The Zhitong Finance App learned that Zhishang Securities released a research report saying that the current valuation of the express delivery sector is at the bottom, which basically reflects the industry's pessimistic expectations, and the industry volume growth rate since 2024 is better than expected. Currently, the risk and return of investment in the express delivery sector is relatively cost-effective. At the same time, the Shanghai Stock Exchange issued an announcement on March 1 that Zhongtong Express was included in the “Hong Kong Stock Connect” list, which is expected to increase the market liquidity of Zhongtong Express. It is recommended to focus on express delivery sector allocation opportunities.

The bank believes that 1) Franchise Express: In the medium to long term, industry differentiation continues, and the market share of leading express delivery companies is expected to increase further, thus driving performance recovery (Zhongtong Express/Yuantong Express); it is recommended to focus on Shentong Express (002468.SZ) (accelerating capacity investment, the company's volume growth rate continues to lead the peers, which is expected to lead to profit release under the scale effect) /Yunda Shares (002120.SZ) (The growth rate of unit volume franchises ushered in positive growth, and is expected to drive marginal improvements). 2) Direct Express: Optimistic about SF Express Holdings (002352.SZ) (the steady rise in the time-efficiency business, the increase in profits in the oversized express business combined with the continuous improvement of new business. The cost reduction of multi-network integration is expected to exceed expectations, and it is expected to be the first to benefit in a pro-cyclical context).

The main views of Zheshang Securities are as follows:

Airlines: Volume and price during the peak season of the Spring Festival travel season exceeded expectations, and the March season was lackluster. Xiaohang's Q1 performance is expected to improve significantly year-on-year

Airline volume and price performance during the peak season of the Q1 Spring Festival travel season exceeded expectations. The price side performance in March was lackluster. The airline's 24Q1 performance is expected to improve markedly year-on-year. 1) Cumulative ASK for January-February: Air China, China Southern Airlines, China Eastern Airlines, Chunqiu, and Jixiang ASK respectively +5%, +7%, +10%, +32%, and +35% compared with the same period in '19. 2) Cumulative RPK for January-February: Air China, China Southern Airlines, China Eastern Airlines, Chunqiu, and Jixiang RPK were +1%, +7%, +32%, and +37%, respectively, compared with the same period in '19. 3) The cumulative passenger occupancy rate for January-February: Air China, China Southern Airlines, China Eastern Airlines, Chunqiu, and Jixiang's cumulative occupancy rates for January-February were 79%, 83%, 80%, 92%, and 85%, respectively, -3.2, +0.3, -2.1, +0.1, and +0.8 pct compared to the same period in '19, respectively. 4) Fuel prices: The average price of aviation kerosene in 24Q1 was 6,694 yuan/ton, down 12% from 23Q4 and 4% from 23Q1. 5) Exchange rate: In terms of the median price between the US dollar and RMB, the RMB depreciated 0.2% at the end of 23Q1 (as of March 29) compared to the end of 23Q4.

China Southern Airlines: The estimated net profit for 24Q1 is about -2.5 billion yuan to 1.11 billion yuan (1.9 billion yuan for 23Q1).

Air China: The estimated net profit for 24Q1 is about -6.0 to 980 million yuan (-2.9 billion yuan for 23Q1).

China Eastern Airlines: The estimated net profit for 24Q1 is about -50 to 780 million yuan (-3.8 billion yuan in 23Q1).

Spring Airlines: The net profit for 24Q1 is estimated to be about 750 to 830 million yuan, an increase of 112%-134% over 23Q1.

Juneyao Airlines: The net profit for 24Q1 is estimated to be about 4.1 to 50 billion yuan, an increase of 149%-204% over 23Q1.

Airport: Further recovery of international travelers in Q1 drives performance recovery

As passenger throughput on international routes recovers, airport business continues to improve, and performance continues to recover. According to the company's announcement, the cumulative number of passengers at Shanghai Airport and Baiyun Airport in January-February was 13.17 million, respectively, -1% and +10% compared with the same period in '19. The number of passengers within China was +13% and +24%, respectively, compared with the same period in '19, and the number of international and regional passengers was -26% and -30%, respectively, compared with the same period in '19.

Baiyun Airport: The net profit of the 24Q1 company is expected to return 170-200 million yuan, an increase of 270%-352% over the same period in 23Q1.

Shanghai Airport: The net profit of 24Q1 is estimated to be about 48-530 million yuan, reversing the year-on-year loss.

Express delivery: The volume growth rate is higher than expected, and demand is resilient

Upstream commercial flow: In January-February 2024, the total net sales volume was 8.1 trillion yuan, +5.5% year-on-year. The cumulative online retail sales volume of physical products was 1.83 trillion yuan, +14.4% year-on-year. The penetration rate of online shopping for physical products in the first 2 months was 22.4%.

