With the rapid development of the real economy and the return of value to the recovery chain, the future Chinese logistics market will also grow rapidly. The development of the industry will mainly be reflected in
the total volume and efficiency levels. Investment in the logistics industry will also be promoted along these two lines. The sector is mainly composed of three types of assets: cyclical, growth, and infrastructure.
Among them, the core elements of the express delivery sector are industry concentration and single ticket prices.

Previously, when the market was under pressure, the transportation sector could often outperform the market. Due to differences in the business models of the three types of assets, there are corresponding opportunities
under different market conditions. However, as of October 26th, the Shenwan Transportation Index has fallen by 14.86% this year, ranking eighth among Shenwan’s first-level industries. Among them, the Shenwan Logistics
sub-industry in the growth category has fallen by 24.26%, underperforming the Shanghai and Shenzhen 300 Index.

As an important link in the recovery chain, it is widely believed that express delivery logistics, which has a fast repair speed after opening up, will usher in opportunities. China’s C-end belongs to e-commerce-driven,
with 90% of current parcel volume coming from e-commerce and 10% from business and personal parcels. On the one hand, the demand side has high resilience, and express delivery logistics is mainly used for transporting
clothing, daily necessities, and home appliances. Secondly, the supply side has great elasticity, and transportation capacity has quickly recovered in the post-epidemic era. Following this logic, the long-term returns of
the express delivery industry are worth looking forward to, after all, the industry itself has a natural monopoly attribute, and economic laws determine that the industry can see an increase in concentration.

However, this year’s economy has shown weak recovery so far, mainly reflected in the weakness of real estate as the most important driving force for total demand, which to some extent has dragged down the performance of
related industries in the construction chain. However, with recent moves by China Investment Corporation to increase holdings of ETFs, approval for issuing special bonds worth trillions of yuan, and a new round of share
buybacks by listed companies, the prospects for the recovery chain are promising, and the logistics sector is waiting for signals of recovery.

Looking at the price aspect, due to the industry’s off-season, in September, the single ticket income of the Tongda system showed a year-on-year decline, with Yunda and Shentong’s single ticket income declining by more
than 10% year-on-year. However, in the fourth quarter, as the peak season, express e-commerce items began to increase in price, and the express grain-producing areas (referring to areas where express delivery costs are
lower than express prices) have basically completed their repairs. For example, since the price increase on September 1st, the prices in the Chaoshan area have been stable. Some brands in the Guangdong, Shenzhen, and Yiwu
areas have also increased their base prices, and the industry’s price environment has rebounded.

In terms of subsidiaries, YTO’s single ticket income fell by more than 7% year-on-year and remained flat month-on-month. SF Express, Yunda, YTO, and Shentong achieved single ticket income/ year-on-year growth rates of
17.21 yuan/-4.12% (excluding Fengwang), 2.29 yuan/-12.93%, 2.34 yuan/-7.32%, and 2.11 yuan/-13.52%, respectively. In the same month, SF Express, Yunda, YTO, and Shentong’s single ticket income increased by 0.67 yuan,
0.12 yuan, 0.00 yuan, and 0.01 yuan month-on-month, respectively.

Affected by the triple pressure of off-season demand, price, and cost, the quarterly performance of e-commerce express delivery in the third quarter is expected to fall compared to the previous quarter. The stock prices
of listed companies may be affected by this factor in the short term. However, the current market’s pessimistic expectations for the express delivery sector are relatively sufficient, and there is limited downside
potential.

Looking at the third-quarter performance report, YTO Express achieved operating income of 40.759 billion yuan in the first three quarters, a year-on-year increase of 4.98%; the net profit attributable to shareholders was
2.659 billion yuan, a year-on-year decrease of 4.06%. The reason for this is that the company’s financial data is not good due to fierce industry price competition and a decline in average item price. In addition, with
more capacity being put into operation in the peak season of the fourth quarter for e-commerce express delivery, cost pressures are suppressing profitability. In terms of valuation, Wind’s Express Index has a P/E ratio of
about 17.74 times, which is currently at a low level.
From top to bottom, investors should primarily focus on the industry’s volume growth rate and cost reduction. “High growth + cost reduction” is expected to become the key driver of performance for express delivery
companies. From bottom to top, there are potential opportunities for individual stocks within the sector, including industry leaders such as ZTO Express and YTO Express, second-tier players like SF Holding, turnaround
candidates like Yunda Holding, latecomers like STO Express, and companies specializing in large items like Deppon Express. However, specific portfolio allocation requires a dynamic understanding of changes in the relative
competitiveness and profit prospects of major players in the industry.

Differentiation in the industry is an inevitable trend in the future, especially in the strong categories of various e-commerce platforms. For example, JD.com focuses on 3C electronics, while Pinduoduo focuses on fresh
produce and daily necessities. This leads to differences in average order value and corresponding delivery costs, resulting in a stratification of the express delivery industry. Based on this judgment and referencing the
situations in Europe, America, Japan, and South Korea, the future industry will likely be characterized by a “high-end leader, mid-to-high-end player, and mid-to-low-end player” scenario. With JD.com’s acquisitions of
Kuayue Express and Deppon Express, the high-end express delivery sector has entered a duopoly competition between “SF Group” and “JD Group”. However, the future listings of Jitu Express and Cainiao may have a significant
impact on the industry landscape. The current industry structure is still in a period of accelerated competition and is not yet stable. Price competition in certain regions and the overall pattern of e-commerce delivery
are about to become clear.

In the short term, trading behaviors such as racing to grab opportunities with speculative attributes become key marginal pricing factors. In the long term, investors need to identify companies where fundamental changes
have not been fully priced in, with a focus on whether their networks are stable and their financial reports are healthy. Only then can sufficient alpha be generated in the medium to long term. Taking September data as an
example, leading company SF Express (excluding Fengwang) achieved an overall volume growth rate of 20.5%, with express items (including returns) growing at a double-digit rate and traditional express items growing at a
high single-digit rate.