Huafu Securities: Express delivery demand exceeds expectations in 2024, pay attention to the bottom configuration value of leading companies.

Huafu Securities released a research report stating that demand in the express delivery industry will exceed expectations in 2024, with the effect of the direct-operated express delivery cost reduction and efficiency improvement strategy becoming apparent, leading to a continuous recovery in industry profitability. Currently, the valuation of franchise express delivery companies already fully reflects the pessimistic expectations of a price war. E-commerce express delivery may be the sub-industry with the lowest expectations in the logistics sector in 2025. It is recommended to focus on optimizing the industry landscape and repairing valuations. Key recommendations include S.F. Holding (002352.SZ), STO Express Co., Ltd. (002468.SZ), ZTO Express (Cayman), Inc. Sponsored ADR Class A (ZTO.US; 02057), YTO Express Group (600233.SH), Yunda Holding Group (002120.SZ), Deppon Logistics (603056.SH), etc. Key points of Huafu Securities are as follows: The demand exceeding expectations in 2024 will help the company's profitability continuously recover, and the profit repair of direct-operated express delivery with cost reduction and efficiency improvement strategy is significant. In 2024, with the assistance of demand exceeding expectations in the express delivery industry, franchise express delivery companies are experiencing a quarterly recovery in profitability. The direct-operated express delivery company Shunfeng is continuing its cost reduction and efficiency improvement strategy from 2023 to 2024H1, with a noticeable profit recovery. The trend of decreasing capital expenditure in direct-operated express delivery, with differentiated capital expenditure trends in the Tongda group. The capital expenditure of listed express delivery companies peaked in Q4 2021 and has since slowed significantly from 2022 onwards. The overall trend of capital expenditure in direct-operated express delivery, with Shunfeng's capital expenditure as a whole maintaining a downward trend, shows some differentiation in the capital expenditure trends of the Tongda group in 2023. In 2024, Shunfeng's capital expenditure in Q1 increased by 12.0% year-on-year, with growth rates in Q2-Q3 of 24 as follows: -29.0%, -41.1%, maintaining a downward trend; the capital expenditure trends of Tongda group in 2024 show differentiation, with YTO maintaining overall positive growth in the first three quarters of 2024, while Zhongtong and Yunda's capital expenditure turned positive in the third quarter, and Shentong's capital expenditure in Q1 and Q2 of 2024 increased positively. Investment recommendations: As for the industry landscape of e-commerce express delivery, the Q3 quarterly reports of YTO/Shentong are more optimistic, while Zhongtong's Q3 quarterly report shows a decrease in profits. Overall, the price war expectation for Tongda's rabbits in 2025 has increased, but under the neutral assumption that e-commerce express delivery maintains medium-high-speed growth supported by consumption downgrading in 2025, the corresponding capacity expansion of the industry's capital expenditure does not point to fierce price wars. In terms of direct-operated express delivery: major players such as Shunfeng/JDL benefit the most directly from the reverse policy turning macro expectations. In terms of pace, it is expected that as retail gradually warms up, the high consumer resilience on the C end will be beneficial for the further repair of the profit margin of the direct-operated system. As for franchise express delivery: in terms of valuation, the expectations of a price war have already been fully priced in, and before Zhongtong's price and volume policy becomes clear in February 2025, the market has already used the intensity of the price war in 2023 for pessimistic pricing, with the valuations of leading companies such as ZTO/Yunda at historical lows. E-commerce express delivery may be the sub-industry with the lowest expectations for 2025 in the logistics sector, which has good bottom-up configuration value. Risk warning: Risks of macroeconomic downturn; risks of intensified industry competition.