Research Report: it's time to meet Yuantong again! What is the logic of soaring performance?

Source / Haitong International



01




Company profile: a leading integrated logistics service provider in China

1、 Main business composition and equity structure Yuantong Express is a leading integrated logistics operator in China. The company adopts the operation mode of self-supporting hub transfer center and flat end franchise network, focuses on express delivery services, and provides logistics extension services such as collection of payment and integration of warehousing and distribution based on customer needs.

The company's logistics products mainly include: domestic time effective products, international express and parcel services, value-added services, warehousing services, freight forwarding services and aviation services. Among them, freight forwarding services are mainly provided by the holding subsidiary Yuantong Express International (6123.hk). The main business income of the company mainly comes from the express industry, freight forwarding industry, aviation business and other industries.

The growth rate of operating revenue of the express industry fluctuated greatly. The sharp decline in growth rate in 2017 was mainly due to the retention of express mail caused by the operation adjustment of individual outlets. In 2020, affected by the epidemic and the price war, the growth rate of the company's express business revenue fell again.

In 2021, the company deepened its strategic positioning of service quality, significantly improved its product competitiveness and pricing ability, and continued to improve the superposition industry pattern. The operating revenue of the express industry of the company increased by 30.24% year-on-year.

Affected by the epidemic, the international air cargo business has maintained a high profile in the past two years, and Yuantong international has fully benefited.

As the largest business segment of Yuantong Express International, air cargo grew against the trend in 2020, and the freight volume and business income have increased significantly.

The homogenization of e-commerce express delivery is serious, the competition is fierce, and the single ticket revenue decreases year by year. Affected by this, the gross profit margin of the company's express delivery industry decreased from 22.16% in 2013 to 6.6% in 2021. The gross profit margin of the freight forwarding industry and the aviation industry remained at 15% and 23% respectively.

The actual controllers of the company are Yu Huijiao and Zhang Xiaojuan, and the second largest shareholder is Alibaba. According to the 2022q1 report, the controlling shareholder of the company, Shanghai Yuantong Jiaolong Investment Development Co., Ltd., holds 30.36% of the shares, and the actual controllers are Yu Huijiao and Zhang Xiaojuan, who together hold 35.44% of the total share capital of the company. Mr. Yu Huijiao, the legal representative of Yuantong express, resigned as the president of the company in April 2019 and is currently the chairman of the board of directors of the company. The second largest shareholder of the company is Alibaba network, with a shareholding ratio of 11.04%.

2、 The "innovation" gene has been inherited to this day

Yuantong Express is a leading integrated logistics service provider in China. We review its development process and find that the word "innovation" runs through the whole process. In the process of business development, Yuantong has always been bold to be the first, stable and far-reaching.

1. Self operated hub transfer center + flat terminal franchise network

In 2000, Yuantong Express was officially established. Soon after its establishment, it established a relatively innovative express operation mode of "combining self operated hub transfer center with flat terminal franchise network".

Self operation of hub transfer center means that the transfer of cross regional express is coordinated by the company in the whole network and is mainly in the charge of the company's self operated hub transfer center. It has the advantages of strong control over the service network and relatively stable network. In 2021, the company will further optimize the layout of transit centers, increase investment in the automation upgrading and transformation of hub transit centers, strengthen the radiation range of hub transit centers, and further enhance the stability of the company's express service network.

The flattening of terminal franchise network refers to the large number of franchisees, the small business coverage of a single franchisee, and the franchisees are directly controlled by the company, thus effectively reducing the management level. Compared with the general franchise mode, the flat terminal franchise network of the company has the following advantages: (1) it helps the headquarters to establish a perfect franchise business supervision and assessment system, strengthen control, and ensure the service quality of the whole network; (2) Balance the interests according to the specific conditions of various regions and enhance the stability of the network; (3) The information is more unblocked, and the flexibility of strategic adjustment and business innovation is increased.

Friends who did not implement the self-supporting hub transfer center and flat terminal at the beginning also began to make up lessons in recent years. Shentong express acquired 15 transfer centers in core cities such as Guangdong, Hunan and Beijing through 1.298 billion cash in 2018. From 2020 to 2021, it promoted the reform of the terminal network management system, implemented the flat terminal management, and improved the core competitiveness of the company by realizing the "one game" of transit and network.

