Produced by | Bullet Finance
Author | Chasing the light
Edit | lightning
American Editor | Qianqian
Audit | Ode
As the first financial report after listing, J&T handed over a satisfactory answer.
On March 22, J&T Express released its 2023 performance report, achieving total revenue of US$8.849 billion, a year-on-year increase of 21.8%, and an adjusted net profit loss of US$432 million, a significant narrowing of 71%. More importantly, China also achieved its first profitability, with Adjusted EBITDA of $31 million.
As a dark horse in the express delivery industry in recent years, J&T has quickly stood out and achieved profitability in the fierce domestic market competition, which means that the company has entered a moment of change.
1. Refined operation has achieved results, and the Chinese market has achieved profitability
The significant improvement in the profitability of J&T shows that the effect of large-scale and refined operation has been effective.
In 2023, in addition to the loss of adjusted net profit, J&T will also turn positive for the first time, with gross profit and adjusted EBITDA also turning positive for the first time, at US$473 million and US$147 million, respectively, which is a significant improvement compared with last year's loss.
Along with the improvement of J&T's cash flow. The express delivery industry is a typical asset-heavy operation industry, and cash flow can more intuitively reflect the profitability of enterprises. In 2023, the company's net operating cash flow will be 342 million, which is significantly better than -520 million in the same period last year.
At the business level, the first profit in the Chinese market, which accounts for half of the revenue, has played a great role in promoting the overall profitability improvement of J&T.
In 2023, the core performance indicators of J&T in the Chinese market will still accelerate, achieving revenue of US$5.229 billion, a year-on-year increase of 27.7%, and completing 15.34 billion express parcels, a year-on-year increase of 27.6%, exceeding the average growth rate of the industry.
Although J&T is a latecomer to the domestic "three links and one reach", from entering the Chinese market in 2020 to 2023, it has continuously strengthened the grid layout and infrastructure construction through acquisition and integration and the growth of its own scale, greatly improving the carrying capacity and operational efficiency, during which the average annual compound growth rate of express orders is as high as 94.5%, completing the counterattack in a very short time.
According to Frost & Sullivan research, J&T's market share in the Chinese market in 2023 will be 11.6%, an increase of 0.76% from 2022, ranking 6th in the industry.
Not only the scale factor, but also the refinement of operations is critical to achieving profitability. For example, in terms of diversified products and services, the "Rabbit Youda" product has been launched for medium and high-end e-commerce parts, which has accumulated high-quality customer groups while meeting the needs of different e-commerce customers, and the number of brand merchants has been increasing.
At the same time, J&T also provides return reverse logistics services for e-commerce platforms, strengthens the development of loose single pieces, etc., and the proportion of reverse parts and loose single pieces will continue to increase in 2023, further expanding the source of revenue growth.
In addition, J&T continues to deepen the sinking market by carrying out agricultural assistance projects and expanding the container transportation business in remote areas, and continues to expand the basic market. At present, J&T has a county-level coverage rate of more than 99% in China.
The digital application of J&T is also a major embodiment of refined operation. For example, the company's self-designed JMS system can help establish and upgrade the address digitization system, transportation configuration and network resources in markets around the world, track and monitor the whole life cycle of parcels, and help improve the intelligence level and operational efficiency of outlets.
The JMS system is highly flexible and applicable, enabling J&T to complete the construction of the dedicated JMS system and related IT infrastructure within the three-month preparation period, helping the business to quickly land in new markets. And through the application of technological innovation, the monitoring and visualization of the whole link operation unit and process links are realized, and the operation efficiency and operation service quality are improved, which is also one of the reasons why J&T can consolidate the construction of the express network in the Chinese market.
It is based on the scale effect and refined operation that in 2023, in the case of fierce competition in China's express delivery industry and declining industry prices, J&T will achieve a single ticket revenue of US$0.34, which will remain stable compared with 2022. The cost per ticket also dropped from $0.40 in 2022 to $0.34. In the future, with the further expansion of the scale, there is still room for further cost reduction.
