Founder: Express delivery industry Q2 profits continue to grow steadily, with consistent price increases expected to be realized ahead of peak season.

Founder released a research report stating that the volume of items is driving revenue to maintain relatively high growth, and the Q2 express industry profitability is steadily released. Looking ahead to the second half of the year, seasonal price competition may have reached its peak, and the expectation of price increases during the peak season is being realized in advance. The future competition and changes in the layout of the express delivery industry will be a "marathon" process of competing in full-chain cost reduction capabilities and service quality. In the medium to long term, on the demand side, the volume of items is expected to maintain moderate to high growth under the catalysis of consumer downgrading, emerging e-commerce, and returned items; on the supply side, the current industry competition of "one super, multiple strong" has different stages of production capacity among various companies, with industry leaders seeking a balance between quantity, quality, and profit. In the short to medium term, the express delivery industry may have difficulty quickly achieving the ideal expectations of complete clearing, and is expected to present a phase-wise, locally controllable mild price competition. Summary of the performance of the express delivery industry in 2024 Q2: The volume of items drives revenue to maintain relatively high growth, and Q2 profitability is steady. Operational performance: Overall decrease in unit price/cost, relatively stable single ticket profit, significant optimization of profit for Shentong Express. Outlook for the second half of the year: Seasonal price competition may have reached its peak, and the expectation of consistent price increases during the peak season is being realized in advance. In Q3, due to factors such as a traditional off-peak season with a decrease in the volume of items in the industry, a lightened product structure, demand for items by industry leaders, and the operation of some transfer centers, there is an intensification of localized, stage-wise price competition in some regions, resulting in a seasonal decline in unit price. Starting in September, with the approach of the peak season, several express delivery companies in Zhejiang and Guangdong regions announced price increases, especially targeting key production areas such as Chaoshan and Yiwu, with a significant increase in prices. This early realization of the price increase in the peak season is mainly due to: 1) the Central Political Bureau meeting and the State Post Bureau's proposal to prevent "vicious competition", with some regional postal authorities intervening to guide pricing intensity (such as Hangzhou advocating for a brand premium system to ensure that prices do not decline further and to promote a return to a reasonable price range), pushing prices up. 2) This year, the off-peak season of localized price competition lasted for a long time, severely squeezing the profits of headquarters/franchisees, thus creating a strong expectation for a consistent price increase by headquarters/franchisees as the peak season approaches; 3) Some franchisees in key production areas formed regional price alliances and joined with headquarters to crack down on scalpers engaging in inter-regional arbitrage, thus pushing prices up from the bottom up; 4) Currently at the critical point of transitioning from off-peak to peak season, in order to avoid peak season inventory overflow/product structure becoming heavier/price increases in production factors during the peak season leading to increased costs, seasonal conventions require coordinated price increases to optimize capacity utilization and profit. After the peak season, it is necessary to further observe the increase in the volume of items in production areas, the price increase/number of times, and changes in distribution fees in non-production areas under the background of "anti-vicious competition", with the probability of intense price competition in the future likely to decrease. In the medium to long term, 1) on the demand side, the volume of items is expected to maintain moderate to high growth under the catalysis of consumer downgrading, emerging e-commerce, and returned items; 2) on the supply side, the current industry competition of "one super, multiple strong" has different stages of production capacity among various companies, with industry leaders seeking a balance between quantity, quality, and profit. In the short to medium term, the industry may find it difficult to quickly achieve the ideal expectations of complete clearing, and is expected to present a phase-wise, locally controllable mild price competition. After entering the mature stage, the future will be a struggle for the distribution of interests at the industry and company levels. 1) The distribution of industry interests mainly depends on the ability of the entire chain to reduce costs and build stable quality services in order to obtain the largest share of industry profits. 2) The distribution of company interests mainly depends on whether branded express delivery companies can reasonably distribute the interests of e-commerce, headquarters, franchisees, and delivery personnel, in order to consolidate and focus on building a franchising system with centralized management as the core of development. Investment recommendations: The future competition and changes in the express delivery industry will be a "marathon" process of competing in full-chain cost reduction capabilities and service quality. It is recommended to pay attention to: ZTO Express (02057), which has cost leadership inside and outside the table-sharing mechanism, and YTO Express Group (600233.SH), which strengthens management through digitalization; and STO Express Co., Ltd. (002468.SZ), which has substantial optimization potential in cost and switching assets from light to heavy under Alibaba's empowerment, andYunda Holding (002120.SZ), which promotes capacity optimization and cost reduction through management optimization. Risk warning: The effect of the price increase in the peak season may not meet expectations; industry policy adjustment risks; price competition intensity exceeds expectations; risks of terminal branches shutting down; unexpected decrease in the volume of items in express delivery, etc.