2. Cooperate with Taobao

In 2005, the company became the first express delivery enterprise to carry out comprehensive strategic cooperation with Taobao, opening up a new growth point for the development of China's express delivery industry - since then, the price of the express delivery industry has declined, and the express business volume has gradually entered a new stage of blowout development.

3. Yuantong airlines & freight forwarding business

In 2015, Yuantong airlines, a wholly-owned subsidiary of the company, officially launched operations. The company has become one of the only two private express delivery enterprises with its own airlines in China. By June 2022, Yuantong Airlines has introduced 13 all cargo aircraft, including 2 wide body aircraft. According to the aircraft introduction plan, Yuantong airlines will introduce a number of B767, B757 and other major models of cargo aircraft in 2022q3. The company expects that by the end of 2022, the fleet size of Yuantong airlines will reach about 20. Yuantong's own aviation network plays an important role in improving the timeliness of products and developing high-end markets such as business parts. At the same time, it is also an important basis for the company to layout international express business and expand overseas markets.

In 2017, the company completed the acquisition of the controlling interest of Yuantong Express International (6123.hk, formerly known as Xianda International), and the international freight forwarding business segment was effectively strengthened.

02




Industry volume and price and evolution of competition pattern



1、 Entering the "100 billion piece era": medium and low speed growth stage

1993-2002: most of the influential private express companies in China were founded in this period.

The domestic express market is strictly regulated. The main participants are China Post and Sino foreign joint venture express enterprises. E-commerce has not yet developed. Private express companies are in a reckless period as a whole. At this stage, the compound growth rate of business volume of the express industry is 23.14%. Yuantong was officially launched in Shanghai in 2000, later than Shentong, Shunfeng, Yunda and other companies. Yuantong learned from the development experience of its predecessors, gave full play to its late development advantages, and grew rapidly.

2003-2010: the rise of e-commerce and online shopping promoted the transformation of people's consumption patterns and the development of online shopping. Major traditional e-commerce platforms such as Taobao and jd.com were born and developed during this period. The demand for express delivery increased, and private express delivery entered a brutal growth period. At this stage, the compound growth rate of business volume of the express delivery industry was 45.14%.

In 2005, Yuantong took the initiative to embrace the Internet and reached strategic cooperation with Taobao. In the following years, the driving role of e-commerce in express delivery has become more and more obvious. E-commerce platforms or take shares in express companies, or set up their own logistics departments and logistics subsidiaries. The number of competitors in the blue ocean market of express delivery is increasing.

2011-2016: with the gradual popularization of new consumption modes such as online shopping, the scale of e-commerce business continues to expand. As an important link in the e-commerce industry chain, the express industry has entered a stage of rapid growth in coordination with the e-commerce industry.

At this stage, the compound growth rate of express business volume and business income was 53.48% and 39.29% respectively. In 2014, China's express business volume exceeded 10 billion pieces, reaching 13.96 billion pieces. The business scale exceeded the United States for the first time, and China became the world's largest express country.

Private express companies continue to develop rapidly at this stage, and their contributions to the express market are gradually prominent. The market share of private express delivery increased from 67.6% in 2010 to 85.6% in 2014, and has become the main force in China's express delivery industry. In 2015, Yuantong city accounted for 14.67%, becoming the first in the express industry. During this period, major express companies gradually landed in the capital market and entered a new stage of development.

2017 to date: the growth rate of e-commerce has slowed down, and the express industry has gradually moved from a high-speed growth stage to a medium speed growth stage. From 2017 to 2021, the compound growth rates of business volume and business income were 28.23% and 20.16% respectively.

In 2021, with the diversification of e-commerce sales channels and the iteration of traffic platforms, the express industry achieved a milestone development with business volume exceeding 100 billion and business revenue exceeding trillion, and maintained the world's first business volume for eight consecutive years. Among them, the business volume increased by 29.92% year-on-year, and the business income increased by 17.47% year-on-year.

