YUNDA HOLDING(002120)：PER-PARCEL COST CONTINUES TO DECLINE;CONTROLLING SHAREHOLDER TO INCREASE STAKE

　　What's new
　　On May 6, Yunda Holding announced that its controlling shareholder - Shanghai Luojiesi - plans to increase its stake in the firm by Rmb100- 200mn of shares via centralized bidding and block trades. The deal will be completed within six months, and there is no price restriction.
　　Comments
　　Stake increase of controlling shareholder signals bottoming out. We think the firm's balance sheet is healthy, with liability-to-asset ratio staying at 46.7% as of end-1Q25. Its current valuation measured by net assets has fallen to 1x 2024 P/B.
　　Efforts to reduce costs and control expenses have paid off. In 2024, the firm's parcel volume rose 26% YoY (vs. industry average of 21.5% YoY) to 23.8bn units. Its core operating cost dropped 22% YoY thanks to lower investment (capex down 5% YoY to Rmb2.44bn in 2024) and efficiency improvement. In 2024, the firm’s overall expense ratio dropped 14% YoY, demonstrating efficient cost and expense control. Thanks to the firm’s efforts, it maintained profit growth amid intense market competition, with operating cash flow improving notably.
　　Demand in the express delivery industry has maintained healthy growth driven by online shopping. In 1Q25, national express delivery volume grew 21.6% YoY, beating our expectations at the beginning of 2025. We expect full-year growth rate to exceed 15%, implying a bright outlook for the industry. Prices in the industry may come under pressure due to the slack season and companies' efforts to enhance market shares. However, we expect price competition to ease marginally given the high-quality development of the industry, possible stronger-than-expected demand, and the upcoming peak season in 2H25. In addition, we think falling oil prices and economies of scale brought by increasing parcel volume could help the industry offset some of the negative impacts through cost reduction.
　　Financials and valuation
　　The firm’s revenue per parcel dropped 11%, 14.9%, and 5.8% over January-March. Due to falling unit price caused by competition, we cut our 2025 net profit forecast 30% to Rmb1.96bn and introduce our 2026 earnings forecast of Rmb2.1bn. The stock is trading at 10.1x 2025e P/E　and 9.5x 2026e P/E. We maintain an OUTPERFORM rating, but we cut our TP 8% to Rmb8.79 due to lowered earnings forecast, weak market expectations, and stake increase of the controlling shareholder. Our TP implies 13x 2025e P/E and 12.2x 2026e P/E with 29% upside.
　　Risks
　　Price competition intensifies; labor and fuel costs rise sharply.
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