J&T not only performed well in China, but also maintained strong growth in Southeast Asia and new market regions.
2. The Southeast Asian market has been the first in 4 years, and the growth curve of the new market has been formed
For the Southeast Asian market, which was started by J&T, it continues to maintain a strong dominance.
Unlike the Chinese market, the Southeast Asian market has a higher entry threshold than the domestic market due to poor network coverage, underdeveloped transportation infrastructure, and a high proportion of cash on delivery. After J&T entered Indonesia, Southeast Asia's largest market, in 2015, it successfully overcame barriers and quickly won the local hegemony.
With the successful experience in Indonesia, J&T's business network has covered 7 countries in Southeast Asia, and the Southeast Asian market has become the second largest market after China, with revenue of US$2.633 billion in 2023, a year-on-year increase of 10.56%, accounting for 29.8% of revenue.
From the perspective of express order volume, in 2023, the express order volume of J&T Southeast Asia will be 3.24 billion pieces, a year-on-year increase of 28.9%, which is significantly higher than the overall express volume in Southeast Asia with an increase of 14.4%.
Due to the rapid growth of J&T Express's order volume, its market share in Southeast Asia has increased again, reaching 25.4% in 2023, an increase of 2.9% compared with 22.5% in 2022, and it has ranked first in the region for 4 consecutive years.
The reason why J&T's Southeast Asian business has achieved rapid growth is that, on the one hand, based on its own market position, it has seized the growth dividend of e-commerce and social e-commerce. At present, the e-commerce market in Southeast Asia is still a blue ocean, and the e-commerce retail transaction volume will reach US$189.74 billion in 2023, a year-on-year increase of 22.6%.
According to China Merchants Securities, the compound growth rate of the Southeast Asian e-commerce market is expected to reach 18.6% from 2023 to 2027, higher than the 10.3% growth rate of the Chinese market in the same period.
At the same time, social e-commerce, as an emerging format, is becoming an important driving force for the e-commerce market in Southeast Asia. According to Frost & Sullivan Research, the retail transaction volume of social e-commerce in 2023 will be US$81.95 billion, a year-on-year increase of 36.2%, accounting for 43.2% of the total size of the e-commerce retail market, and it is expected to account for 50.1% by 2028.
The price advantage brought about by the decline in the cost of a single ticket of J&T is not easy to ignore. J&T leverages its operational experience in the Chinese market to empower Southeast Asia, including digitalization and enterprise management, expanding the scale effect and improving the operational efficiency of all links.
In 2023, the cost of a single ticket in the Southeast Asian market of J&T will drop from US$0.76 in 2022 to US$0.67 in 2023, further enhancing the competitiveness of J&T's business.
In J&T's international market, not only the Southeast Asian market has performed well, but also the new market business including Brazil, Mexico, Saudi Arabia, the United Arab Emirates and Egypt has also shown explosive growth.
In 2023, J&T's express delivery order volume in the new market will be 230 million, with a year-on-year growth rate of 369%, and its market share will also increase from 1.6% in 2022 to 6% in 2023, ranking in the top 5 in Brazil, Mexico, Saudi Arabia, and Egypt. The annual revenue also reached 327 million US dollars, an increase of 299.7% year-on-year, which has become a new growth curve for J&T.
At present, J&T's new market business is still in the early stage of layout, and the explosive growth is related to increasing infrastructure layout and market demand, and it is inseparable from the close cooperation established with major e-commerce platforms, including cross-border e-commerce giants and short video live broadcast platforms such as Shopee, Shein, Temu, TikTok, and Noon, a local e-commerce platform in the Middle East. With the increase in infrastructure investment and brand awareness in emerging markets, the rapid growth of the business is expected to continue in the future.
It is worth mentioning that the early stage of development in the new market has also made the company's express service pricing relatively high, and the gross profit of the new market in 2023 has turned positive to $1.65 million.