Since the outbreak, the "housing economy" has accelerated the development of new consumption patterns, and online consumption demand has continued to grow.

In 2021, the national online retail sales increased by 14.1% year-on-year, of which the online retail sales of physical goods increased by 12%, accounting for 24.5% of the total retail sales of social consumer goods. From January to may 2022, affected by the epidemic, consumption stagnated, and the total retail sales of social consumer goods fell by 1.5% year-on-year. However, online consumption is still relatively active. The online retail sales of physical goods increased by 5.6% year-on-year, accounting for 24.9% of the total retail sales of social consumer goods, an increase of 1.1 percentage points from January to April.

Under the epidemic, although the express business volume is disturbed in the short term, the long-term demand is still supported. From January to February 2020, affected by the Wuhan epidemic, the express business volume fluctuated periodically, with a year-on-year decline of 10.1%. However, under the catalysis of the epidemic, the consumption structure has been upgraded and transformed, and the online penetration rate of online shopping has gradually increased, which has also added new impetus to express delivery. From May to December 2020, the growth rate of express business volume was higher than that of the same period in 2018-2019, forming a situation of first inhibition and then improvement. In April 2022, under the impact of the epidemic, the express logistics operation was under pressure, and the business volume fell by 11.9% year-on-year, a decline greater than the level during the first round of the epidemic; In May, the growth rate of business volume turned positive, with a year-on-year increase of 0.2%. We believe that the impact of the epidemic on the express industry is short-lived. After the epidemic, consumption is expected to usher in a "retaliatory" rebound. With the orderly easing of logistics pressure, the backlog of express demand will be gradually released. It is expected that the growth rate of business volume in 2022 is still expected to remain above 12%.

As a supporting service, express delivery has become an indispensable part of residents' life, and the attribute of rigid demand has been continuously strengthened.

In recent years, the rapid development of new consumption has become an important driving force for the growth of express business.

It is noteworthy that the rise of live broadcasting with goods has become the fastest-growing e-commerce model.

The live broadcast users and transaction scale have expanded year by year, which not only brings higher incremental business to the express industry, but also puts forward higher requirements for express services.

In particular, the "instant purchase and arrival" and the "last mile" logistics congestion have gradually become a new round of competition in the express industry.

In the long run, the demand for express delivery may usher in greater room for growth.

2、 The policy continues to increase and guide the industry to return to rational competition

E-commerce express companies' products and services are highly homogeneous, and price competition has become the main means for many e-commerce express companies to expand their share. At the same time, capital helps new competitors enter the e-commerce express market, and low-cost competition has become the main strategy for new entrants to quickly seize the market. Since 2020, the means of grabbing volume at a low price has impacted the original competition pattern of the e-commerce express industry, the price war has intensified, and the growth rate of the industry's single ticket revenue has continued to fall. In January 2021, the growth rate of single ticket revenue fell to a low point of -22.84%.

Subsequently, the regulatory authorities repeatedly issued relevant policies to rectify the vicious price war chaos in the express industry. In September 2021, the introduction of the regulations on the promotion of the express industry in Zhejiang Province is an important sign of the slowdown in the price war of e-commerce express delivery. At the same time, in response to the "opinions on ensuring the legitimate rights and interests of express delivery groups" jointly issued by the Ministry of transport, the State Post Office and other seven departments, major express delivery service enterprises generally raised their delivery fees in September, effectively improving the delivery remuneration of salespersons and ensuring the rights and interests of express delivery brothers. With the arrival of peak seasons such as "double 11", the service unit price of the express industry has increased, the price competition has slowed down significantly, and the industry price has continued to return to a reasonable level.

We believe that the changes in supply and demand in the peak season and the tightening of regulatory policies have a great impact on the single ticket revenue, but the single ticket revenue performance of Tongda system during the off-season in 2022 is still resilient, and the single ticket revenue increased by 2.1% and 0.71% year-on-year in April and may respectively.

We expect that the price war will slow down until 2022.

