The scale of revenue has doubled, and the achievements are not easy to come by
Aneng Logistics, the "first stock of Hong Kong Stock Express", which was listed in Hong Kong on Singles' Day last year, handed over its first annual report on March 25, with quite eye-catching results. During the reporting period, the total revenue of Aneng Logistics approached 10 billion, the freight volume rose sharply year-on-year, and the company as a whole showed sustainable "profitable growth", which is considered to be the title of "King of Express Transportation".
According to the report, the total revenue of Aneng Logistics reached 9.645 billion yuan, an increase of 36% year-on-year; the total freight volume reached 12.6 million tons, an increase of 23.4% year-on-year. Total assets reached RMB6,336 million, up 71% year-on-year; adjusted net profit for the year was RMB408 million, gross margin was 11.1%, gross profit was RMB1,066 million, adjusted EBITDA was RMB1,342 million, up 12% year-on-year, and net cash from operating activities was RMB1,085 million, up 50% year-on-year.
36Kr screenshots based on earnings reports
It is worth noting that such a report card was handed over by Aneng Logistics in the case of repeated epidemics, limited production and power, and rising energy prices. Also because of the general environment, although Aneng has achieved substantial growth in the past year, its net profit has declined.
In the previous disclosure of performance expectations, Aneng also explained that the decline in net profit was mainly affected by the slowdown in economic growth caused by the epidemic and other factors, the rise in fuel prices and increased investment in research and development, network platform management and personnel recruitment.
In 2021, Aneng Logistics made a significant investment in its own fleet. However, due to the widespread impact of the industry, the growth rate of freight volume is slower than expected, which extends the climbing cycle of truck fleet utilization to a certain extent.
Similarly, other players in the industry have also experienced the pain of profits, and SF Holdings' 2021 performance shows that the expected deduction of non-net profit for the whole year is expected to fall by 69%-71% year-on-year. Deppon's net profit attributable to the mother in 2021 is expected to decrease by 67% to 87% year-on-year.
In contrast, Aneng's performance is fairly good compared to its peers, and in the process of experiencing the crisis, it has shown its vitality and competitiveness.
Perhaps because of this, after the release of Aneng's financial report, A number of securities companies such as JPMorgan Chase and Huachuang Securities have successively given Aneng Logistics a "buy" rating, and have been officially included in the Hang Seng Composite Index, and will further expand its liquidity after being included in the Hong Kong Stock Connect.
The industry is turbulent, and the giants have entered
So, what exactly is LTL Express? Why are major e-commerce platforms and express delivery giants laying out this market?
The general definition in the industry is that when the weight or volume of a batch of goods is less than a truck, it can be shipped with several other batches or even hundreds of batches of goods, called LTL express, and the express network is relative to express delivery, express delivery is small pieces, express transport is large pieces.
To put it simply, LTL express can be simply understood as a market for goods over 10kg transported in a networked manner like express delivery. In terms of transportation mode, LTL express transportation is more transported by truck road, although it is slower than the timeliness of aircraft, but it is safer and more cost-effective. Compared with express delivery, express transportation is relatively more difficult to operate due to the difference in "size matching, light and heavy goods collocation, long and short line collocation".
In addition, the LTL express market mainly serves B2B customers, as an important part of the enterprise supply chain, serving all supply chain links from raw materials to manufacturers to distribution channels and retailers, in recent years, with the growth of e-commerce and the accelerated penetration of large-scale e-commerce, the market share of LTL express is also growing in the B2C field.
According to iResearch data, China's LTL express market is the world's largest market, with a scale of 1.5 trillion yuan, nearly twice that of the express delivery industry, belonging to a new blue ocean market, and is expected to reach 2 trillion yuan by 2025.
But in fact, the LTL fast-running industry where Aneng Logistics is located is entering a period of turbulent integration: major e-commerce giants and head express logistics companies have entered the express transportation market through acquisition, integration and separate networking.
Not long ago, Debon was acquired by JD.com, and according to the announcement of JD.com, JD.com will complete the comprehensive invitation acquisition of Debon in three phases.
Ali has been laid out in the field of express transportation for a long time, Cainiao as early as 2018 in conjunction with Baishi, Aneng, Debon and other head enterprises to launch the express index, the future will follow the express mode to remotely control a number of express companies is expected.
Pinduoduo is also accelerating its layout in the field of logistics and express delivery, and in July last year, Jitu Express, which has a special relationship with Pinduoduo, acquired One Meter Tick through Huisen Express, and staged a snake swallowing elephant drama in the fast running industry.
In addition to the active layout of the e-commerce platform in the field of express transportation, the head of express delivery enterprises has also accelerated its layout in the field of LTL express transportation:
Zhongtong Express announced in 2016 that it started its own network and got a B round financing of 300 million US dollars at the beginning of this year; SF acquired Simpang in 2018 to establish a Shunxin Jetta to form a franchise express network, and in 2019, the SF Express brand was officially independent, thus directly operating + joining the two-legged walk; Yunda, which is good at making a fortune in low-key muffled voices, also established a fast express network in 2017, and the action continues.