3. Differentiated advantages are emerging, and long-term value is gradually highlighted
In the highly competitive and homogeneous express delivery industry, differentiation is the key to maintaining competitiveness and achieving breakthroughs. The unique regional agency model and international genes have built the differentiation barriers of J&T.
Different from the franchise operation of the Tongda system, the regional agency model of J&T is formulated by the headquarters to formulate the operation strategy and implementation plan of each market, and the regional agent has a certain degree of independent decision-making power, can make decisions according to the actual situation of the region, and manages the network partners through the regional operating entity jointly established with the headquarters.
From the perspective of the operation mechanism of the regional agency model, it can not only make the headquarters and the regional agent maintain the same interests, but also avoid the possibility of management accidents caused by conflicts of interest between franchisees and headquarters under the franchise model.
What's more, since the regional operating entity is only responsible for the critical parts of the express delivery process for sorting and trunk transportation, and the terminal pick-up and delivery is managed by the regional agent or network partner, it can better meet the cost reduction needs and the assets are relatively lighter.
Thanks to the flexibility and adaptability of the regional agency model, it is more convenient for J&T to expand its global business, and therefore the pace of J&T's global layout is accelerating. In 2023, J&T will have about 8,500 network partners and 19,600 outlets around the world, including more than 6,000 network partners and 7,000 outlets in the Chinese market, and more than 10,600 outlets and more than 2,400 network partners in Southeast Asia.
In addition, J&T's international layout also disperses the risk of over-concentration in a single region, and can also provide reference for other regions by summarizing the successful experience of the region. For example, the experience of the Chinese market can better empower the cost reduction and efficiency increase in Southeast Asia and new market regions.
J&T's differentiated breakthrough is not only reflected in the operating model, but also in its own service advantages. Service quality is also an important part of the evaluation of express delivery companies, and J&T has always maintained a high level of customer satisfaction.
In the Southeast Asian market, J&T has continuously optimized its service capabilities, such as providing cash collection services to solve e-commerce settlement problems, strengthening the training of practitioners and optimizing information technology systems, etc., which have been widely recognized by customers. In 2023, the average delivery time of J&T's parcels in Southeast Asia will be shortened by 6.5% year-on-year, and the customer complaint rate will continue to decline.
In the Chinese market, J&T's customer satisfaction also continues to lead the industry. According to the data disclosed by the State Post Bureau, the average complaint rate of J&T in 2023 will be 0.54, ranking the lowest level among major domestic express delivery manufacturers, and the comprehensive index of the company's complaint handling work will be 99.43, ranking first in the industry, higher than the industry average of 97.09.
The increasing number of J&T's e-commerce customers is also a major confirmation of its differentiation capabilities. Through the acquisition and integration of Best Express and Fengwang Express, J&T has given the company the opportunity to contact more e-commerce platforms and expanded the company's customer base. At the same time, in recent years, J&T has also actively cooperated with vertical e-commerce and social e-commerce platforms, basically completing the full platform coverage.
On the whole, with the deepening of J&T's differentiation barriers, the internationalization attribute will become more prominent, and each business line will have more replicable experience to promote to the world, and the ability to resist risks will be stronger. Therefore, J&T's first profit in the Chinese market is only the beginning, and its growth is far from stopping. In the fierce competition of domestic express delivery, there is still room for further improvement in the ranking.
In terms of the investment value of J&T, based on the future development potential of J&T, both capital and investment banking institutions are optimistic about the long-term value of the company. A number of star shareholders, including Tencent and Hillhouse, chose to increase their holdings during the IPO, China Merchants Securities and Guohai Securities gave "highly recommended" and "overweight" ratings in their research reports on J&T, and foreign investment bank Deutsche Bank also gave "buy" ratings in its latest research report in March. As J&T's performance continues to materialize, it is expected to bring significant returns to investors.