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>The scale of fraud in a new US federal criminal complaint – US$60M of fake postage – mirrors the recent dramatic growth of Chinese e-commerce platforms that target US consumers</li>
<li>The case also highlights the importance of securing cheap last-mile US distribution for the Chinese e-commerce platforms selling inexpensive goods directly to US consumers</li>
<li>It’s unclear which of the Chinese platforms benefited from the scheme, but the incident should refocus investors’ attention on logistics as a critical piece of their business models </li>
</ul>


The scale of fraud in a new US federal criminal complaint – US$60M of fake postage – mirrors the recent dramatic growth of Chinese e-commerce platforms that target US consumers
The case also highlights the importance of securing cheap last-mile US distribution for the Chinese e-commerce platforms selling inexpensive goods directly to US consumers
It’s unclear which of the Chinese platforms benefited from the scheme, but the incident should refocus investors’ attention on logistics as a critical piece of their business models 


The Curious Case of $60M of Bogus US Postage or 'How Can They Can Make Money Exporting $5 Shirts?!'

<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

<ul>
<li>Combined January-February express industry parcel volume was up just 4.6% Y/Y, and ASPs were down -1.8% Y/Y</li>
<li>Listed express companies' parcel volume and government-reported online tangible goods sales in the first two months of 2023 also both up a modest ~5% Y/Y</li>
<li>In a year when one express player hopes to list its shares, it's unclear who will be willing to concede market share. We expect price competition to intensify in 2023.</li>
</ul>


Combined January-February express industry parcel volume was up just 4.6% Y/Y, and ASPs were down -1.8% Y/Y
Listed express companies' parcel volume and government-reported online tangible goods sales in the first two months of 2023 also both up a modest ~5% Y/Y
In a year when one express player hopes to list its shares, it's unclear who will be willing to concede market share. We expect price competition to intensify in 2023.


TRACKING TRAFFIC: Chinese Express / No Signs of a Sharp Recovery in Jan-Feb Data

<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

China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from delivery service in Japan (+)</li>
<li>ZTO/PDD: Logistics companies increased parcel prices in Yiwu City (+/-)</li>
<li>BILI:BILI hold content creator seminar to discuss video metrics (+)</li>
</ul>


PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from delivery service in Japan (+)
ZTO/PDD: Logistics companies increased parcel prices in Yiwu City (+/-)
BILI:BILI hold content creator seminar to discuss video metrics (+)


China/Asia TMT Update(Mar.14): PDD/CPNG/BILI/ZTO - Logistics Companies Increased Prices;

China

ZTO Express (Cayman) Inc. operates as an express delivery company. The Company provides express delivery service through their nationwide network, as well as other value-added logistics services. ZTO Express serves customers globally.

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ZTO Express Cayman (ZTO US)

The Curious Case of $60M of Bogus US Postage or 'How Can They Can Make Money Exporting $5 Shirts?!'

Thie story of fake US postage being used to distribute Chinese goods to US consumers isn't just a fascinating story -- it could potentially have...

Tracking Traffic

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

TRACKING TRAFFIC: Chinese Express / No Signs of a Sharp Recovery in Jan-Feb Data

So far in 2023, parcel volume has recovered only moderately. We believe the industry may again see price deterioration after a brief respite in 2022.

Tracking Traffic

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

China/Asia TMT Update(Mar.14): PDD/CPNG/BILI/ZTO - Logistics Companies Increased Prices;

PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from Japan (+)l ZTO/PDD: Logistics companies increased prices (+/-)l...

Blue Lotus Research Institute

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