Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

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Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Equity Bottom-Up

After getting hit by Covid-19 in February and early March, Chinese express company <a href="https://www.smartkarma.com/entities/yto-express" target="_blank" data-smartkarma-citation="entities:20319:1" rel="noopener">YTO Express (600233 CH)</a> has roared back to life, hitting a two-year high of 15.96 CNY on Friday, June 12. YTO's apparent recovery from the depths of the pandemic (April parcel volume up 41% YoY) masks a ferocious price war in China's express market. A newly-aggressive <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> and a shift to low-priced shipments tied to discount eCommerce platform <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> have combined to put strong downward pressure on pricing. We see no near-term recovery for YTO.YTO's +51% move since March 22 puts the shares on approximately 33x 2020 diluted EPS and over three times book value. We see little room for strong growth in 2021 due to ongoing margin compression. Weaker than expected Q220 results (out in August) will dent shares over the next six months and recommend investors Short YTO against an equivalent Long position in SF Holding.

After getting hit by Covid-19 in February and early March, Chinese express company YTO Express (600233 CH) has roared back to life, hitting a two-year high of 15.96 CNY on Friday, June 12. YTO's apparent recovery from the depths of the pandemic (April parcel volume up 41% YoY) masks a ferocious price war in China's express market. A newly-aggressive S.F. Holding (002352 CH) and a shift to low-priced shipments tied to discount eCommerce platform Pinduoduo (PDD US) have combined to put strong downward pressure on pricing. We see no near-term recovery for YTO.YTO's +51% move since March 22 puts the shares on approximately 33x 2020 diluted EPS and over three times book value. We see little room for strong growth in 2021 due to ongoing margin compression. Weaker than expected Q220 results (out in August) will dent shares over the next six months and recommend investors Short YTO against an equivalent Long position in SF Holding. 

YTO Express (International) Holdings (6123 HK)

YTOエクスプレスのショート：急激な出来高回復は価格競争の激化の影響を覆い隠す