The Zhitong Finance App learned that Changjiang Securities released a research report saying that on March 20, Zhongtong Express released the 2023Q4 results announcement and dividend policy. In 2023, Zhongtong will distribute a cash dividend of 0.62 US dollars per share. In 2024, Zhongtong will implement a regular dividend policy with a dividend payment rate of not less than 40%, while increasing the total amount of stock repurchases by 500 million US dollars to 2 billion US dollars, and extending the validity period of the repurchase plan for one year. From an industry perspective, express delivery prices, sector valuations, and institutional holdings are currently at the bottom of history, and industry growth is expected to exceed expectations in 2024. In 2024, Zhongtong emphasized high-quality development, combined with regulatory policies to restrict the intensity of price competition. A second-order price turning point can be expected, prompting investment opportunities at the bottom of the express delivery sector.

Related targets: Priority is given to recommending industry leaders Zhongtong (02057) and Yuantong (600233.SH) with high win rates, while focusing on Shentong (002468.SZ) (gradual release of profit flexibility), Yunda (002120.SZ) (focus on network quality improvement), and the bottom procyclical product SF Express (002352.SZ) (continuous improvement in operating cash flow).

Express delivery business data for January-February:

According to statistics from the State Post Office, in January-February, the national express delivery business volume was 23.26 billion units, up 28.5% year on year; in January-February, express delivery revenue was 19886 billion yuan, up 19.8% year on year; according to the volume and revenue growth rate of the Post Office, the unit price of express delivery in January-February reached 8.5 yuan/piece, down 6.7% year on year.

The main views of Changjiang Securities are as follows:

Zhongtong Express Annual Report:

Increase dividends+repurchases to ease market concerns about prices. In 2024, Zhongtong implemented a regular dividend policy and added a repurchase plan amount. After the industry volume growth rate exceeded expectations, it also alleviated market concerns about excessive price competition. Chairman Lai emphasized, “We adhere to a consistent strategy and effectively balance the growth between service quality, business volume and profit.” In an imperfectly competitive market, leading companies are often industry price leaders. As a leader in the industry, Zhongtong paid more attention to high-quality development in 2024, emphasizing service quality improvement and differentiation, which means that the industry's unit price and single ticket profit are likely to bottom out, and the bottom line of price competition in 2024 will gradually be established under the leadership of the leader.

Industry volume and price performance:

Douyin and Kuaishou drove major increases, and unit prices declined moderately. The volume of items in the industry increased by 28.5% year-on-year in January-February, which is significantly higher than the Post Office's forecast of 8%. In January-February, the country's online retail sales increased 14.4% year on year. Demand for online consumers was strong. Douyin and Kuaishou's rapid growth or boosted volume exceeding expectations (see our industry buying tips report “Express Delivery Demand Exceeds Expectations, Seizing Bottom Opportunities”). According to the volume and revenue growth rate of post offices returning to the unit price level, the national express delivery unit price fell 6.7% year on year in January-February, and the unit price dropped slightly year on year. Among them, prices gradually entered a period of decline in mid-February 2024.

Brand performance:

Shentong led the growth rate in component volume, and unit prices rose seasonally. In January-February, SF Feng/Yuantong/Yunda/Shentong achieved a cumulative total of 19.3/33.9/30.2/2.85 billion pieces, an increase of 14.5%/26.6%/27.0%/40.0% over the previous year. SF Express had a high base impact due to the same period last year to guarantee delivery demand after production and life resumed and during the Spring Festival, and the growth rate was weaker than other brands. In January-February, the unit price of SF Express, Yuantong, Yunda and Shentong was 16.71/2.48/2.27/2.21 yuan, respectively, -4.5%/-5.4%/-14.6%/-12.4%, and +0.71/+0.06/+0.03 yuan compared to December. There was a year-on-year decline in unit prices due to the gradual decline in prices in mid-February 2024, and seasonal increases from month to month, mainly due to changes in cargo volume around the Spring Festival and peak season adjustment fees.

Volume price in grain-producing regions:

Prices increased and decreased in Guangzhou and Yiwu, while volume and price reductions increased in Jieyang. In January-February, Yiwu/Guangzhou/Jieyang express delivery volume increased by 39.8%/40.8%/-15.6%, respectively. Guangzhou and Yiwu volumes grew rapidly, and Jieyang volumes declined year-on-year. In January-February, unit prices in Yiwu/Guangzhou/Jieyang changed by -12.7%/-13.1%/+1.8%, respectively. Unit prices in Jieyang alone increased year-on-year.

Risk warning

1. Industry price competition intensified; 2. Industry volume growth fell short of expectations; 3. Oil prices and labor costs rose sharply.