YTO EXPRESS(600233)：RESULTS IN LINE WITH OUR EXPECTATIONS;VALUATION ATTRACTIVE

　　2022 and 1Q23 results in line with our expectations
　　YTO Express announced its 2022 results: Revenue rose 19% YoY to Rmb53.54bn. Net profit attributable to shareholders grew 86% YoY to Rmb3.92bn （including Rmb268mn from airfreight and international business）。 Recurring net profit attributable to shareholders rose 83% YoY to Rmb3.78bn. In 4Q22, revenue rose 1% YoY to Rmb14.71bn. Net profit attributable to shareholders stayed largely flat YoY at Rmb1.15bn. Recurring net profit attributable to shareholders fell 6% YoY to Rmb1.11bn. The results were in line with our expectations.
　　Per-parcel cost rose Rmb0.21 YoY to Rmb2.72 in 2022, with per-parcel delivery spending up Rmb0.17 YoY. However, the transport cost per parcel and operating cost per parcel remained largely flat YoY, indicating effective cost control despite rising oil prices and rising labor costs in 2022.
　　The firm also announced its 1Q23 results: Revenue rose 9% YoY to Rmb12.91bn. Net profit attributable to shareholders increased 4% YoY to Rmb906mn. The firm preannounced that its parcel volume reached 4.46bn in 1Q23, with market share up 1.2ppt YoY to 16.6%. Per-parcel revenue declined Rmb0.29 YoY to Rmb2.90. Per-parcel net profit fell Rmb0.03 to Rmb0.20 （vs. a high base in the same period last year）， but remained at a high level.
　　Trends to watch
　　Industry: Sector parcel volume will likely resume double-digit growth in 2023; per parcel price to remain stable and fluctuate slightly as the price war between express delivery names is kept under control by the regulator . According to statistics from the State Post Bureau, sector parcel volume grew 11% YoY in 1Q23 （vs. +10.5% YoY in 1Q22）， and the YoY growth should accelerate notably beginning in 2Q23 due to lower base. As online consumption of physical goods and consumer confidence gradually recover, we expect sector parcel volume to resume double-digit growth in 2023, indicating a positive growth outlook.
　　Moreover, in our April 14, 2022 report, Analyzing express delivery industry from market, platform, regulatory perspectives , we believe that firms in the industry will focus on the healthy and high-quality development as the price war between express delivery names moderates. Although competition for market share may intensify, we believe that per parcel price is likely to remain stable, resulting in stable earnings in the industry. In addition, we believe the firm’s cash flow will improve as the recent peak in its capex has passed （YTO’s capex fell 15% YoY to Rmb4.7bn in 2022）。 At present, market expectations and the company’s valuation are at trough levels. As a result, we remain upbeat on investment opportunities in the express delivery sector.
　　Continues to strengthen digital capabilities and build alpha with competitive advantages. The firm continues to enhance its digitalization and standardization, building standardized systems both at the headquarters and franchise network levels. As of end-2022, the utilization rate of its financial system for franchisees exceeded 85%, and that of its intelligent customer service system reached 40%. These initiatives helped to enhance brand stickiness and recognition at franchises, thereby earning customers’ trust. In 2022, the firm’s customer complaint rate fell nearly 10% （all data disclosed in its annual report）。
　　Financials and valuation
　　We largely maintain our 2023 and 2024 earnings forecasts. The stock is trading at 13.5x 2023e and 11.2x 2024e P/E. Maintain OUTPERFORM. Given the sluggish performance of the broader market and downward valuation revisions, we cut our target price 13% to Rmb24.68, implying 19x 2023e and 16x 2024e P/E, offering 40% upside.
　　Risks
　　Parcel volume growth disappoints; competition intensifies.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。