Shenwan Hongyuan Group: Upgrades J&T EXPRESS-W (01519) rating to "buy", strong growth momentum in Middle East, Latin America, and other markets.

Shenwan Hongyuan Group has released a research report, upgrading the rating of J&T EXPRESS-W(01519) from "hold" to "buy". The bank expects the company's adjusted net profit for 2026-2028 to be $702 million, $906 million, and $1.05 billion, respectively, with year-on-year growth of 76.18%, 29.08%, and 15.86%. Based on the divisional valuation method, the company's valuation in 2026 is estimated to be $18.149 billion, equivalent to HK$142.3 billion, representing a 60% upside potential from the current market value. Shenwan Hongyuan Group's main points are as follows: Strong growth momentum in emerging markets, likely to replicate the growth curve of Southeast Asia Other markets such as the Middle East and Latin America have strong growth momentum, likely to replicate the growth curve of Southeast Asia. Southeast Asia, as the first validation field for global emerging e-commerce logistics, still has significant room for improvement in online consumption penetration and parcel volume. There are two main structural changes: 1) e-commerce product prices in Southeast Asia have not bottomed out; 2) Rapid iteration of content e-commerce in the AI era. The global e-commerce market is steadily growing, with increasing penetration rates. While mature markets have high penetration rates with slowing growth, emerging markets have low base numbers and strong growth momentum, with significant room for growth in per capita parcel volume. China's e-commerce model and supply chain capabilities continue to be exported, with major cross-border e-commerce platforms venturing overseas to expand the global e-commerce landscape. Therefore, the bank believes that the e-commerce market in emerging markets will continue to grow, supporting sustained growth in the courier industry. The bank estimates that the total courier volume in emerging markets (Latin America, the Middle East, Africa) in 2025 will be approximately 9.5 billion parcels. Assuming a 1% increase in online penetration rate each year for the next 15 years and a basic stabilization in average order value, the courier volume in emerging markets is expected to reach 142.2 billion parcels by 2040, nearly a 15-fold increase from 2025. "Integrity" as the core, brothers as allies, corporate culture creates efficient and high-quality courier services "Integrity" as the core, brothers as allies, the company's unique corporate culture creates efficient and high-quality courier services, with J&T Express expected to continuously expand its market share and maintain pricing power. The bank believes that J&T Express primarily builds high barriers through three aspects: 1) "Integrity" as the core builds core barriers, brothers as allies improve corporate cohesion; 2) Forward-looking layouts bring cost, efficiency, and scale leadership; 3) China's region as the company's "Whampoa Military Academy," the advanced experience accumulated in fierce competition is the core value. Specifically: 1) Emerging countries primarily use COD payment methods, so building trust between couriers and companies is crucial. This trust needs to be gradually formed over a long period and undergo full validation. To maintain long-term competitive advantage without being affected by capital competition, the core lies in intangible assets that capital cannot establish in the short term. Corporate culture is the core barrier, and J&T Express mainly builds corporate cultural barriers through three aspects: the core concept of "together, there is a future" cultivates a strong sense of belonging among employees; a strong incentive system motivates employees at all levels; a dynamic corporate culture attracts excellent talent reserves; 2) J&T Express in Southeast Asia continuously invests in land assets, trunk transportation vehicles, and automated sorting lines to expand production capacity, consolidate its lead in scale, and optimize costs and efficiency, maintaining a leading position in Southeast Asia, with the company continuing the trend of heavy asset investment in 2026 and focusing on Southeast Asia and new markets; 3) The competition in the Chinese courier industry is fierce, with the TONGDA system having deep accumulations and price wars ongoing. The model that survives the intense competition has undergone the highest intensity of pressure testing, and J&T Express has accumulated rich advanced experience in this environment. J&T Express in China is also the company's "Whampoa Military Academy," continuously training backbone personnel with practical experience for new overseas markets. Profit forecast The bank maintains J&T Express's profit forecasts for 2026-2028, with the company estimated to achieve net profits of $702 million, $906 million, and $1.05 billion, respectively, with year-on-year growth of 76.18%, 29.08%, and 15.86%. Risk warning Expansion into new markets falls below expectations, courier price competition in Southeast Asia exceeds expectations, fluctuations in regional agent networks, cost control falls below expectations, courier price competition in the Chinese market exceeds expectations, significant fluctuations in oil and exchange rates.