Industry situation: From January to February 2024, the express delivery business volume completed 23.26 billion pieces, an increase of 28.5%; according to data released by the Ministry of Transport and the State Post Office, since the beginning of the Spring Festival travel season (January 26 to February 17), the national postal express industry has collected 5.655 billion express parcels, an increase of 30.8% over the same period of the 2023 Spring Festival travel season; at the same time, various express delivery companies resumed work and production early after the 2024 holiday season, and the industry gradually returned to normal operation; according to the Ministry of Transport; according to the Ministry of Transport According to the weekly data released, it is estimated that as of March 17, the cumulative package/delivery volume since 2024 is about 28.413/28.406 billion pieces, +21.5%/17.8% compared with the same period in 2023, respectively. Since 2024, the volume performance of the industry has been better than expected. It is estimated that the volume of parts in the Q1 industry is expected to increase by about 20% year-on-year in 2024. Although the industry's single ticket revenue has declined year over year since 2024, it has basically remained stable from month to month. The performance of express delivery companies is expected to maintain steady year-on-year growth in 2024Q1.

SF Holdings: The estimated net profit for 24Q1 is approximately RMB 2.05 to 2.5 billion yuan, +19.2% to 45.6% YoY.

Yuantong Express: The estimated net profit for 24Q1 is about 909-1.06 billion yuan, +0.3% to 17% year-on-year.

Yunda Co., Ltd.: The net profit for 24Q1 is expected to be about 3.61 to 421 million yuan, +0.6% to 17.4% year-on-year.

Shentong Express: The estimated net profit for 24Q1 is about 165-202 million yuan, +24.2% to 51.8% year-on-year.

Debon Co., Ltd.: The net profit for 24Q1 is expected to be about 0.7-094 million yuan, +5.6% to 29.1% year-on-year.

Oil transportation: The balance between supply and demand in the industry is tight, and the impact of the Red Sea is evident. It is expected that 24Q1 will improve significantly year-on-year

In February, the Middle East trade increased, and exports from the US Gulf continued to be high. Combined with the impact of the Red Sea incident on oil transportation, VLCC tariffs swayed up after the holiday season, reflecting that the industry is already in a tight balance between supply and demand. Considering the industry situation, the Q1 performance mainly refers to the average freight rate from December last year to February of that year. The average 24Q1 TD3c freight rate was $41,782/d, an increase of 22% over the previous year, and the performance is expected to improve significantly.

COSCO HNA: Referring to the 24Q1 spot rate, the net profit for 24Q1 is estimated to be about 1.35 billion yuan, an increase of 23% over the previous year.

China Merchants Shipping: Referring to the 24Q1 spot freight rate, the net profit for 24Q1 is estimated to be about 1.6 billion yuan, an increase of 43% over the previous year.

China Merchants CNPC: The estimated net profit for 24Q1 is about 450 million yuan to 500 million yuan, +11% to +23% year-on-year.

Freight forwarding: 24Q1 foreign trade market freight rates rose month-on-month, domestic trade freight rates declined during off-season

Foreign trade freight rates rose sharply in the first quarter due to the Red Sea incident. Domestic trade freight rates declined month-on-month during the off-season. The average SCFI index for the foreign trade market was 2,065 points (as of March 15), +113% year over month, +90% month over month; the average PDCI index for the domestic trade market 24Q1 (as of March 8) was 1107 points, -28% year on month, and -6% month on month.

Zhongya Logistics: The net profit for 24Q1 is estimated to be about 330 million yuan to 350 million yuan, or -46% to -43% year-on-year.

Cross-border logistics: Jiayou's business in Africa grew rapidly, and air freight rates fell month-on-month during the Q1 off-season

Ganqimaodu Port's import and export situation: Weak domestic demand for coking coal affects traffic volume and short shipping costs at Ganqimaodu Port. Most Mongolian coal traders closed the market around the Q1 Spring Festival holiday, and port traffic declined. According to the Bayannur Municipal Bureau of Commerce of Inner Mongolia Autonomous Region, Ganqimaodu Port completed a total import and export volume of about 6.15 million tons in January-February, an increase of 33% over the previous year. Among them, imported about 5.97 million tons of coal, an increase of 33% over the previous year, and imported 154,000 tons of copper powder, an increase of 37% over the previous year. In terms of short-run freight rates for Mongolian coal, according to the Mongolian coal network, the average prices for January, February, and March (as of March 22) were 154, 105, and 107 yuan/ton, respectively, -36%, -66%, and -72% compared with the previous year.

