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机构：中金公司
研究员：Wenjie ZHANG/Qibin FENG/Xin YANG
ANE (Cayman) Inc announced its 1Q24 results: Revenue rose 15.2% YoY to Rmb2.38bn. Gross profit grew 77.6% YoY to Rmb382mn, with GM rising 5.7ppt YoY to 16.1%. Adjusted pre-tax profit rose 134% YoY to Rmb280mn. Attributable net profit rose 326% YoY to Rmb188mn. Adjusted net profit rose 174% YoY to Rmb209mn. The firm's results notably beat our expectations, thanks to better-than-expected cost reduction and strong freight volume growth.
Revenue grows soundly driven by freight volume growth. In 1Q24, freight volume rose 22% YoY to 2.88mnt and parcel volume grew 25% YoY. We attribute the robust freight volume growth to franchisees’ entry into the network (the number of partners and distributors grew YoY and QoQ) and increased mini-parcels (the volume of parcels under 70kg rose 25% YoY). The ASP fell 5% YoY and rose QoQ due to adjustment to pricing mechanism. We note that the decline in ASP was milder than that in costs, indicating that the firm has taken the initiative in pricing.
Cost reduction beats our expectations. Per-tonne transportation and distribution costs fell 8% and 27% YoY. We note that the firm’s per-tonne costs remained flat or slightly fell in 1Q24, even compared with that during the peak season in 2H23. We attribute the firm’s successful cost reduction to effective measures such as optimization of network distribution structure and improvement of vehicle and personnel productivity. We think rapid growth in freight volume and rising utilization rate of its fleet and distribution assets also helped the firm reduce its costs. In 1Q24, G&A expense ratio fell 1.8ppt YoY to 5.4%, as flat management and flexible incentives boosted personnel productivity.
Trends to watch
We believe the franchised express delivery industry has shown clear signs of accelerated concentration, with cost advantages being key to competitiveness. We note three signs indicating accelerated concentration of franchised express delivery companies:
Franchised express delivery companies need to increase their freight volume to over 10mnt to stay profitable. We believe the gap between large-scale companies and small-scale ones is widening.
We think the capital market has become more rational towards the sector. As a result, there have not been any large fundraising activities in the franchised express delivery industry in recent years.
Leading companies have adopted more proactive pricing and franchise management mechanisms.
After reviewing the development of the US less-than-truckload (LTL) market, we note that cost and cash flow are the core competitiveness of logistics companies amid sector consolidation. We suggest watching the firm's cost optimization.
Upbeat on cost reduction and scale growth in medium and long term. Given the higher-than-expected earnings in 1Q24, growing demand for shipments in the upcoming peak season, as well as effective measures to reduce costs, we are upbeat that the firm has embarked on a healthy journey of achieving lower costs, better pricing, higher market share, and stronger economies of scale. In the medium-to-long term, we expect the firm's profit margin to rise further as the franchised express delivery industry becomes more concentrated.
Financials and valuation
We raise our 2024 and 2025 net profit forecasts 10.9% and 15.7% to Rmb693mn and Rmb903mn, implying adjusted net profit of Rmb795mn and Rmb1.00bn, as the firm's cost reduction beats expectations and its business is growing. The stock is trading at 8.9x 2024e and 6.9x 2025e P/E. Maintain OUTPERFORM. As we are upbeat on the firm's long-term market share gains and rising profit margin, we raise our TP 13.3% to HK$8.50, implying 12.9x 2024e P/E and 9.9x 2025e P/E, offering 44% upside.
Risks
Price competition; disappointing freight volume growth and/or cost control.