YUNDA HOLDING(002120)：PREANNOUNCED 2Q23 EARNINGS UP 98–202% YOY; WATCH FOR UPSIDE SURPRISES

　　Preannounces 2Q23 attributable net profit of Rmb392mn–598mn
　　Yunda Holding preannounced 1H23 results: Net profit attributable to shareholders increased 37–75% YoY to Rmb750–957mn and recurring attributable net profit rose 30–68% YoY to Rmb691–898mn. In 2Q23, the firm’s attributable net profit grew 98–202% YoY to Rmb392–598mn （with median of Rmb495mn, up 150% YoY） and recurring attributable net profit rose 160–316% YoY to Rmb346–552mn （with median of Rmb449mn, up 238% YoY）。 The recovery in likely profit is line with our expectations.
　　According to the State Post Bureau1 and Yunda Holding’s monthly operating data, assuming the firm had a market share of 14% in 2Q23, we estimate its parcel volume was about 4.6bn units in 2Q23, up 9% YoY or 20% QoQ. Correspondingly, we estimate net profit per parcel of Rmb0.09–0.13 （with median of Rmb0.11, up Rmb0.06 YoY or Rmb0.01 QoQ） and per-parcel recurring net profit at Rmb0.08–0.12 （with median of Rmb0.10, up Rmb0.01 YoY or Rmb0.07 QoQ） in 2Q23.
　　Trends to watch
　　Proposed ESOP shows confidence in development. Recently, Yunda announced it had proposed employee stock ownership （ESOP） plans. For Phase I, the vesting target is an attributable net profit no less than Rmb3.5bn in 2024 or a parcel volume no less than the 2024 industry average. For Phase II, attributable net profit must be at least Rmb3.65bn in 2025 or the rate of growth of parcel volume no lower than the 2025 industry average. We believe the plans will help align the interests of employees and provide attractive incentives.
　　2Q23 per-parcel profit may have continued to improve; we suggest watching investment opportunities. Data from the State Post Bureau shows that the parcel volume grew more than 17% YoY in 1H23, implying an estimated 23% YoY growth in 2Q23. We expect delivery volume to continue growing at double digits this year and believe that prices will edge down to a manageable range （see our report published on May 7, 2023, Another look at express delivery industry from market, platform, regulatory perspectives）。 Yunda’s operating costs （excl. last-mile delivery costs） grew Rmb0.17/parcel in 2022 due to a capacity utilization ratio notably less than the usual rate, which was higher than usual, weighing on per-parcel profit.
　　We think that Yunda will see its EPS rebound if it continues optimizing business operations. The firm’s valuation and market cap are now at low levels. We suggest watching investment opportunities with a potential upside surprise.
　　Financials and valuation
　　We maintain our 2023 and 2024 revenue and earnings forecasts. The stock is trading at 11x 2023e and 8x 2024e P/E. We maintain an OUTPERFORM rating and our TP of Rmb14.00, implying 16x 2023e and 12x 2024e P/S, offering 46% upside.
　　Risks
　　Parcel volume disappoints; intensifying competition; sharp rise in labor and fuel costs.
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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。