Off-season air freight rates declined month-on-month, and the increase in cross-border e-commerce freight volume provided support for promising industry freight rates. The 24Q1 Shanghai Outbound Air Freight Index (BAI80) averaged 3,865 points (as of 3-18), -15% year-on-year and -21% month-on-month.

Jiayou International: Considering the rapid growth of business in Africa, net profit for 24Q1 is estimated to be about 23-250 million yuan, an increase of 14% to 26% over 23Q1.

Sinotrans: Expected net profit for 24Q1 is about 1.01 billion yuan to 1.05 billion yuan, +5% to +9% year-on-year.

China Eastern Airlines Logistics: The net profit for 24Q1 is estimated to be about 660 million yuan to 750 million yuan, -13% to -1% year-on-year.

Highway Ports: Steady restoration of traffic flow from 2024

During the 40-day Spring Festival travel season, the number of people traveling on highways is expected to reach 7.83 billion, of which the number of non-commercial passenger bus trips on highways and ordinary national and provincial highways is expected to complete 6.72 billion (accounting for about 80% of the cross-regional traffic of the whole society), and the road commercial passenger traffic is expected to complete 1.11 billion. Overall, the operating fundamentals of the highway sector are improving with certainty. According to the previous forecast for the full year of 2024, the 19Q1 and 23Q1 results account for the full year. It is estimated that:

Ninghai-Shanghai Expressway: The net profit for 24Q1 is expected to be about 1.26 billion yuan, an increase of 3% over the previous year.

Shandong Express: The estimated net profit for 24Q1 is about 860 million yuan, an increase of 6% over the previous year.

China Merchants Highway: The net profit for 24Q1 is estimated to be about 1.62 billion yuan, an increase of 20% over the previous year.

Qingdao Port: The estimated net profit for 24Q1 is 1.28 to 1.3 billion yuan, +2% to +3% year-on-year.

Investment advice

Aviation airports: Based on the continued restoration of international routes driving the continuous recovery of aircraft utilization, airline performance is expected to achieve positive year-on-year growth in 2024. We recommend Spring Airlines/Air China/Juneyao Airlines/China Southern Airlines based on anticipated flexible space and performance delivery certainty.

Express delivery: Currently, the express delivery sector's valuation is at the bottom. It basically reflects the industry's pessimistic expectations, and the industry volume growth rate since 2024 is better than expected. At the same time, the Shanghai Stock Exchange issued an announcement on March 1 that Zhongtong Express was included in the “Hong Kong Stock Connect” list, which is expected to improve the market liquidity of Zhongtong Express. It is recommended to focus on express delivery sector allocation opportunities. 1) Join Express: In the medium to long term, industry differentiation continues, and the market share of leading express delivery companies is expected to increase further, thus driving performance recovery (Zhongtong Express/Yuantong Express); it is recommended to focus on Shentong Express (speeding up capacity investment, continuing to lead peers in volume growth, which is expected to release profits under the scale effect) /Yunda Shares (volume growth has ushered in an inflection point to achieve positive growth. The headquarters empowers franchisees to drive marginal improvements in outlets). 2) Direct Express: Optimistic about SF Holdings (the time-efficiency business is rising steadily, the profit increase in the bulky express business is compounded by the continuous improvement of the new business. The cost reduction of multi-network integration is expected to exceed expectations, and it is expected to be the first to benefit in a pro-cyclical context).

Oil transportation: The certainty of supply in the industry is slowing down, and we continue to be optimistic about the oil transportation boom cycle interpretation. We recommend COSCO Haineng, China Merchants Shipping, and China Southern Oil.

Cross-border logistics: Benefiting from the rapid growth of cross-border e-commerce in China, cross-border e-commerce logistics may usher in a period of strategic opportunity. We recommend Sinotrans, a leading global freight forwarder to transform into an integrated logistics service platform, and China Eastern Airlines Logistics, which has mastered the core resources of air transport. The basic business market between China and Mongolia continues to be consolidated, and the China-Africa business is growing rapidly, supporting rapid growth in performance. I recommend Jiayou International.

Transportation: We recommend Nakaya Logistics, the leading domestic trade shipping company. Decentralized and multimodal transport opens up room for growth on the racetrack. With the delivery of large ship orders, the company's market share is expected to increase. New ships further enhance the company's cost competitiveness, and performance is expected to increase steadily as demand recovers.

Risk warning

The core assumptions are the risk that performance falls short of expectations due to falling short of expectations, risk of demand falling short of expectations, risk of freight rates falling short of expectations, large fluctuations in oil exchange, emergencies, etc.