Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/dada-nexus-ltd" target="_blank" data-smartkarma-citation="entities:28961:1" rel="noopener">Dada Nexus Ltd (DADA US)</a> recently reported Q2 results that showed strong YoY revenue growth at its two main business units and solid progress on raising margins. Still, Dada posted a net loss of 457 mn RMB on revenue of 1.32 bn RMB, and its shares in the US have fallen since it reported. </p><p>An examination of average revenue per order in its <em>Dada Now</em> business line suggests the company actually handles little 'real' on-demand traffic. Instead, by volume it appears <em>Dada Now</em> mostly handles last-mile delivery duties for JD Logistics and traditional (2-4 day) express delivery firms. </p><p>In this note we remind readers there is more to Dada than its hyped on-demand retail and on-demand delivery -- and less, too. We say this because Dada still appears to have substantial exposure to traditional eCommerce fulfillment, which features slower growth, entrenched rivals, and thin margins. </p>

Dada Nexus Ltd (DADA US) recently reported Q2 results that showed strong YoY revenue growth at its two main business units and solid progress on raising margins. Still, Dada posted a net loss of 457 mn RMB on revenue of 1.32 bn RMB, and its shares in the US have fallen since it reported. An examination of average revenue per order in its Dada Now business line suggests the company actually handles little 'real' on-demand traffic. Instead, by volume it appears Dada Now mostly handles last-mile delivery duties for JD Logistics and traditional (2-4 day) express delivery firms. In this note we remind readers there is more to Dada than its hyped on-demand retail and on-demand delivery -- and less, too. We say this because Dada still appears to have substantial exposure to traditional eCommerce fulfillment, which features slower growth, entrenched rivals, and thin margins. 

Dada-Nexus: More -- And Less -- Than Meets the Eye

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/huazhu-group-ltd" target="_blank" data-smartkarma-citation="entities:17527:1" rel="noopener">Huazhu Group (HTHT US)</a> plans to raise around US$900m in its secondary listing in Hong Kong.</p>
</div>
<div>
<p>I have covered the background of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/huazhu-hk-secondary-listing-early-look-needs-the-cash-more-than-most-secondary-candidates" target="_blank" rel="noopener">Huazhu HK Secondary Listing - Early Look - Needs the Cash More than Most Secondary Candidates.</a></p>
<p>In this insight, I'll talk about the deal dynamics and what to do with the ADR while waiting for the completion of the Hong Kong listing.</p>
</div>
<div>
<p></p>
<p><strong>Links to my previous notes on the topic:</strong></p>
<ul>
<li><a href="https://www.smartkarma.com/insights/yum-china-hk-ipo-trading-index-flows-to-the-rescue" target="_blank" rel="noopener">Yum China HK IPO Trading - Index Flows to the Rescue</a></li>
<li>
<a href="https://www.smartkarma.com/insights/yum-china-hk-listing-relatively-bigger-should-offer-a-bigger-discount" target="_blank" rel="noopener">Yum China HK Listing - Relatively Bigger, Should Offer a Bigger Discount</a>.</li>
<li><a href="https://www.smartkarma.com/insights/yum-china-hk-listing-early-look-relatively-bigger-deal-should-have-a-relatively-bigger-impact" target="_blank" rel="noopener">Yum China HK Listing - Early Look - Relatively Bigger Deal Should Have a Relatively Bigger Impact</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-netease-secondary-listings-what-to-do-with-the-adr-lessons-from-baba" target="_blank" rel="noopener">JD &amp; NetEase Secondary Listings - What to Do with the ADR? Lessons from Baba</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-netease-and-other-secondary-listing-index-ftse-msci-hsi-and-hscei-impact" target="_blank" rel="noopener">JD, NetEase and Other Secondary Listing - Index (FTSE, MSCI, HSI And HSCEI) Impact</a></li>
<li><a href="https://www.smartkarma.com/insights/jd-com-hk-listing-early-look-getting-the-ball-rolling" target="_blank" rel="noopener">JD.com HK Listing - Early Look - Getting the Ball Rolling</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-secondary-listing-early-to-file-but-late-to-launch-puts-it-in-a-peculiar-position" target="_blank" rel="noopener">JD Secondary Listing - Early to File but Late to Launch Puts It in a Peculiar Position</a></li>
<li><a href="https://www.smartkarma.com/insights/jd-secondary-listing-behaving-better-than-netease-so-far" target="_blank" rel="noopener">JD Secondary Listing - Behaving Better than NetEase, so Far</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-secondary-trading-update-strong-demand-but-won-t-have-any-index-flows" target="_blank" rel="noopener">JD Secondary Trading Update - Strong Demand but Won’t Have Any Index Flows</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/netease-hk-listing-early-look-follow-the-leader" target="_blank" rel="noopener">NetEase HK Listing - Early Look - Follow the Leader</a></li>
<li><a href="https://www.smartkarma.com/insights/netease-secondary-listing-relatively-bigger-than-baba-should-offer-relatively-bigger-discount" target="_blank" rel="noopener">NetEase Secondary Listing - Relatively Bigger than Baba, Should Offer Relatively Bigger Discount</a></li>
<li><a href="https://www.smartkarma.com/insights/netease-secondary-listing-doing-a-beigene-rather-than-a-baba-risk-reward-shifting" target="_blank" rel="noopener">NetEase Secondary Listing - Doing a BeiGene Rather than a Baba, Risk Reward Shifting</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/netease-secondary-trading-update-index-flows-to-provide-near-term-support" target="_blank" rel="noopener">NetEase Secondary Trading Update - Index Flows to Provide near Term Support</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-the-real-ipo-only-begins-on-the-11th-day-post-listing" target="_blank" rel="noopener">Alibaba IPO/​Secondary Listing - The Real IPO Only Begins on the 11th Day Post Listing</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li dir="ltr">
<p><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-proposed-stock-connect-changes-might-throw-a-spanner-in-the-works" target="_blank" rel="noopener">Alibaba IPO/​Secondary Listing - Proposed Stock Connect Changes Might Throw a Spanner in the Works</a></p>
</li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-what-to-do-with-the-us-adr-while-waiting-for-the-hk-listing" target="_blank" rel="noopener">Alibaba IPO/​​Secondary Listing - What to Do with the US ADR While Waiting for the HK Listing?</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-not-good-for-the-adr-should-have-put-a-price-range-to-it" target="_blank" rel="noopener">Alibaba IPO/​​​Secondary Listing -  Not Good for the ADR, Should Have Put a Price Range to It</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-neither-here-not-there-index-announcements-comparison-to-other-deals" target="_blank" rel="noopener">Alibaba IPO/​​​​Secondary -  Neither Here Nor There - Index Announcements, Comparison to Other Deals</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-trading-time-to-converge-that-s-it" target="_blank" rel="noopener">Alibaba IPO/​​​​​Secondary Listing Trading - Time to Converge, That’s It</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a></li>
</ul>
</div>