The focus of industry competition will shift from price driven to value driven. We believe that although head express has paid more and more attention to the power of science and technology in the development process of the company, and is constantly increasing investment in research and development, it is undeniable that the express industry as a whole is still a traditional industry. Price war is the only way to clear up this traditional industry. Under the background of consumption upgrading, in the process of the continuous growth of express business, end consumers and merchants have put forward higher requirements for the quality of express service. The closed-loop logic of "cost reduction under scale effect - price reduction - business volume acquisition - further scale effect" is gradually weakening. The upgrading of express products and services and customer stratification will gradually become the competitive strategy of express companies, and the focus of industry competition will shift from price driven to value driven. The key to the competitiveness of a company depends on whether it has pricing ability. Service quality and customer experience can reflect pricing ability to a certain extent. In the long run, if major express delivery enterprises want to consolidate their leading position in the industry, they not only need to reduce costs and increase efficiency through the continuous investment and upgrading of automation and digital equipment, but also need to actively build and build a differentiated product system to meet the multi-level, personalized and differentiated express delivery needs of consumers.

From 2019 to 2021, under the intense interpretation of the price war (Figure 19), although the business volume of major express companies increased rapidly, their profitability weakened (Figure 20). We believe that under the circumstances that the cost reduction space of major express delivery companies is becoming bottleneck and the scale effect is gradually weakening, the strategy of simply reducing costs to maintain profitability may face challenges. After the price war slowed down, the profitability of major express delivery companies improved, which is an important support for the completion of product service upgrading and customer stratification.

3、 Industry structure: the leading share war continues, and the market concentration increases

In 2021, M & A and integration events in the express industry accelerated the liquidation of some brands and enterprises, and the market evolved into a cluster of leading enterprises. From January to may 2022, the CR8 index reached 84.6. We believe that as the scale effect and cost advantage of head express enterprises further appear, some small and medium-sized express enterprises may gradually withdraw from the market, and the concentration of the express industry still has some room to improve.

The leading share war is still on. Since 2013, thanks to the large investment in sorting and other equipment in the early stage and the effective network management ability, the market share of Zhongtong Express has increased steadily, and it has achieved overtaking in curves in 2016. Since then, China connect has continuously increased its investment in core assets (land + plant + vehicles + sorting equipment) and maintained an efficient network management level, always occupying the first position in market share. From 2013 to 2015, Yuantong's market share has been higher than that of Zhongtong and Yunda. However, due to the fact that the adjustment of the company's relevant price policy at the end of 2016 did not meet expectations and the business adjustment of individual outlets at the beginning of 2017, the retention of express mail had a temporary negative impact on the company's operation, and the market share of Yuantong fell sharply in 2017.

Yuantong immediately made adjustments. In 2018, the company continued to increase investment in transfer centers, urban distribution centers, terminal construction, transportation capacity systems, and other aspects, constantly improving the automation level, and significantly improving the network service capacity. In 2019, after taking office, pan Shuimiao paid close attention to the information construction of the company, adhered to the Internet thinking, created advanced information tools, and deeply integrated into business operations. Through the creation and application of advanced information tools, Yuantong has realized the transformation from post control to real-time control of service quality, promoted the whole network service quality management to be more scientific, efficient, refined and proactive, gradually improved work efficiency and significantly improved customer satisfaction. Since 2018, Yuantong has maintained a steady growth in market share.

In 2022q1, the market shares of Zhongtong, Yunda and Yuantong reached new highs, 21.6%, 17.79% and 15.32% respectively, and the market shares of Shentong and SF reached 11.14% and 10.03% respectively.

03




Business analysis:

After several ups and downs, the Dragon went to sea again



From 2013 to 2021, the compound growth rate of Yuantong's operating revenue was 26.5%, and the compound growth rate of net profit attributable to the parent company was 15.7%.

After 2016, the company's performance fluctuated greatly. After eliminating the negative impact of the 2016-2017 price policy adjustment and the operation problems of individual outlets, the company's performance entered the recovery channel. In 2019, the price competition in the industry intensified. At this time, the company welcomed pan Shuimiao to take office and began to strengthen information construction.

