YTO EXPRESS(600233):PREANNOUNCED MARKED EARNINGS RECOVERY IN 4Q21 BEATS MARKET EXPECTATION

类别:公司 机构:中国国际金融股份有限公司 研究员:Qibin FENG/Gangxian LIU/Xin YANG 日期:2022-01-19

2021 earnings preannounced up 13.2%-24.5% YoY YTO Express preannounced that its attributable net profit likely rose

    13.2-24.5% YoY to Rmb2-2.2bn in 2021 and could grow 175-227% YoY to Rmb1.05-1.25bn in 4Q21, registering a marked increase from Rmb308mn in 3Q21. Assuming net profit in 4Q21 reached the median of preannounced range (Rmb1.15bn), we estimate net profit from the main express delivery business (excluding aviation and freight forwarding businesses, and a one-off tax rebate) at around Rmb750mn and per parcel earnings at nearly Rmb0.15, slightly beating market expectation

    and exceeding Rmb0.04 in 3Q21, driven by the price hikes in the 4Q21 peak season.

    Trends to watch Competitive landscape improving; focus of competition shifting. We

    previously emphasized the impact of tightened regulations on the express delivery industry in April 2021, and noted that the turnaround started in September. We reiterate our belief that major express delivery companies ─ YTO, STO, ZTO and Yunda ─ used to offer similar services due to heavy reliance on the e-commerce parcel business. While online merchants offering free shipping are more sensitive to delivery fee changes, rivals between e-commerce platforms also has added to competition in the logistics industry, either directly or indirectly. We think policies introduced in the past year (e.g. safeguarding legitimate rights and interests of deliverymen and anti-monopoly guidelines for platform economy) should drive up the fixed cost at express delivery companies, thus preventing excessive price cuts. It may also discipline the behavior of e-commerce platforms and make it harder for new entrants to rapidly expand delivery volume. We believe leading firms will continue to compete with each other, but the focus of competition will likely shift from pure price war to market share gains, product differentiation and new product development.

    Profitability to strengthen further. The State Post Bureau expects

    domestic express delivery volume and revenue to rise 13% and 12% in 2022. Its targets for 2021 set at the start of 2021 were 15% and 12%, lower than the actual growth. The difference between growth in volume and revenue is narrowing. New policies require that companies should not charge less than cost for express delivery services, and we think market competition may ease during J&T Express’s consolidation of BEST.

    Therefore, we expect overall delivery price to remain stable in 2022, bolstering continued earnings recovery. We are upbeat on YTO’s leading advantages in asset input, digitalization and business differentiation, and the firm stands to benefit first from improved quality of growth in the express delivery sector.

    Valuation and recommendation

    We adjust our 2021 earnings forecast to Rmb2.08bn, and introduce our 2022 and 2023 earnings forecasts of Rmb2.59bn and Rmb3.25bn, implying YoY growth of both at 25%. The stock is currently trading at 22.4x 2022e and 17.9x 2023e P/E. We maintain an OUTPERFORM rating and lift TP by 11% to Rmb21.15 (mainly reflecting continued earnings rebound in 2022 and 2023), implying 28x 2022e and 22x 2023e P/E, offering 25% upside.

    Risks

    Resurgence of price competition; volume growth disappoints.