So, in the case of the entry of giants and the intensification of industry competition, how does Aneng Logistics maintain its competitive advantage and stand out in the second half of the express industry?
Spotlight on the new blue ocean
At present, in addition to Aneng, several other express transportation networks have diversified businesses, and Aneng is the only pure express transportation network.
"Aneng's overall strategy and development direction is highly focused and long-term, the development of the enterprise is a marathon, the most critical thing is to practice internal strength, this internal strength is to continuously optimize operational efficiency." Wang Yongjun, chairman of Aneng Logistics, once said so. In Aneng's view, the law and operational requirements of the LTL industry itself are also highly complex, and only "All in" Express can achieve full investment in resources and deeply cultivate this subdivision industry.
However, some people believe that focusing on the only main business and not laying out diversified businesses may make the capital market lose its imagination and have no moving capital story. In fact, Anneng's choice is not unfounded.
First of all, from the case of cross-border development of express delivery to express transportation, there are indeed not many successful people.
Since the cross-border development of express delivery, the proportion of LTL service revenue has declined year by year, from 94% to 64%, and in the first half of 2021, it only accounted for 35%, although more and more bets are being placed on the express delivery business, but the overall business volume is still low relative to its peers, with a market share of less than 1%.
Baishi began to list with the capital story of eight major business sectors such as express delivery, express transportation, supply chain, and store plus, and from 2020, it began to continuously divest loss-making businesses such as store plus, and in 2021, it sold the express delivery business at a price of 6.8 billion yuan. Shentong and Yuantong have also tried cross-border express transportation, but no significant progress has been made. The aforementioned SF express sector also has a loss of 580 million yuan in 2021.
And Aneng itself has experienced "lessons". At the beginning of 2019, Anneng cut the express delivery business that has been losing money and turned to focus on the core LTL express business, and then profits began to rise. A more obvious set of data is that in 2018, its overall gross profit loss was 585 million yuan, but the second year it achieved an overall operating gross profit of 680 million yuan, and successfully landed on the capital market in 2021.
Secondly, LTL express is worth deep ploughing.
From the perspective of market demand, the digital process of China's commercial trade has accelerated, the digital supply chain has developed rapidly, and the entire supply chain from manufacturers to distributors and retailers needs fast and high-frequency inventory turnover. Coupled with factors such as flexible production by manufacturers, the upward movement of goods from the place of origin, omni-channel retail and the flattening of trade distribution, in the process of China's economic transformation from the consumer Internet to the industrial Internet, the national LTL express network has gradually become an important infrastructure connecting commerce, manufacturing and supply chain, and is an indispensable part of the "new infrastructure".
In the past, China's LTL market was highly fragmented, with millions of freight companies "entrenched" in their respective locations, showing the characteristics of "small scattered", unable to form a nationwide transportation network and layout. This situation makes it difficult for small and medium-sized freight companies to keep up with the trend brought about by changing demand. In fact, this has brought opportunities for the development of express transportation networks such as Aneng Logistics.
According to the latest financial report data released by Aneng, its total freight volume of 12.6 million tons has steadily ranked the largest freight volume in China's LTL express market, and has taken the lead in achieving large-scale profits in the industry, which will have more advantages in the next wave of industry integration.
Efficiency drives the second half
An industry researcher believes that the first half of express transportation is scale-driven growth, and when the scale reaches a certain volume, it will usher in the second half - efficiency-driven growth. There are three core drivers of efficiency growth in the fast-running industry:
The first is how to achieve efficient operation of transit yards, train lines, etc., just like the national high-speed rail network, there are more than 100 high-speed rail stations, there are thousands of high-speed rail lines, and the scheduling operation is extremely complicated;
The second is how to deeply use digitalization to bring efficiency upgrades, so that logistics services have more scientific and technological capabilities to "bless";
The third is how to manage the "sales army" of the terminal, that is, the ecosystem of freight partners, because there are tens of thousands of outlets, if the management is not good, it is difficult.
After a long period of precipitation, polishing and iteration, these three factors have become the "troika" driving the efficiency growth of Aneng Logistics.
Aneng is an early enterprise to invest in digital construction, and digitalization is the key to connecting platforms, networks and service supply, and it is also the core of its operations.
According to reports, Aneng's self-developed operation control tower - compass system, can process more than a billion pieces of data per day, through the system, supply, revenue, cost, gross profit and other data can be reviewed online, linkage, to help managers achieve intelligent decision-making. In addition, Aneng has also polished in all aspects of "receiving, transferring, transporting and dispatching" to achieve digital operation of the whole link.
At the same time, Aneng also has a certain investment in intelligent hardware, such as through AI visual monitoring systems, dynamic volumetric weighing devices, unmanned forklifts, IoT equipment and cargo distribution, automatic driving, etc., to assist digital operation management.