Huazhu Group (HTHT US) plans to raise around US$900m in its secondary listing in Hong Kong.


I have covered the background of the deal in my earlier note, Huazhu HK Secondary Listing - Early Look - Needs the Cash More than Most Secondary Candidates.
In this insight, I'll talk about the deal dynamics and what to do with the ADR while waiting for the completion of the Hong Kong listing.



Links to my previous notes on the topic:

Yum China HK IPO Trading - Index Flows to the Rescue

Yum China HK Listing - Relatively Bigger, Should Offer a Bigger Discount.
Yum China HK Listing - Early Look - Relatively Bigger Deal Should Have a Relatively Bigger Impact




JD &amp; NetEase Secondary Listings - What to Do with the ADR? Lessons from Baba




JD, NetEase and Other Secondary Listing - Index (FTSE, MSCI, HSI And HSCEI) Impact
JD.com HK Listing - Early Look - Getting the Ball Rolling




JD Secondary Listing - Early to File but Late to Launch Puts It in a Peculiar Position
JD Secondary Listing - Behaving Better than NetEase, so Far




JD Secondary Trading Update - Strong Demand but Won’t Have Any Index Flows




NetEase HK Listing - Early Look - Follow the Leader
NetEase Secondary Listing - Relatively Bigger than Baba, Should Offer Relatively Bigger Discount
NetEase Secondary Listing - Doing a BeiGene Rather than a Baba, Risk Reward Shifting




NetEase Secondary Trading Update - Index Flows to Provide near Term Support




Alibaba IPO/​Secondary Listing - The Real IPO Only Begins on the 11th Day Post Listing





Alibaba IPO/​Secondary Listing - Proposed Stock Connect Changes Might Throw a Spanner in the Works

Alibaba IPO/​​Secondary Listing - What to Do with the US ADR While Waiting for the HK Listing?
Alibaba IPO/​​​Secondary Listing -  Not Good for the ADR, Should Have Put a Price Range to It
Alibaba IPO/​​​​Secondary -  Neither Here Nor There - Index Announcements, Comparison to Other Deals




