Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Thematic (Sector/Industry)

<ul>
<li>Gross margin compression in China's express industry has been going on for years and predates the Covid crisis. But margins have enjoyed a modest recovery since late 2021</li>
<li>Since 2019, margins have fallen and the distribution of profits among China's listed express companies has changed dramatically, with two clear-cut losers</li>
<li>Even though two listed express companies have seen their profitability compressed dramatically, there are no signs of industry consolidation -- and some parties like it that way</li>
</ul>


Gross margin compression in China's express industry has been going on for years and predates the Covid crisis. But margins have enjoyed a modest recovery since late 2021
Since 2019, margins have fallen and the distribution of profits among China's listed express companies has changed dramatically, with two clear-cut losers
Even though two listed express companies have seen their profitability compressed dramatically, there are no signs of industry consolidation -- and some parties like it that way


Chinese Express Consolidation? Lesser Players Battered for Years, But Still No Knockout Punch

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US)</a> parcel volume increased by 20.5% Y/Y in Q1, better than market growth</li>
<li>Unit prices fell by 3.7%, slightly worse than peers in Q1 2023, and Revenue missed consensus</li>
<li>EPS beat expectations on lower unit costs, and management raised full-year volume target</li>
</ul>



ZTO Express (ZTO US) parcel volume increased by 20.5% Y/Y in Q1, better than market growth
Unit prices fell by 3.7%, slightly worse than peers in Q1 2023, and Revenue missed consensus
EPS beat expectations on lower unit costs, and management raised full-year volume target


ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Back on the 23 December, <strong><a href="https://www.smartkarma.com/entities/skyworth-group-limited" target="_blank" data-smartkarma-citation="entities:10941:1" rel="noopener">Skyworth Group (751 HK)</a> </strong><a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2022/1223/2022122301066.pdf" target="_blank" rel="noopener">announced</a> <em>another</em> partial buyback - this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  </li>
<li>On the 28 March, terms were <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0328/2023032800861.pdf" target="_blank" rel="noopener">bumped</a> to $5.00/share. Independent shareholders approved the whitewash waiver on the 5 May.</li>
<li>The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the final proration to be higher. </li>
</ul>


Back on the 23 December, Skyworth Group (751 HK) announced another partial buyback - this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  
On the 28 March, terms were bumped to $5.00/share. Independent shareholders approved the whitewash waiver on the 5 May.
The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the final proration to be higher. 


Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of April 28th.</li>
<li>We estimate the weekly outflows to be US$844.5 million, led by financials, consumer staples, and offset by industrials, information technology.</li>
<li>We highlight flows for Kweichow Moutai, East Money Information, Contemporary Amperex Technology, Gree Electric Appliances, China Merchants Bank.</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of April 28th.
We estimate the weekly outflows to be US$844.5 million, led by financials, consumer staples, and offset by industrials, information technology.
We highlight flows for Kweichow Moutai, East Money Information, Contemporary Amperex Technology, Gree Electric Appliances, China Merchants Bank.


Northbound Flows (Apr 28th): Kweichow Moutai, East Money, CATL, Gree Electric Appliances, CMB

<ul>
<li>March parcel volume growth (22.7%) improved against an easy comp (-3.1%) from 2022</li>
<li>Prices are declining, too (-3.2% Y/Y) -- not yet precipitous, but worst since Q1 2022</li>
<li>Based on what we see, ZTO's 2023 volume targets will still be difficult to meet</li>
</ul>


March parcel volume growth (22.7%) improved against an easy comp (-3.1%) from 2022
Prices are declining, too (-3.2% Y/Y) -- not yet precipitous, but worst since Q1 2022
Based on what we see, ZTO's 2023 volume targets will still be difficult to meet


TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

China

S.F. Holding Co., Ltd operates as a holding company. The Company, through its subsidiaries, provides logistics, order tracking, supply chain management, and warehousing services. S.F. Holding operates worldwide.

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S.F. Holding (002352 CH)

Chinese Express Consolidation? Lesser Players Battered for Years, But Still No Knockout Punch

Margins in China's express sector have been falling for years. However, there are few signs of consolidation: companies remain profitable, and...

Tracking Traffic

ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance

ZTO's Q1 results showed strong volume growth, but also weaker unit pricing and a lack of control over SG&A expenses. We retain our negative view on...

Tracking Traffic

Skyworth (751 HK): Thoughts On Proration

Independent shareholders approved the whitewash waiver on the 5 May. The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the...

David Blennerhassett

Northbound Flows (Apr 28th): Kweichow Moutai, East Money, CATL, Gree Electric Appliances, CMB

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlight flows for Kweichow Moutai, East Money Information, CATL, Gree...

Ke Yan, CFA, FRM

TRACKING TRAFFIC/Chinese Express: Volume Up Versus Weak Comp | Prices Down | Yunda Lags Group

In March, Chinese express industry volume was up 22.7% Y/Y against easy comps, but ASPs declined the most since February 2022. We still believe ZTO...

Tracking Traffic

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