Text | U.S. Stock Research Agency
On December 8, 2021, the real-time monitoring data of the express big data platform of the State Post Bureau showed that the volume of express delivery business in the mainland reached 100 billion pieces in 2021, marking that China's express delivery has entered the "era of 100 billion pieces".
In the middle of the year, the fourth quarter is the peak season of express delivery, and the "Double Eleven" and "Double Twelve" e-commerce festivals have undoubtedly boosted the express delivery industry into the "era of 100 billion pieces".
On March 17, 2022, ZTO Express announced its unaudited financial results for the fourth quarter of 2021 and the full year 2021. The most important point that deserves the attention of the outside world, after the price war smoke dissipates, can Zhongtong Express complete the transformation of "high quantity" to "high quality" under the competitive pattern of stronger and stronger?
The head players have grown together, and the industry has a new pattern of competition
Under the influence of the policy, in the third quarter, various express delivery companies have raised the dispatch fee by different ranges, so that the competition in the express delivery industry has entered the era of "quality war" from the "price war".
In the fourth quarter, the "Double Eleven" and "Double Twelve" arrived as scheduled, giving a shot in the arm for the express delivery companies that ended the price war. According to the disclosure of Zhongtong Express, the highest single-day order volume of Zhongtong in this year's "Double 11" was 180 million, and the cumulative order volume and business volume exceeded 1 billion pieces on November 12.
Under the favorable conditions of the entire industry, many express delivery companies have basically achieved positive growth in Q4 financial performance, which is reflected in both operating income and net profit.
According to the financial report, in Q4 2021, ZTO's revenue was 9.217 billion yuan, an increase of 12% over the same period of 2020 of 8.257 billion yuan, and achieved a certain year-on-year increase for four consecutive quarters.
Source: ZTO Investor Relations Network
At the same time, the revenue of Shentong Express's express delivery business in October, November and December 2021 was 2.336 billion, 2.907 billion and 28.16% respectively, an increase of 16.88%, 19.88% and 25.28% respectively, and Yunda announced that the revenue of the express delivery business in December 2021 was 4.316 billion yuan, an increase of 24.74% year-on-year. Judging from the data performance, this also proves that the express delivery industry as a whole is good in the fourth quarter.
It is reported that the growth of ZTO's Q4 revenue is mainly from the improvement of business volume. According to the financial report, ZTO parcel volume was 6.343 billion pieces, an increase of 17.2% from 5.410 billion pieces in the same period of 2020.
More noteworthy than revenue is net profit. Since the end of the third quarter, the cost of dispatch has risen, can ZTO Q4 net profit achieve positive growth?
According to the financial report, the adjusted net profit of Q4 Zhongtong was RMB1.745 billion, an increase of 35.2% from RMB1.29 billion in the same period of 2020 and an increase of 52.0% from RMB1.148 billion in the third quarter of the same year. At the same time, it ended the situation of increasing revenue and not increasing profits for two consecutive quarters.
ZTO Q4 net interest rate also rose from 15.6% last year to 19.0%, in the view of the US stock research agency, the net interest rate rose mainly for two reasons:
First, the economic benefits of the single ticket of Zhongtong have improved.
Due to the increase in the single ticket dispatch fee, the operating cost of a single ticket rose from 0.97 yuan in Q3 to 1.05 yuan, an increase of 8.2%, but the single ticket revenue also rose from 1.24 yuan in Q3 to 1.39 yuan, an increase of 12.1%.
It can be seen that the price alliance formed by leading express delivery companies such as the Tongda Department has successfully covered the rise in operating costs in the peak season and repaired the profitability of the entire network by simultaneously raising the unit price of express delivery. For example, YTO Express achieved a net profit of 1.138 billion yuan in Q4, an increase of 198.87% year-on-year.
The second is the cost efficiency improvement brought about by the scale effect.
In 2021, due to the epidemic, inflation and other reasons, the price of crude oil has risen, which in turn has led to a simultaneous increase in domestic gasoline prices and an increase in transportation costs for express delivery companies. In Q4, due to the Conflict between Russia and Ukraine and other reasons, the cost increase phenomenon reflected obviously.
In this context, the transportation cost of ZTO Q4 single ticket trunk line increased by only 0.8% year-on-year to 0.52 yuan, mainly due to the increase in the utilization rate of high-capacity vehicles, the improvement of automation rate and the improvement of operational efficiency brought about by the optimization of route planning.
At the same time, the scale effect of ZTO as the head player in the express delivery industry is obvious, and the cost of single ticket sorting in Q4 has dropped by 1.1% to 0.30 yuan compared with last year.
Overall, ZTO benefited from the growth of parcel volume in the peak season and excellent cost control in the fourth quarter, achieving double growth in revenue and profit, and getting rid of the situation of increasing revenue without increasing profits in the first two quarters.
But at the same time, the slowdown in ZTO's market share growth can be clearly seen: ZTO's market share growth fell below 1% for the first time in four years, and its market share increased by 0.2% in 2021.
Since 2011, the market share of ZTO Express has reached 20.6% in 2021 from 7.6% to an average annual increase of more than 1%, and the market share of ZTO Express has ranked first in the Tongda system.
It is not difficult to imagine that it is very difficult for ZTO Express to continue to grow rapidly on the basis of more than one-fifth of the market share. Especially as China's Internet demographic dividend fades, the entire express delivery industry will shift from incremental competition to stock competition along with the e-commerce market.
As Mr. Lai Meisong, founder and chairman of ZTO Express Group, said earlier, as industry competition returns to rationality, express delivery prices are expected to stabilize in 2022, and to maintain a leading and sustainable development, ZTO is facing new challenges.
Focusing on digitalization, can ZTO run the "last mile"?