In 2020, affected by the industry price war, even if the express business volume achieved a high-speed growth of 38.76% and the government issued a series of social security relief and other preferential policies, the company's profitability was still damaged, and the gross profit margin fell by nearly 3 percentage points year-on-year. However, the air cargo business and international business laid out in the early stage have brought positive contributions to the company. Among them, Yuantong Express International achieved a net profit attributable to its parent company of 252 million yuan, a year-on-year increase of more than 800%, and Yuantong aviation achieved a net profit attributable to its parent company of 216 million yuan, a year-on-year increase of more than 200%. Therefore, although the gross profit margin of the company fell sharply, the net profit margin remained basically the same as that in 2019.

In 2021q3, the price war slowed down, the industry structure continued to improve, and the company's profitability also showed a trend of quarterly repair. Superimposed on the positive contribution of the air cargo business, the company's performance in 2022q1 was brilliant, achieving a net profit attributable to the parent company of 821 million, an increase of 134.88% year-on-year. Among them, Yuantong international and Yuantong aviation achieved a total net profit attributable to the parent company of 81 million yuan.

1、 Core express business: both volume and price rise, cost continues to fall, and performance is realized

Express business is the core business of the company, accounting for more than 80% of operating revenue. The compound growth rate of express business revenue from 2013 to 2021 was 24.15%. In 2021, the express business revenue accounted for 82.7% of the operating revenue, of which the domestic time effective express business revenue accounted for 78.66% of the operating revenue. The company actively implemented the "express to sea" project and steadily expanded the international network layout and market. The revenue of international express and package services increased from 0.58% in 2017 to 4.04% in 2021.

1. Volume: the epidemic does not change the long-term express demand, and high-quality services are expected to contribute new increment

From 2013 to 2021, the business volume of Yuantong express increased steadily, with a compound growth rate of 37.65%. Among them, from 2018 to 2020, the growth rate of Yuantong's business volume reached more than 30%. From January to February 2020, during the Spring Festival, the COVID-19 struck, and the growth rate of Yuantong's business volume fell by 10.69% and 21.81% year-on-year respectively. With the effective prevention and control of the epidemic, express logistics has gradually recovered. In May 2020, the growth rate of the company's business volume reached 61.06%, exceeding the industry level in the same period. From January to February 2021, due to the impact of low base, the business volume of the company increased rapidly, with a year-on-year increase of more than 100%. From March to December 2021, the impact of low base disappears, and the growth rate of the company's business volume returns to the normal level.

In late March 2022, the epidemic rebounded on a large scale, and the impact on express logistics was concentrated in April. The growth rate of Yuantong's business volume fell, with a year-on-year increase of 5.12%, 4.81% and 5.75% from March to may, respectively. We believe that the disturbance of the epidemic to the express industry is short-lived, and the suppressed express demand will be gradually released with the smooth logistics. We judge that the business volume growth rate of the company is still expected to reach 15-20% in 2022.

In 2021, Yuantong will actively build the basic ability of customer stratification and product classification, reflect differentiation in product stratification and classification, and reflect competitiveness in universal service.

This is also in line with the trend of the industry changing to high-quality development.

In January 2022, the strategic product "yuanzhunda", which takes time-lapse upgrading and precise delivery as its core advantages, was officially opened to customers.

Yuanzhunda is mainly for customers such as e-commerce platforms and brand merchants. It will provide customers with upgraded services in the whole process of solicitation, transfer, transportation, dispatch, customer service, etc. it has the characteristics of time priority, pre delivery telephone connection, accurate delivery and whole process direct customer service tracking, and helps customers solve service pain points such as unstable time limit and false receipt.

The launch of yuanzhunda will not only meet the personalized and differentiated needs of customers, but also lay the foundation and create conditions for the launch of more high-end products in the future.

2. Price: the industry pattern has improved and the unit price has stabilized

In 2021, the company deepened the strategic positioning of service quality, relying on digital management tools, strengthened the construction of customer service capacity, continued to improve customer experience, significantly improved product competitiveness and pricing ability, significantly improved customer structure, and gradually enhanced brand premium ability. With the improvement of the industry pattern and the improvement of the company's pricing ability, the decline of the company's single ticket revenue continued to narrow, and in August 2021, the growth rate of unit price turned positive year-on-year. The logic of stabilizing the unit price has also been verified in the off-season. From March to may 2022, the single ticket revenue of Yuantong increased by 10.11%, 16.41% and 23.24% respectively year-on-year. We believe that thanks to the slowdown in the price war, Yuantong's single ticket revenue is expected to maintain a steady upward trend in 2022, and its profitability will be further repaired.