In addition, Aneng has its own unique understanding of digitalization, that is, to deeply integrate technology and operation genes. Aneng's digital system is tailored for its actual operation scenarios, and 12 years of operational experience and data accumulation have also enabled the digital system to truly land.
In this process, Aneng's infrastructure network is also expanding and strengthening, keeping pace with the process of digitalization.
For a long time, Aneng has been known as the "infrastructure demon" of the express transportation industry. Because since its inception, Anneng has resolutely implemented the idea of "martial arts under the heavens, only fast is not broken", and has carried out the layout of distribution centers throughout the country. By the end of 2021, Aneng will have 162 self-operated distribution centers across China, adding 15 new distribution centers last year alone, and each transit hub has an average direct connection to about 17 provinces, which has greatly improved the efficiency of dot-to-point connectivity.
A few years ago, after the completion of the layout of first- and second-tier cities, Aneng began to carry out the market sinking layout. In Suqian Shaji, the first town of China's furniture e-commerce, Aneng was the first to establish a distribution center, which reduced the logistics cost of a piece of furniture export in the local area from the original 160 yuan to about 50 yuan. Relying on Aneng's low-cost logistics network covering the whole country, Shaji furniture can basically be sold to all parts of the country, and the sales radius has been greatly extended, which has also promoted the further agglomeration of the local furniture industry.
In addition to site construction, Aneng has also begun to form a self-operated fleet in recent years. It is reported that Aneng's self-operated fleet consists of about 4,000 large-capacity trunk trucks and more than 4,600 trailers, signed more than 5,100 truck drivers, and the number of transportation routes has increased from 2,700 to 3,100.
In 2021, Anneng invested up to 1.12 billion yuan in self-operated fleets, and in the long run, the establishment of self-operated fleets provides a more powerful guarantee for its efficient operation, and further reduces the procurement costs of fuel and accessories.
From the perspective of business model, Aneng Logistics' freight partner platform model is an integration of the traditional small, scattered and chaotic freight market. Through the "express network" composed of nearly 30,000 freight partners and agents, it has truly opened up the "capillaries" of the Chinese market. It is precisely because of the existence of this network that Aneng has been able to cover 96% of China's counties and townships, serving more than 3.6 million customers and spreading throughout all fields of china's commercial circulation.
Due to the relatively low management costs and the ability to replicate in batches, this model is superior to the direct-operated system in terms of network coverage and operational efficiency. In China, a low-cost express network allows products from fourth- and fifth-tier cities and rural areas to be shipped to all parts of the country at a lower logistics cost.
It can be said that relying on the innovative freight partner platform model, leading infrastructure construction and advanced digital operation level, Aneng has achieved the maximum cost-effectiveness and operational efficiency of the industry.
According to iResearch data, in 2020, the unit operating cost of Aneng Logistics' LTL business was RMB 591/ton, one of the lowest in China's express transportation network. In addition, as a key component of operating costs, the cost of transport per unit trunk line of Aneng decreased by 22.7% from 2018 to 2020.
Long slopes with thick snow and long-termism
It is conceivable that with the concentration of cargo demand brought by manufacturing enterprises, the fragmentation of vehicle orders brought about by the C2M model, and the reform of the omni-channel distribution environment, China's LTL market has huge room for integration.
The LTL fast running industry is indeed a typical "long slope thick snow" track, China's LTL market is about 5 times the US market, and the growth rate of China's LTL market in the past five years is much higher than that of the United States, and the Chinese market is spread across large, medium and small special lines and regional LTL, and the market concentration is low.
According to the data, the total market share of the national LTL express network in China's LTL market increased from 2.9% in 2015 to 6.1% in 2020, and is expected to reach 15.7% by 2025 and 34.6% in 2030. In contrast, there is still a lot of room for imagination in the concentration of domestic head express delivery enterprises.
ODFL is a small-duty giant in the United States, with a current market value of more than $36 billion, a ten-year market value increased by 22 times, and an average net profit margin of 14.1% in the past 5 years, and as high as 20% last year. More than 98% of ODFL's revenue comes from LTL cargo, and its business is very focused, which can be said to be a pure LTL express company.
After the subprime mortgage crisis in 2008, only ODFL did not join the price war in the logistics industry, and it quickly increased its market share with high-quality services, refined cost control and extreme efficiency operation, which also made it the only profitable listed LTL company that year.
To be sure, LTL Express is a slow-working industry, only steady can achieve continuous improvement in profitability and market scale, and this is also the reason why Aneng Logistics continues to invest in digitalization and infrastructure construction, focus on the main business, adhere to long-termism, and is also the key for the whole industry to enter the "second half" competition.
As the "king of express transportation", Aneng Logistics has stable cash flow and profitability, market size and cost reduction and efficiency improvement ability are also far ahead, under the fluctuation of the industry, its competitive advantage is obvious, or it may become a Chinese version of ODFL.