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For an economy to operate at full capacity, it is important to have a free movement of goods and products. Similarly in China, the courier, express, and parcel (CEP) sector is the reason behind the nation’s efficient business operations. CEP refers to the collection of services that involves the delivery of various goods and products through different mediums such as air, water, and land across regions.
According to the State Post Bureau of China, the country handled over 60 bn parcels from January to June in 2023, recording a year-on-year increase of 17%. The revenue of the sector is expected to exceed 550 bn yuan ($76.75 billion), up 11.5% year-on-year.
Factors behind the impressive growth
The massive rise of e-commerce platforms like Alibaba, Tencent, and Pinduoduo has been one of the major catalysts in the development of the CEP sector in China. Interestingly, this was even before the start of the pandemic. During the 10 days long Alibaba’s Double 11 shopping festival in November every year, more than a billion packages are delivered nationwide.
The adoption of technology has played an important role in the growth of the courier industry. 5G and new mobile apps facilitate quick decisions or placing orders for consumers. Also, the use of drones, delivery robots, and unmanned cold-chain vehicles has boosted efficiency and lowered the cost of delivery.
Also, the rural market was a major growth corridor for the Chinese courier industry. Liu Jiang, a research fellow of the Development and Research Center of the SPB stated, “Over 30 bn packages were shipped to and from rural China last year, and the year-on-year growth is 20 percentage points higher than that in the urban market.” This is primarily due to the growing demand for farm produce, poultry, and meat like beef, mutton, and crabs. The strategies to extend the network to lower-tier markets and the rural network has received an immensely positive response.
Technology and sustainability expected to drive China’s courier industry
As per Mordor Intelligence, China’s courier, express, and parcel industry is projected to reach $238.4 bn by 2028, growing at a CAGR of 13.39% from 2023 to 2028.” Eddie Huang from SF Express, China’s second-largest courier service, told McKinsey, “On the B2C side, customer demand is led by both the technology and convenience of e-commerce.” He also stated that the B2C parcel-delivery segment will continue to grow by 15-30% per annum in China, while the B2B market would grow by 10-15% despite a slowdown. Huang expects 3D technology to boost the B2B market in China.
The postal industry continues to see an increase in investment in technology infrastructure construction, equipment and facilities, and transportation capacity. So, several constructions started on several large-scale processing centres.
Another trend that is developing in the Chinese courier market is the inclination toward sustainability. The courier industry in China has made considerable advances toward green packaging, massively increasing the recycling rate of packages. Today, China uses electronic waybills and reusable mail bags. According to Guan Aiguang, an official with the State Post Bureau, “The courier sector will continue to carry out the pilot project of promoting green services at express delivery outlets and distribution centres and steadily improve the coverage of reusable packages.”
However, transportation and labour are two of the main costs associated with the courier and express parcel, and they are likely to go up due to fluctuations in oil prices, as well as rising labour costs. Due to this trend, the overall average price of express delivery could slightly rise. Also, there is excess competition in the express delivery market due to which companies are experiencing a decline in revenue in that business segment.
Biggest players in China’s CEP market
S.F. Holding Co., Ltd.
SF Holdings through its subsidiary SF Express provides domestic and international express delivery. Located in Shenzhen, Guangdong, SF Express is the second-largest courier in China offering domestic and international express delivery. SF Express has a fleet of 69 cargo aircrafts, including two B747 all-cargo freighters.
The company’s net sales rose 29.1% year on year to 267.5 bn yuan ($ 3.7 bn) in the fiscal year ended December 2022. Its operating profit climbed by 82.6% to 12.6 bn yuan ($1.7 bn).
Listed on the Shenzhen Stock Exchange as (SHH: 002352), S.F. Holding Co. has a market capitalisation of 231.64 bn yuan ($3.6 bn). The company’s stock has declined by 13.8% in the past year. It has a PE ratio of 33.55 and a PB ratio of 2.64.
YTO Express Group Co., Ltd
YTO Express Group offers logistics services across China, principally courier delivery. Its portfolio also includes car rental, supply chain management, general cargo warehousing, domestic air transportation, and other related services.
The company’s net sales increased by 18.6% year on year to 53.5 bn yuan ($ mn) in the fiscal year ended December 2022. Its operating profit rose by 73.5% to 5.1 bn ($ bn).
Listed on the Shenzhen Stock Exchange as (SHH: 600233), YTO Express Group has a market capitalisation of 53.699 bn yuan ($7.47 bn). The company’s stock has declined by 21.05% in the past year. It has a PE ratio of 33.45 and a PB ratio of 2.64.
ZTO Express Co., Ltd.
Founded in 2002, ZTO Express Co Ltd offers courier and logistic services in China. Headquartered in Hong Kong, the company also delivers online-shopping packages and e-commerce parcels.
The company’s net sales rose by 16.3% year on year to 35.4 bn yuan ($4.93 mn) in the fiscal year ended December 2022. The firm’s operating income climbed by 40.6% to 7.7 bn yuan ($1.07 bn).
Listed on the Hong Kong Stock Exchange as (HK: 2057), ZTO Express Group has a market capitalisation of HK$165.80 bn ($21.20 bn). The company’s stock has declined by 0.77% in the past year. It has a PE ratio of 20.65 and a PB ratio of 2.83.
Yunda Holding Co., Ltd.
Yunda Holding Co., Ltd. offers delivery services across China. It also offers logistics services, warehouse distribution services, and online shipment services.
The company’s net sales rose by 13.7% year on year to 47.4 bn yuan ($6.60 bn) in the fiscal year ended December 2022. The firm’s operating income climbed 18.5% to 2.5 bn yuan ($0.35 bn).
Listed on the Shenzhen Stock Exchange as (SHH: 002120), Yunda Holding Co has a market capitalisation of 28.123 bn yuan ($31.74 bn). The company’s stock has declined by 46.82% in the past year. It has a PE ratio of 19.00 and a PB ratio of 1.62.
JD Logistics, Inc.
JD Logistics is China’s largest integrated supply chain logistics services provider and part of JD.com. The company’s net sales rose by 31.2% year on year to 137.40 bn yuan ($19.12 bn) in the fiscal year ended December 2022. The firm also incurred an operating loss of 2.37 bn yuan ($0.33 bn).
Listed on the Hong Kong Exchange as (2618. HK), JD Logistics, Inc has a market capitalisation of HKD 78.86 bn ($10.97). The company’s stock has declined by 26.46% in the past year. It has a PS ratio of 0.48 and a PB ratio of 1.55.
Editor’s note: All stock movement figures as of July 20, 2023.
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