accelerate its concentration in the lead. Eneng's cargo volume is expected to continue to grow rapidly, and current valuations are still attractive.

The main views of CICC are as follows:

Judging from the pace, the bank expects 1H24 costs to continue to drop significantly year over year.

The company began integrating 55 distribution centers one after another in May '23, so the corresponding reduction in distribution and transportation costs was significantly reflected in the second half of the year: 2H23 distribution/transport bill KG costs decreased by 2.0/1.6 points year-on-year, respectively, and a decrease of 3.2 points/1.7 points month-on-month. 1H24 continues the cost reduction results and considers the base effect. It is expected that the company's costs may still be significantly reduced year over year.

Judging from the measures, there are still “bullets” for cost savings.

Over the past 24 years, the company has continued to actively adopt measures such as intelligently planning lanes, increasing sales ratio, implementing digital automation, and optimizing labor efficiency to improve operational efficiency. The bank expects that along with the increase in cargo volume, the scale effect of distribution and transportation will be highlighted: assuming that the KG costs of distribution and transportation orders are reduced by 1 cent each, the total increase in the company's gross profit will be about 240 million yuan.

The cost advantage provides strong pricing competitiveness, and the company's volume is expected to regain rapid growth.

The company's volume of goods has shown strong growth momentum since 4Q23. The average daily volume increased 10-20% year on year in November-December; considering that the company's cost and pricing competitiveness are gradually becoming prominent, and in line with the trend of industry franchisees accelerating concentration towards leaders, the bank estimates that the average daily volume of 1Q24 companies is expected to grow by more than 20% year on year.

The Matthew effect of joining Express is gradually showing, and attention is being paid to increasing the share of leading companies.

The three major signals indicate that joining Express will accelerate its concentration on the front line: ① Companies above the scale have entered the “profit-expansion-cost reduction” healthy growth path and are bridging the gap with companies below the scale; ② Since 2022, industry volume has been affected by demand, the capital market has returned to rationality, and there has been no large-scale financing for joining Express; ③ leading companies have more significant advantages in pricing and franchise management mechanisms. For example, Eneng will abolish outlet volume assessment fines and implement incremental cargo volume incentives in June 23. Overall, the advantages of leading express in terms of cost, pricing and product competitiveness are being highlighted, and the bank is optimistic that the share of leading companies will continue to increase.

Risk: Economic growth falls short of expectations, fuel costs have increased more than expected, and the company's cost control falls short of expectations.