3. Cost: deepen the focus on cost control, and the core cost has decreased year after year

From 2015 to 2017, the single ticket cost of Yuantong has been stable at more than 3.25 yuan. From 2018 to 2020, the company's single ticket cost showed a significant downward trend. On the one hand, the company deepened the implementation of various cost control measures, took digital management tools as the starting point, refined the cost control of the whole link and the whole process, and refined the assessment data sinking unit; On the other hand, the company has increased capital expenditure since 2018 and increased the proportion of investment in machinery and transportation equipment. With the continuous improvement of business volume, the scale effect gradually appears.

Transportation cost: in 2021, the company will further improve the transportation capacity system, increase the proportion of its own transportation vehicles, and improve the proportion of bilateral transportation vehicles, large transportation vehicles, drop and hitch vehicles, as well as the comprehensive utilization rate of its own vehicles and social vehicles. The company's transportation cost control was refined and deepened. Under the influence of the increase in the price of refined oil and the cancellation of various tax preferential policies, the company's single ticket transportation cost in 2021 was 0.50 yuan, basically the same as that of the same period last year.

Operation cost of the center: the company comprehensively implements the innovative management mode, refines the management granularity of the transfer center to the smallest business unit, continues to improve the automation and intelligence level of the transfer center and urban distribution center, promotes the layout of automatic sorting equipment, reduces the number of sorting, and improves the efficiency and accuracy of high-grade sorting operation. In 2021, the company's per capita efficiency increased by nearly 12% year-on-year, and the operating cost of the single ticket center was 0.30 yuan, a decrease of 0.01 yuan over the same period last year.

From 2016 to 2017, the capital expenditure of Yuantong basically remained at the same level as the net profit, and the capital expenditure of Zhongtong in 2016 was 2.689 billion yuan. From 2018 to 2021, Yuantong began to increase capital expenditure, and the capital investment was about 1.8-3 times its net profit. In the same period, the express business volume also maintained a steady growth.

Yuantong paid attention to the investment of houses and buildings in the early stage, but the short-term effect of this investment on the efficiency improvement and cost improvement of express business is not significant. With the continuous growth of the company's business scale and the rising labor price in the express industry, the company has put forward higher requirements for the sorting efficiency and cost control of the transfer network. In 2018, the company began to adjust the capital expenditure structure, increase the capital investment in machinery and transportation equipment, and superimpose the transfer center resources invested in the early stage. The cost improvement effect was significant, and the single ticket cost decreased year by year. As of 2021, there are 154 sets of Yuantong automatic sorting equipment, an increase of 115 sets compared with 39 sets in 2018; There are 5370 self owned trunk transport vehicles, and the proportion of self owned vehicles has increased to 70.7% from 23.5% in 2018.

The configuration of automatic sorting equipment, on the one hand, helps to improve the sorting capacity and operation efficiency of the transfer hub, reduce the labor cost of the transfer link, and meet the growing business needs of the company; On the other hand, automatic sorting can improve sorting efficiency, reduce sorting error rate, improve the quality assurance of express service, and provide effective guarantee for express companies to expand high-end business market and international market transformation and upgrading.

2、 Second growth curve: air cargo business and international business

Yuantong laid out its aviation business and international business respectively in 2015 and 2017, paving the way for the development of integrated logistics services. In 2021, the revenue of freight forwarding business and aviation business accounted for 9.76% and 3.40% of operating revenue respectively.

1. Yuantong International: counter trend growth

With the continuous evolution of the variant strain of covid COVID-19 and its rapid spread in the world, the recovery of the international logistics supply chain is slow, and the shortage of factor resources on the supply side continues. In addition, affected by the upgrading of consumption, the transformation and upgrading of manufacturing industry and the reconstruction of global supply chain, the demand for cross-border aviation logistics continues to remain strong, and aviation logistics plays an increasingly important role in the global supply chain.

