"Investor.com" Hou Shuqing
Recently, J&T Express (01519. HK) announced its 2023 results. The company's total revenue and parcel handling volume have increased throughout the year, but the net profit has turned from profit to loss, with a loss of US$1.156 billion for the year, a significant gap with the profit of US$1.573 billion in 2022.
According to the financial report, in 2023, J&T Express's "selling, general and administrative expenses" soared from $1.095 billion to $2.157 billion, almost doubling. However, the company's market share did not improve significantly compared with the same period in 2022, only increasing by 0.76 percentage points year-on-year.
After being listed on the Hong Kong Stock Exchange on October 27, 2023, due to the market's optimism about the company's growth, the share price of J&T Express has experienced a period of rise, with an increase of nearly 40%. But in the past month, this part of the increase has been given back, and there is only half a month left before the lifting of the ban on J&T Express, but the company has fallen below the issue price.
Increase in revenue but not in profit
The financial report shows that in the whole year of 2023, the business volume and operating income of J&T Express will maintain a high growth rate.
Total revenue was $8,849 million, up 22% year-over-year from $7,267 million for the full year of 2022. J&T Express handled a total of 18.8 billion parcels for the year, an increase of 29% from 14.6 billion parcels in the same period last year. In terms of sub-markets, the growth rate of parcel volume in Southeast Asia and China remained at the level of 28%, and the parcel volume in new markets increased from 49.1 million to 230 million, a growth rate of 369%.
In terms of market share, the three markets have all made achievements in 2023, and the new market may not have much reference value at the beginning, with the market share of J&T Express in the Southeast Asian market increasing by 2.9%, while the market share of the Chinese market has increased by less than 1%.
In terms of growth rate, J&T's business volume growth rate is slightly higher than revenue growth, and the two are generally in sync, but this has not brought more profits to the company. In 2022, the company's profit for the year will be $1.573 billion, but in 2023, it will turn from a profit to a loss of $1.156 billion.
According to the financial report, the operating cost of J&T Express in 2023 will be US$8.849 billion, an increase from US$7.267 billion in 2022, but the increase is still in sync with the revenue growth. The main reason for the annual loss was on the expense side of "selling, general and administrative expenses".
In 2022, J&T Express spent $1.096 billion on this expense, and in 2023, this cost skyrocketed to $2.157 billion.
Not only that, J&T Express is also facing greater pressure in terms of single ticket revenue and single ticket cost in the two major markets.
In terms of revenue scale, the Chinese market is the largest market for J&T Express. According to the financial report, here, the company's revenue per ticket is the same as the cost per ticket, which is $0.34. The difference is only that in 2022, the cost of a single ticket of J&T will be $0.4, and the revenue of a single ticket will be the same as in 2023. The Chinese market has changed from "losing money for market" in 2022 to breaking even.
In the Southeast Asian market, although J&T has a market share of more than 20%, the performance of single ticket revenue and single ticket cost is not optimistic enough. Among them, the revenue per ticket decreased from $0.95 to $0.81, and the cost per ticket decreased from $0.75 to $0.67. The cost per ticket in Southeast Asia is declining at a slower rate than revenue per ticket.
Under the dual pressure of a sharp increase in expenses and poor business income, the annual loss of J&T Express has become less surprising.
The price war is not so easy to end
In March 2020, J&T Express, which started from the Southeast Asian market, first entered the domestic market and picked up parcels at a low price 30%-50% lower than that of its peers, which later became a landmark event in the price war of the express delivery industry. The single ticket income of Yuantong, Shentong and Yunda also declined significantly that year.
In April of that year, J&T Express and the Yiwu distribution center of Best Express at that time were suspended by the local postal administration due to low-price dumping restrictions. The first attack of J&T Express has obviously opened Pandora's box, but it can also be seen from the cost and revenue of a single ticket in the 2023 financial report that J&T is gradually reversing this status quo.
In 2020, J&T Express's single ticket revenue was only $0.23, and J&T had not yet acquired Best and Fengwang at that time, so the cost of a single ticket was as high as $0.51. But the effect of this is also very obvious, and by 2022, J&T Express will get 10.9% of the domestic market share.
But price wars are like any war: you have the right to choose when to start, but you have the difficulty of choosing when to end. Entering 2024, some express delivery companies that once followed the price of J&T have gotten the script of "reversing Tiangang".
From January to February 2024, the business volume of YTO, Yunda, and Shentong grew very rapidly year-on-year, with 26.6%, 27%, and 40% respectively, while their single ticket income was 2.49 yuan, 2.28 yuan, and 2.22 yuan respectively, down 5.68%, 14.77%, and 13.28% year-on-year.
According to the US dollar exchange rate on April 10 and the domestic single ticket price in 2023, the single ticket price of J&T 0.34 US dollars corresponds to 2.45 yuan. That is to say, in front of Yunda and Shentong, J&T has lost its price advantage.
Since entering the domestic market, J&T has seized the market through financing, money burning, price wars and other means, and quickly made up for its own hardware shortcomings through the acquisition of Fengwang and Baishi, which are essentially "making up for lessons". However, compared with the local express delivery companies that have been deeply involved in China for many years, the foundation of J&T is still too shallow.
What happens after the ban is lifted?
Judging from the current market capitalization and the listing history of J&T, its IPO may not be a decision that is beneficial to both secondary market investors and institutional investors. The six-month lifting period is approaching, and J&T will face a lot of trouble.
The story also starts before the listing, before the listing, J&T Express may have experienced at least two IPO fundraising shrinks.
In June 2023, the Securities Times reported that after deducting underwriting fees, commissions and projected expenses payable for the global offering, J&T Express planned to raise between US$5 billion and US$1 billion (about HK$3.909 billion to HK$7.818 billion at the time). In the end, J&T Express disclosed in the announcement that it is expected to raise HK $3.528 billion in the IPO. Such a fundraising scale is even lower than the lower limit previously reported by the Securities Times.
According to the prospectus, the issue price of J&T Express's D round of financing preferred shares is $7.65 per share, raising a total of $200 million. In the C1 round of financing, the financing price was $14.1 per share.
In addition, before the listing, J&T Express has reached a valuation of HK $105.7 billion after multiple rounds of financing. Compared with other domestic peers, such a level of valuation is also somewhat "inflated".
Based on the number of parcels processed in 2022, J&T handled 14.6 billion pieces, Zhongtong 24.4 billion pieces, Shunfei 11.14 billion pieces, Shentong 12.947 billion pieces, and YTO and Yunda both 17.5 billion pieces. Compared with the market value at that time, Zhongtong was about 148 billion Hong Kong dollars, SF Express was 188 billion Hong Kong dollars, and YTO and Yunda were 46 billion yuan and 26.5 billion yuan respectively. The market value of Shentong Express, which is similar to J&T's order volume and scale, is only about HK $15 billion.
The valuation or market value of listed companies in the express delivery industry is not simply proportional to the volume and revenue scale, which must include the market's growth expectations for a company. However, from the above comparison, it is not difficult to see that in the valuation of more than 100 billion Hong Kong dollars at the beginning of J&T's listing, "growth expectations" may account for a large proportion of it.
According to the listing date, J&T Express will usher in the lifting period on April 27, 2024. As of the close of trading on April 10, the market value of J&T Express was only 92.528 billion Hong Kong dollars, which was still in a state of falling below the issue price. (Produced by Thinking Finance)■