Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Thematic (Sector/Industry)

<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> met consensus Q422 EPS estimate despite a miss on Revenue</li>
<li>Management expects to exceed industry volume growth (around +10%) in 2023</li>
<li>Likely obstacles to a sharp earnings recovery are: ASP momentum, "new-old" competition, and a lack of demonstrated cost control</li>
</ul>



ZTO Express (ZTO US) met consensus Q422 EPS estimate despite a miss on Revenue
Management expects to exceed industry volume growth (around +10%) in 2023
Likely obstacles to a sharp earnings recovery are: ASP momentum, "new-old" competition, and a lack of demonstrated cost control


ZTO Express Q4/2022 Results & Guidance:  Moderate Growth in '23, but Also Obstacles

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

Cross Asset Strategy

<ul><li>In Depth: The shadowy businessman behind a multibillion-dollar bank swindle</li><li>Chongqing monkeypox patient caught the disease in Berlin, China CDC says</li><li>Former Shanghai police chief sentenced to life in prison for corruption</li></ul>

In Depth: The shadowy businessman behind a multibillion-dollar bank swindleChongqing monkeypox patient caught the disease in Berlin, China CDC saysFormer Shanghai police chief sentenced to life in prison for corruption

CX Daily: The Shadowy Businessman Behind a Multibillion-Dollar Bank Swindle

Research on Tech Companies

Evelyn Zhang

<ul>
<li>The competition between Alibaba and JD has been heating up after Alibaba abandoned its "exclusivity requirement”, JD sale GMV increased by 28.4% vs Alibaba only increased by 8.4% YoY.  </li>
<li>Live streaming has become a mainstream sales channel, Douyin and Kuaishou both achieved more than 200% sales increase YoY.  </li>
<li>Influencers and brands are fighting over price setting power. Many brands have opened their own official livestreaming channels this year.</li>
</ul>


The competition between Alibaba and JD has been heating up after Alibaba abandoned its "exclusivity requirement”, JD sale GMV increased by 28.4% vs Alibaba only increased by 8.4% YoY.  
Live streaming has become a mainstream sales channel, Douyin and Kuaishou both achieved more than 200% sales increase YoY.  
Influencers and brands are fighting over price setting power. Many brands have opened their own official livestreaming channels this year.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Back in April of this year, China's President Xi Jinping <a href="http://paper.people.com.cn/rmrb/html/2020-04/16/nw.D110000renmrb_20200416_1-09.htm" target="_blank" rel="noopener">mentioned</a> taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the <a href="http://cpc.people.com.cn/n1/2020/0515/c64094-31709627.html?mc_cid=28966ada58&amp;mc_eid=902fe70bde" target="_blank" rel="noopener">14 May</a> under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July <a href="https://web.archive.org/web/20200811045300/http://www.xinhuanet.com/politics/leaders/2020-07/21/c_1126267575.htm" target="_blank" rel="noopener">speech</a> to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping <a href="https://news.cgtn.com/news/2020-09-14/Xi-attends-China-Germany-EU-leaders-meeting-via-video-link-TMA0kfp5lK/index.html" target="_blank" rel="noopener">reiterated</a> that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

Back in April of this year, China's President Xi Jinping mentioned taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the 14 May under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July speech to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping reiterated that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

China's Dual Circulation: Hedged Integration

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/922/original/BANNER-LOGISTICS-FINAL.png?1561080436" class="editor-image img-responsive" data-smartkarma-image-id="90922"></figure>Tracking Traffic/Express &amp; Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking Traffic/Express &amp; Logistics features analysis of relevant Chinese express and logistics data, notes from our conversations with industry players, sector news, and links to recent company and thematic research.<h2>May parcel volume up 25% YoY; growth in hinterlands slows</h2>Express sector volume and revenue growth remained steady in May, but it appears less-developed sub-markets away from wealthy coastal areas have lost momentum. If May’s shift becomes a trend, it could lift margins but eventually drag down volume growth.<h2>Headline ASP declined just 1%, but some firms fared far worse</h2>Although sector-wide pricing was down only 0.9% in May, monthly data from a few individual players suggests pricing remains weak. We expect pricing to remain weak for the remainder of 2019, which will likely put downward pressure on margins.<h2>Express models and margins converging; valuations haven’t though</h2>We expect express companies to migrate towards the fully-integrated model in the medium-term. As a result, the profitability gap between more and less profitable companies should narrow. However, valuations are not converging - yet.<h2>We retain a negative view of the express sector; Sell ZTO Express</h2>Price declines are putting downward pressure on margins. In addition, the sector is evolving in ways that will likely pull down returns in the medium-term. We continue to rate <a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US)</a> a Sell with a $13.31 target price.

Tracking Traffic/Express &amp; Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking Traffic/Express &amp; Logistics features analysis of relevant Chinese express and logistics data, notes from our conversations with industry players, sector news, and links to recent company and thematic research.May parcel volume up 25% YoY; growth in hinterlands slowsExpress sector volume and revenue growth remained steady in May, but it appears less-developed sub-markets away from wealthy coastal areas have lost momentum. If May’s shift becomes a trend, it could lift margins but eventually drag down volume growth.Headline ASP declined just 1%, but some firms fared far worseAlthough sector-wide pricing was down only 0.9% in May, monthly data from a few individual players suggests pricing remains weak. We expect pricing to remain weak for the remainder of 2019, which will likely put downward pressure on margins.Express models and margins converging; valuations haven’t thoughWe expect express companies to migrate towards the fully-integrated model in the medium-term. As a result, the profitability gap between more and less profitable companies should narrow. However, valuations are not converging - yet.We retain a negative view of the express sector; Sell ZTO ExpressPrice declines are putting downward pressure on margins. In addition, the sector is evolving in ways that will likely pull down returns in the medium-term. We continue to rate ZTO Express (ZTO US) a Sell with a $13.31 target price.

TRACKING TRAFFIC/Chinese Express & Logistics: Express Models Converging (But Not Valuations)

China

Yunda Holding Co Ltd operates as a holding company. The Company, through its subsidiaries, provides industrial investment, enterprise management, business consulting, car rental, technical development, information technology, and advertising services. Yunda Holding serves customers in China.

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Yunda Holding (002120 CH)

ZTO Express Q4/2022 Results & Guidance: Moderate Growth in '23, but Also Obstacles

ZTO guides strong volume growth and potentially better unit economics in '23, but we expect price pressure to return, and the company needs to rein...

Daniel Hellberg

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Caixin Global

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Another year another Single's Day, but the pandemic has put a damper on this year's shopping bonanza. Faced with a shrinking pie, a new player is...

Evelyn Zhang

China's Dual Circulation: Hedged Integration

Back in April, Xi Jinping

David Blennerhassett

TRACKING TRAFFIC/Chinese Express & Logistics: Express Models Converging (But Not Valuations)

Tracking Traffic/Express & Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking...

Daniel Hellberg

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