Alibaba IPO/​​​​​Secondary Listing Trading - Time to Converge, That’s It
China ADRs Secondary Listing Deep-Dive: Yin and Yang
China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home
China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List



Huazhu HK Secondary Listing - Needs the Money but Looks Toppish

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Yum China Holdings  / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK)</a> will commence trading in Hong Kong on Thursday, 10 September. <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> priced its Hong Kong secondary listing at HK$412 per share. Yum China raised net proceeds of HK$17,002 million ($2.2 billion).</p></div><div><div><div class="content-highlight"><p>Yum China priced its H-shares at a 4.9% discount to its ADS. In comparison, Alibaba, NetEase and JD.com priced their H-shares at a 2.9%, 2.0% and 3.9% discount to its ADSs, respectively. At the last close price of $52.32 per ADS, the H-share offer price of HK$412 implies a 1.6% premium. We believe that JD.com’s H-share will likely trade to a slight premium to the ADS on average, broadly similar to the last three secondary listings.</p></div></div></div>

Yum China Holdings Inc (9987 HK) will commence trading in Hong Kong on Thursday, 10 September. Yum China Holdings, Inc (YUMC US) priced its Hong Kong secondary listing at HK$412 per share. Yum China raised net proceeds of HK$17,002 million ($2.2 billion).Yum China priced its H-shares at a 4.9% discount to its ADS. In comparison, Alibaba, NetEase and JD.com priced their H-shares at a 2.9%, 2.0% and 3.9% discount to its ADSs, respectively. At the last close price of $52.32 per ADS, the H-share offer price of HK$412 implies a 1.6% premium. We believe that JD.com’s H-share will likely trade to a slight premium to the ADS on average, broadly similar to the last three secondary listings.

