J&T GLOBAL EXPRESS(01519.HK)：A RAPIDLY GROWING INTERNATIONAL EXPRESS DELIVERY SERVICES PROVIDER WITH A STRONG FOOTHOLD IN SOUTHEAST ASIA-格隆汇

机构：中金公司
研究员：Qibin FENG/Xin YANG/Gangxian LIU/Jiulu LI

　　Investment positives
　　We initiate coverage on J&T Global Express Ltd (J&T) with an OUTPERFORM rating and a SOTP-based target price of HK$8.00. J&T has established a leading position in the Southeast Asia express delivery market, and a global presence as well. In 2023, it ranked No.1 in Southeast Asia and No.5 in China by parcel volume. The firm operates in 13 countries, with those in Latin America and the Middle East referred to as new markets in this report. We are upbeat on J&T’s growth prospects backed by its broad logistics network and global presence.
　　Why an OUTPERFORM rating?
　　Growth potential remains in the global express delivery industry; markets in Southeast Asia and China as well as new markets are at different growth stages. Frost & Sullivan forecasts that express delivery parcel volume over 2023-2027 in Southeast Asia may rise from 12.8bn to 23.5bn, China may increase from 132.1bn to 201bn, and new markets may grow from 3.9bn to 7.1bn, implying CAGRs of 16.5%, 11.1%, and 16.5%. We think express delivery demand may continue to increase, boosted by the e-commerce boom, a rising portion of small parcels in total parcel volume, and increased sales returns.
　　J&T’s global presence: Leading position in Southeast Asia, strong competitive advantages in China, and consistent growth in new markets (i.e., Latin America and the Middle East). By leveraging its worldwide logistics network and neutral stance towards cooperation with e-commerce platforms, J&T may work with e- commerce partners to expand its global presence under the “regional agent” business model. We are optimistic about the firm’s solid leadership in Southeast Asia, competitive advantages in China, and rapid expansion in its new markets.
　　Improvement in operating leverage: Business in Southeast Asia is driving stable earnings growth, in China is gradually turning profitable, and in new markets is expanding rapidly. We expect the firm’s revenue from Southeast Asia, China, and new markets to rise at CAGRs of 20.5%, 20.5%, and 43.7% over 2023-2025. We　estimate that in Southeast Asia, EBITDA margin may stabilize at 14- 15%; in China, operating profit may turn positive in 2024; and in new markets, EBITDA may turn positive in 2024 and operating profit may turn positive in 2025.
　　How do we differ from the market? The market has yet to recognize J&T’s revenue growth potential backed by its global presence, and its long-term earnings growth potential amid operational efficiency enhancement.
　　Potential catalysts: Easing competition in Chinese express delivery market; operational efficiency enhancement thanks to strengthening economies of scale; and stronger-than-expected revenue growth in the new markets.
　　Financials and valuation
　　We forecast EPS of US$0.02 in 2024 and US$0.05 in 2025. We initiate coverage with an OUTPERFORM rating, and a target price of HK$8.0 (implying 23x 2025e P/E), with 31% upside. Under the SOTP valuation methodology, we assign 13.6x 2024e EV/EBITDA to the Southeast Asia business, and 0.35x 2024e EV/sales to the firm’s businesses in China and others (i.e., cross-border and new markets). The stock is trading at 17.1x 2025e P/E.
　　Risks
　　Market competition once again intensifies; demand growth disappoints; overseas policy headwinds; cost of fuel and labor surge.