Morgan Stanley upgrades ANE (09956) to "overweight" rating with a target price of HK$11.7, bullish on the growth potential of the leading less-than-truckload express delivery company.

On September 3rd, Morgan Stanley released its first research report covering ANE (09956), giving it an "Overweight" rating with a target price of 11.7 Hong Kong dollars. As of the closing price on September 2nd, ANE's stock price was 8.10 Hong Kong dollars, indicating a potential upside of 44% based on the target price. Of note, ANE's performance in the first half of 2025 has shown steady growth: freight volume reached 6.82 million tons, a year-on-year increase of 6.2%; operating income was 5.625 billion yuan, a year-on-year increase of 6.4%; adjusted net profit was 476 million yuan, a year-on-year increase of 10.7%. The gross profit margin remained stable at 15.6%, laying a solid foundation for full-year growth. Morgan Stanley's research report highlights the growth opportunities in the less-than-truckload (LTL) freight market and ANE's leading advantages. In the industry, the LTL freight market in China reached 1.7 trillion yuan in 2024, but the structure is highly fragmented, with about 200,000-300,000 small and local freight companies accounting for 90% of the revenue share, while express delivery (a high-margin segment of LTL) only accounts for 10%. With the popularization of intelligent manufacturing and the penetration of on-demand manufacturing models, coupled with the increasing electrification of large items such as home appliances and furniture, there is a continuous demand for nationwide distribution coverage and high service quality. At the same time, the logistics industry is undergoing accelerated integration, and leading companies are expected to gain market share through a "suction effect." Morgan Stanley predicts that the express delivery market will grow at a compound annual growth rate of 8% from 2024 to 2027, with its share in the LTL market expanding from 9% to 11%, and iResearch consulting further predicts that this share could reach 35% by 2030, indicating significant growth potential. ANE, as a leader in the LTL express delivery market in China, is strategically seizing industry opportunities. In 2024, its freight volume reached 14.15 million tons, an increase of 18% year-on-year. In the first half of 2025, its network coverage reached 99.6% of townships nationwide, significantly higher than competitors' coverage levels of 85%-97%, providing solid network support for business expansion. Optimizing product structure is one of its core competitive strengths: it adheres to the strategy of "effective scale growth," focusing on high-margin small parcels (<70kg) and light cargoes (70-300kg) rather than simply expanding scale. These categories have significantly higher unit prices and profit margins than bulk freight, with mini parcels' volume increasing by 23.9% year-on-year in the first half of 2025, and small parcel LTL volume increasing by 14.0%. This drove the total number of parcels to increase by 25.2% year-on-year to 90.572 million, with the average weight per parcel decreasing from 93kg in 2023 to 75kg in the second quarter of 2025, continuously tilting the product structure towards high-profit categories. ANE's profitability is particularly outstanding, with a return on equity (ROE) of 30% in 2024, far exceeding the domestic logistics industry's average of 10%, mainly due to an asset turnover rate of over 200% (compared to the industry average of 160%) and a net profit margin of 7.2% (compared to the industry average of 4.4%). Morgan Stanley further predicts that ANE's adjusted net profit compound annual growth rate (CAGR) from 2025 to 2027 could reach 15%, with the gross profit margin gradually increasing from 15.9% in 2024 to 16.2% in 2027, indicating a strong certainty of profit growth. The less-than-truckload freight industry has entered a stage of stock competition, with significant Matthew effects. ANE's investment value is gradually being realized. As a leader in the industry, its advantages in network coverage, product structure, and profitability will help it continuously increase market share during the consolidation process, along with a stable dividend policy. ANE has become a typical "value stock," and with deepening industry consolidation and improving profit efficiency, ANE is expected to further consolidate its leading position in the stock market and realize a dual release of value and performance. Continuous growth may become the best endorsement of its investment value.