Yum China Secondary Listing: Trading Debut

<div>
<p><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc" target="_blank" data-smartkarma-citation="entities:23677:1" rel="noopener">Yum China Holdings, Inc (YUMC US)</a> raised around US$2.5bn in its Hong Kong secondary listing.</p>
<p>I have covered the deal background in:</p>
<ul>
<li>
<a href="https://www.smartkarma.com/insights/yum-china-hk-listing-early-look-relatively-bigger-deal-should-have-a-relatively-bigger-impact" target="_blank" rel="noopener">Yum China HK Listing - Early Look - Relatively Bigger Deal Should Have a Relatively Bigger Impact,</a> and</li>
<li>
<a href="https://www.smartkarma.com/insights/yum-china-hk-listing-relatively-bigger-should-offer-a-bigger-discount" target="_blank" rel="noopener">Yum China HK Listing - Relatively Bigger, Should Offer a Bigger Discount</a>.</li>
</ul>
</div>
<div>
<div id="annotable-executive_summary-2">In this insight, I'll talk about the deal dynamics and updates over the past week.</div>
<div></div>
</div>
<div></div>
<div>
<p><strong>Links to my previous notes on China ADRs secondary listing:</strong></p>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/huazhu-hk-secondary-listing-early-look-needs-the-cash-more-than-most-secondary-candidates" target="_blank" rel="noopener">Huazhu HK Secondary Listing - Early Look - Needs the Cash More than Most Secondary Candidates</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-netease-secondary-listings-what-to-do-with-the-adr-lessons-from-baba" target="_blank" rel="noopener">JD &amp; NetEase Secondary Listings - What to Do with the ADR? Lessons from Baba</a></li>
<li><a href="https://www.smartkarma.com/insights/jd-netease-and-other-secondary-listing-index-ftse-msci-hsi-and-hscei-impact" target="_blank" rel="noopener">JD, NetEase and Other Secondary Listing - Index (FTSE, MSCI, HSI And HSCEI) Impact</a></li>
<li><a href="https://www.smartkarma.com/insights/jd-com-hk-listing-early-look-getting-the-ball-rolling" target="_blank" rel="noopener">JD.com HK Listing - Early Look - Getting the Ball Rolling</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-secondary-listing-early-to-file-but-late-to-launch-puts-it-in-a-peculiar-position" target="_blank" rel="noopener">JD Secondary Listing - Early to File but Late to Launch Puts It in a Peculiar Position</a></li>
<li><a href="https://www.smartkarma.com/insights/jd-secondary-listing-behaving-better-than-netease-so-far" target="_blank" rel="noopener">JD Secondary Listing - Behaving Better than NetEase, so Far</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/jd-secondary-trading-update-strong-demand-but-won-t-have-any-index-flows" target="_blank" rel="noopener">JD Secondary Trading Update - Strong Demand but Won’t Have Any Index Flows</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/netease-hk-listing-early-look-follow-the-leader" target="_blank" rel="noopener">NetEase HK Listing - Early Look - Follow the Leader</a></li>
<li><a href="https://www.smartkarma.com/insights/netease-secondary-listing-relatively-bigger-than-baba-should-offer-relatively-bigger-discount" target="_blank" rel="noopener">NetEase Secondary Listing - Relatively Bigger than Baba, Should Offer Relatively Bigger Discount</a></li>
<li><a href="https://www.smartkarma.com/insights/netease-secondary-listing-doing-a-beigene-rather-than-a-baba-risk-reward-shifting" target="_blank" rel="noopener">NetEase Secondary Listing - Doing a BeiGene Rather than a Baba, Risk Reward Shifting</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/netease-secondary-trading-update-index-flows-to-provide-near-term-support" target="_blank" rel="noopener">NetEase Secondary Trading Update - Index Flows to Provide near Term Support</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-the-real-ipo-only-begins-on-the-11th-day-post-listing" target="_blank" rel="noopener">Alibaba IPO/​Secondary Listing - The Real IPO Only Begins on the 11th Day Post Listing</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li dir="ltr">
<p><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-proposed-stock-connect-changes-might-throw-a-spanner-in-the-works" target="_blank" rel="noopener">Alibaba IPO/​Secondary Listing - Proposed Stock Connect Changes Might Throw a Spanner in the Works</a></p>
</li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-what-to-do-with-the-us-adr-while-waiting-for-the-hk-listing" target="_blank" rel="noopener">Alibaba IPO/​​Secondary Listing - What to Do with the US ADR While Waiting for the HK Listing?</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-not-good-for-the-adr-should-have-put-a-price-range-to-it" target="_blank" rel="noopener">Alibaba IPO/​​​Secondary Listing -  Not Good for the ADR, Should Have Put a Price Range to It</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-neither-here-not-there-index-announcements-comparison-to-other-deals" target="_blank" rel="noopener">Alibaba IPO/​​​​Secondary -  Neither Here Nor There - Index Announcements, Comparison to Other Deals</a></li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li><a href="https://www.smartkarma.com/insights/alibaba-ipo-secondary-listing-trading-time-to-converge-that-s-it" target="_blank" rel="noopener">Alibaba IPO/​​​​​Secondary Listing Trading - Time to Converge, That’s It</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-deep-dive-yin-and-yang" target="_blank" rel="noopener">China ADRs Secondary Listing Deep-Dive: Yin and Yang</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-holding-foreign-companies-accountable-act-i-m-coming-home" target="_blank" rel="noopener">China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home</a></li>
<li><a href="https://www.smartkarma.com/insights/china-adrs-secondary-listing-covid-19-has-increased-the-tension-but-narrowed-the-short-list" target="_blank" rel="noopener">China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List</a></li>
</ul>
</div>


Yum China Holdings, Inc (YUMC US) raised around US$2.5bn in its Hong Kong secondary listing.
I have covered the deal background in:


Yum China HK Listing - Early Look - Relatively Bigger Deal Should Have a Relatively Bigger Impact, and

Yum China HK Listing - Relatively Bigger, Should Offer a Bigger Discount.



In this insight, I'll talk about the deal dynamics and updates over the past week.




Links to my previous notes on China ADRs secondary listing:



Huazhu HK Secondary Listing - Early Look - Needs the Cash More than Most Secondary Candidates




JD &amp; NetEase Secondary Listings - What to Do with the ADR? Lessons from Baba
JD, NetEase and Other Secondary Listing - Index (FTSE, MSCI, HSI And HSCEI) Impact
JD.com HK Listing - Early Look - Getting the Ball Rolling




JD Secondary Listing - Early to File but Late to Launch Puts It in a Peculiar Position
JD Secondary Listing - Behaving Better than NetEase, so Far




JD Secondary Trading Update - Strong Demand but Won’t Have Any Index Flows




NetEase HK Listing - Early Look - Follow the Leader
NetEase Secondary Listing - Relatively Bigger than Baba, Should Offer Relatively Bigger Discount
NetEase Secondary Listing - Doing a BeiGene Rather than a Baba, Risk Reward Shifting