Although the price war is over, the entry of Jitu and the acquisition of Best Express, jd.com's increase in dada, and JD Logistics' acquisition of Debon have accelerated industry differentiation.
In the future, the pattern of stronger and stronger express delivery industry will gradually take shape, and the competition between head players will most likely change from "quantity" to "quality", and cost control and service quality will become the two most important indicators.
In terms of cost control, the most effective improvement measure is to accelerate digital transformation.
At the 2022 network conference of the Tongda Department, Lai Meisong, chairman of Zhongtong, said that it is necessary to make full use of digital intelligence to improve the quality of operation and enhance the coordinated and efficient development of ecological business resources; Yunda proposed to improve the ability of "digital intelligence escort"; Yuantong said that it is necessary to adhere to science and technology leadership, digital drive, and empowerment network.
The above statement can summarize a key word: "digitalization".
In December last year, ZTO Express conducted a one-month internal test of the first domestic vehicle-level driverless logistics vehicle in the simulated park scene of the headquarters.
Not only that, according to the Q4 financial report, ZTO also tested driverless cars, self-driving cars, and hybrid drones. Through the above actions, it is not difficult to see that Zhongtong Express hopes to improve the strategic planning of operation quality through digital and intelligent means for a long time.
At the same time, according to the list of "500 private enterprises with R&D investment in 2021" officially released by the All-China Federation of Industry and Commerce in Guangzhou, Zhongtong Express ranked 450th.
But the problem is that fellow players are also making great efforts to digitize.
According to Qingdao Daily, whether it is Debon, SF, JD.com, or "three links and one reach", or a new "interloper" such as Jitu, digital transformation is the focus of work.
Debon invests 1.5% to 2% of the total revenue in the construction of IT projects every year for research and development and innovation, and cooperates with well-known technology companies such as Huawei and iFLYTEK to improve the construction of smart logistics systems.
SF has carried out forward-looking layout in the frontier fields of science and technology such as artificial intelligence, big data, robotics, Internet of Things, logistics maps, etc., and is in the leading position in many fields.
YTO takes digital transformation as a "first-hand" project, and the granularity of cost control is achieved in every vehicle and every workstation.
This gives rise to two major risk factors: one is that the intensified digital competition will force express delivery companies to invest more research and development funds, resulting in a rise in comprehensive costs; second, whether ZTO can become the first express delivery company to complete the digital transformation strategy is not yet known.
In addition, compared with JD.com and SF, service quality is also a short board of three links and one reach, and "last kilometer" has always been one of the pain points of Zhongtong.
From the perspective of model analysis, ZTO was able to rapidly increase its market share in the early days, which is inseparable from its franchise model. Compared with direct operation, the franchise model has achieved rapid geographical coverage and expansion, and the construction cost of pick-up and delivery outlets is also low.
However, the drawbacks of the franchise model will only become more and more prominent with the changes in the competitive landscape.
Compared with direct operation, the franchise model has insufficient control over the "last mile" of express delivery, and it is difficult to ensure the quality of service.
In contrast, JD Logistics, a self-operated logistics service line, has formed a synergy effect with JD e-commerce. SF relies on its own express delivery network to obtain more efficient delivery speeds, and can help the same city express delivery business to tap more increments.
Zhongtong Express is not unaware of the drawbacks of joining, but the rapid growth in the early days makes it more dependent on the franchise model. Nowadays, the "quantity" competition has shifted to the "quality" competition, and it is imperative for Zhongtong to increase its own operation and expand the moat.
According to the Q4 financial report, from the perspective of changes in capital expenditure, ZTO's expenditure on "purchasing plant, equipment and vehicles" increased from 7.237 billion yuan in 2020 to 8.361 billion yuan in 2021.
It can be seen that ZTO is working hard to increase its own heavy assets, and the question is whether ZTO can handle the resistance caused by performance pressure and conflict of interest of franchisees? This is also a big test.
In addition, the 1 cent payment fee increased by the Tongda Department is not enough compared with the new investment of more than 200 million yuan for the improvement of employee income of SF Express, and the Jingdong Logistics plan to gradually increase the average annual salary of employees from 14 salaries to 16 salaries.
To upgrade the service, increasing the income of couriers is the best way, and the key to this measure is how to ensure cost efficiency on this basis.
Finally, the epidemic has recurred again, is ZTO fully prepared in the first and second quarters of 2022? This is also a common problem faced by many express delivery companies.
epilogue
Sun Yan, an analyst at Anxin Securities, believes that the terminal prices of express delivery companies have stabilized in the short term, and it is optimistic that the price center of the industry will move up, and it is expected that the profitability of express delivery companies will improve significantly in 2022. The demand growth of the express delivery industry is more certain, the free shipping policy is loose, and the service will become a new competitive factor.
Southwest Securities pointed out that the recent industry events reflect the acceleration of integration, the supply is expected to slow down in the medium term, and the industry rebound will continue to cash in. Optimistic about the leading position of Zhongtong and the profitability of the leading industry in the future under the strong scale effect.
China Merchants Securities released a research report saying that under the background of pattern optimization and policy catalysis, the e-commerce express delivery sector has entered the ROE rising channel, and Zhongtong, as the leader of e-commerce express delivery, will deeply benefit from the industry dividend. Affected by multiple factors such as war, rising oil prices, and US policies, zhongtong's valuation is at a historically low quartile level, and its value is seriously undervalued.
At present, the main risk factors of ZTO Express include: 1. Whether the digital field can maintain a competitive advantage; 2. Whether service upgrades can be done under the requirements of high quality; 3. Whether revenue and profit growth can be maintained under the epidemic factors in the first half of 2022.
With the advent of the era of 100 billion pieces, can Zhongtong Express continue to lead the Tongda system? The U.S. Stock Research Agency will also continue to follow up.