Affected by the epidemic, the international air cargo business has maintained a high profile in the past two years, and Yuantong international has fully benefited. In 2020, the operating revenue of Yuantong international was HK $5.048 billion / +29.5%, the net profit attributable to the parent company was HK $252 million / +866.3%, and the gross profit margin was 15.3%, an increase of 1.2 percentage points over 2019. As the largest business segment of Yuantong international, air cargo grew against the trend in 2020, and the freight volume and business income have increased significantly. Among them, the rising demand for health and medical supplies has made a great contribution to the company's revenue and led to a significant increase in net profit. In 2020, the revenue of air cargo business was 3.063 billion, with a year-on-year increase of 39.1%, accounting for 60.7% of revenue; Gross profit increased by 90.8% year-on-year.

In 2021, the operating revenue of Yuantong international was HK $7556 million / +49.7%, the net profit attributable to the parent company was HK $273 million / +8.4%, and the gross profit margin was 10.5%, a decrease of 4.8 percentage points over 2020. In 2021, the performance growth mainly benefited from the substantial increase in shipping business revenue and profit due to the space demand for shipping containers and the rise in shipping container freight. In 2021, the revenue of shipping business was 2.004 billion, with a year-on-year increase of 145.2%, accounting for 26.5% of revenue; Gross profit increased by 90.8% year-on-year.

2. Yuantong aviation: take advantage of the trend to develop

In 2020, Yuantong Airlines achieved an operating revenue of 1.193 billion yuan and a net profit attributable to the parent company of 216 million yuan, with a year-on-year increase of more than 200%. In 2021, Yuantong Airlines realized a net profit attributable to the parent company of 273million yuan.

Under the epidemic, stimulated by market demand, domestic aviation logistics business has developed rapidly. However, as of March 2022, there are 10 existing all cargo airlines in China, with only 173 all cargo aircraft, and the development is still in the initial stage. In February, 2022, the Civil Aviation Administration of China issued the "special plan for the development of aviation logistics during the 14th five year plan", which requires to promote the smooth and efficient domestic logistics network, establish a flexible cargo aircraft introduction mechanism, and support cargo airlines to expand the scale of cargo aircraft and develop air cargo.

With the strong support of the policy, Yuantong can give full play to its own aviation advantages, accelerate the coverage of overseas route network, deeply expand the commercial operation of its own aviation, strengthen the linkage and coordination between Yuantong Express international and Yuantong aviation, and continue to optimize and upgrade cross-border logistics products and service links.

Since 2022, Yuantong Airlines has put three new cargo planes into operation. According to the aircraft introduction plan, Q3 Yuantong will also introduce a number of B767, B757 and other major models of cargo planes, and the world's first domestic cargo aircraft ARJ21-700 will also be put into service at the end of the year. We predict that by the end of 2022, the fleet of Yuantong airlines will reach about 20.

3. Stable expenses and improved operating cash flow during the period

From 2016 to 2022q1, the company's period expenses accounted for 2.5-4.2% of revenue, which was relatively stable. From 2018, the period expense rate showed a downward trend year by year. Among them, management expenses accounted for the main part. In 2018, Yuantong's management expenses increased significantly, mainly due to the merger of Yuantong International's management expenses. Since then, the management fee rate of Yuantong has decreased year after year, mainly due to: 1) the business volume continues to grow, while the management level is also constantly improving, from experience management to digital management; 2) Reclassify the R & D expenses in the original "administrative expenses" to "R & D expenses" and list them separately. Relying on the franchise model, Yuantong Express has established a mutually beneficial and win-win cooperative relationship with franchisees, so as to achieve rapid business growth with low advertising and marketing fees.

Affected by the price war, the profitability of major express delivery enterprises has been damaged, and the pressure on cash flow has increased. In 2020, Tongda express company's single ticket operating cash flow fell sharply. With the slowdown of the price war, the operating cash flow of each express company has rebounded, among which, in 2022q1, the operating cash flow of Yuantong single ticket has exceeded that of Zhongtong.

Source / Haitong International

Source / Haitong International