NetEase Secondary Trading Update - Index Flows to Provide near Term Support




Alibaba IPO/​Secondary Listing - The Real IPO Only Begins on the 11th Day Post Listing





Alibaba IPO/​Secondary Listing - Proposed Stock Connect Changes Might Throw a Spanner in the Works

Alibaba IPO/​​Secondary Listing - What to Do with the US ADR While Waiting for the HK Listing?
Alibaba IPO/​​​Secondary Listing -  Not Good for the ADR, Should Have Put a Price Range to It
Alibaba IPO/​​​​Secondary -  Neither Here Nor There - Index Announcements, Comparison to Other Deals




Alibaba IPO/​​​​​Secondary Listing Trading - Time to Converge, That’s It
China ADRs Secondary Listing Deep-Dive: Yin and Yang
China ADRs Secondary Listing - Holding Foreign Companies Accountable Act - I’m Coming Home
China ADRs Secondary Listing: COVID-19 Has Increased the Tension but Narrowed the Short List



Yum China HK IPO Trading - Index Flows to the Rescue

<p>Q2 results for China's six listed express companies are finally in, and while most companies continued to report depressed profitability, outcomes varied significantly. Several firms pursued volume growth aggressively in the period, sacrificing pricing in order to maximize the number of parcels flowing through their networks; others appeared to do just the opposite. In the Q2 numbers, there is little evidence either approach actually worked consistently well. </p>
<p>Looking at the volume versus pricing 'tradeoff' over the last two years, there is also little evidence that using pricing to boost volumes actually increases profitability. Indeed, most of the six express companies we track reported Q220 gross profits at or <em>below</em> Q218 levels, despite the companies more than doubling parcel volumes during the period. </p>
<p>In our view, most Chinese express companies are 'price takers' that offer commodity-like services which are hard to differentiate from what their peers offer. In the long-run, we believe attempts to control pricing by pursuing only select cargoes are unlikely to succeed, and that companies should focus almost purely on securing greater volume and beating down unit costs. Alas, even this approach is likely to result in significantly lower margins over time, in our view.</p>
<p>In this note we review Q220 results, then look back farther to see individual company performance in terms of volume growth, pricing change, and change in gross profit. We also note growing CapEx demands and show how each company's shares have performed so far in 2020. In the medium-term, we expect profitability and cash flow at most express companies to continue to suffer. </p>
<p>Under the scenario we describe in this note, <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> continues to stand out. SF's time-definite products and its offerings in cold-chain, international, and local on-demand express truly differentiate it from the other five listed express companies. We believe SF can continue to increase its share of express sector profits and retain our BUY rating. </p>

Q2 results for China's six listed express companies are finally in, and while most companies continued to report depressed profitability, outcomes varied significantly. Several firms pursued volume growth aggressively in the period, sacrificing pricing in order to maximize the number of parcels flowing through their networks; others appeared to do just the opposite. In the Q2 numbers, there is little evidence either approach actually worked consistently well. 
Looking at the volume versus pricing 'tradeoff' over the last two years, there is also little evidence that using pricing to boost volumes actually increases profitability. Indeed, most of the six express companies we track reported Q220 gross profits at or below Q218 levels, despite the companies more than doubling parcel volumes during the period. 
In our view, most Chinese express companies are 'price takers' that offer commodity-like services which are hard to differentiate from what their peers offer. In the long-run, we believe attempts to control pricing by pursuing only select cargoes are unlikely to succeed, and that companies should focus almost purely on securing greater volume and beating down unit costs. Alas, even this approach is likely to result in significantly lower margins over time, in our view.
In this note we review Q220 results, then look back farther to see individual company performance in terms of volume growth, pricing change, and change in gross profit. We also note growing CapEx demands and show how each company's shares have performed so far in 2020. In the medium-term, we expect profitability and cash flow at most express companies to continue to suffer. 
Under the scenario we describe in this note, S.F. Holding (002352 CH) continues to stand out. SF's time-definite products and its offerings in cold-chain, international, and local on-demand express truly differentiate it from the other five listed express companies. We believe SF can continue to increase its share of express sector profits and retain our BUY rating. 

A Price Vs. Volume Tradeoff? Not For Firms Offering Commodity-Like Chinese Express Services

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com (ADR) (JD US)

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A Price Vs. Volume Tradeoff? Not For Firms Offering Commodity-Like Chinese Express Services

Results varied Which approach worked? Market is rewa

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