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Zhongtong returns to Hong Kong to ring the bell with a market value of HK$2,020 billion. Who is the real “king of express delivery”?



On September 29, ZTO Express (NYSE: ZTO, closing price on the 28th was US$31.97; 02057, HK) was officially listed on the Hong Kong Stock Exchange. On the first day of listing, ZTO Express opened 11.93% higher and hit an intraday high of HK$245.2. Wind data shows that Zhongtong Express closed at 238 Hong Kong dollars that day, up 9.17%, and its market value reached 20.2 billion Hong Kong dollars. ZTO Express has also become the first express company to be listed on both the New York Stock Exchange and the Hong Kong Stock Exchange. It is also the company with the largest market value in the logistics sector of the Hong Kong stock market.

Since its establishment in 2002 at No. 290, Pushan Road, Zhabei District, Shanghai, starting with 57 votes on the first day, to the “Double 11” period in 2019, the single-day order volume of the entire network exceeded 200 million, becoming the world’s number one As an express company with an annual business volume of over 10 billion pieces, ZTO Express is a microcosm of the development of private express delivery in China.

Since 2016, China’s major private express companies “Tongda” Shentong Express (002468, SZ; yesterday’s closing price of 15.22 yuan), YTO Express (600233, SH; yesterday’s closing price of 13.96 yuan), Zhongtong Express, Yunda (002120, SZ) ; Yesterday’s closing price of 18.74 yuan) and SF Holdings (002352, SZ; yesterday’s closing price of 79.97 yuan) all landed in the capital market and started the “second venture”. In the past four years, China’s express delivery industry has experienced rapid changes.

As a late-started courier company in the “Tongda system”, how can ZTO Express catch up from behind, ranking first in the market in terms of business volume for four consecutive years? In this regard, the “Daily Business News” reporter counted the 18-year growth history of Zhongtong Express, and systematically combed the business digital competition and capital market value changes of major domestic private express listed companies in the past 4 years, trying to deconstruct the Chinese express market. Capital Bureau: Who is the real “king of express delivery”?

On September 29, the “Cloud Knock the Gong” site of Zhongtong Express’s listing on the Hong Kong Stock Exchange Photo courtesy of Zhongtong Express

On September 29, the “Cloud Knock the Gong” site of Zhongtong Express’s listing on the Hong Kong Stock Exchange Photo courtesy of Zhongtong Express

Grassroots entrepreneurship Tonglu Corps creates world express miracles

At 9:30 am on September 29, ZTO Express was officially listed on the main board of the Hong Kong Stock Exchange. The Hong Kong listing ceremony was held in the report hall on the third floor of the new No. 1 building of Zhongtong Express Group in Qingpu District, Shanghai. The “Daily Economic News” reporter noted on the spot that all the guests who came to the stage of “Cloud Knock the Gong” were representatives of Zhongtong outlets and courier representatives, as well as employees and customer representatives of various positions. The founder, chairman and chief executive of Zhongtong Express Official Lai Meisong took a low-key seat and did not take the stage.

Lai Meisong said in his subsequent on-site speech that in 2016 (ZTO Express) went abroad to be listed on the New York Stock Exchange, opening a window for the world to understand Chinese express; today, returning to China with a grateful heart, listed in Hong Kong, Full of confidence in China’s economy and China express. The stock code of Zhongtong on the Hong Kong Stock Exchange is 02057, 20 represents 2020, and 57 is exactly the business volume on the first day of Zhongtong’s establishment. This is the collision of two new starting points, which opened a new journey for Zhongtong.

Behind the active capital market, according to the business data of the 2020 semi-annual report, as of the second quarter of this year, the four “three links and one reach” companies together accounted for “half of China’s express market share” (63.06%). Among them, the market share of Zhongtong Express exceeded 20% to 21.5% for the first time, Yunda’s market share was 16.61%, Yuantong Express’ market share was 14.57%, and Shentong Express’ market share was 10.38%. It can be seen that the scale advantage of ZTO Express has become more obvious, and the market gap with the second and third places has further widened.

It is worth mentioning that during the “Double 11” period in 2019, ZTO Express became the world’s first express company with an annual parcel volume exceeding 10 billion pieces.

Due to the special economic environment changed by the epidemic in 2020, the increase in China’s express delivery industry is more likely to be unprecedented. On September 1, ZTO Express ushered in the 10 billionth express in 2020. Compared with reaching 10 billion pieces in 2019, it only took 8 months and 1 day this year, setting a new record again.

Lai Meisong judges that ZTO’s order volume in 2020 alone will exceed 15 billion, which means that ZTO’s increase this year may be equivalent to the volume of express delivery in the United States.

Obviously, the operation of the tens of billions of parcels carried by the “three links and one delivery” each year has created a miracle of express delivery and e-commerce in China, and is a miracle of the world.

China’s private express delivery began in 1993, especially the “Tongda”, the express army that created the miracle of Chinese express delivery, and even the world’s express delivery miracle, all came from grassroots.

The founders of the four “three links and one reach” companies not only come from the same county, but also from the same township-Song and Dance Township, Tonglu County, Zhejiang Province. Their hometown, Tonglu County, has also been awarded the title of “China Express Hometown” by the China Express Association.

Just before returning to Hong Kong to go public in mid-September, when Lai Meisong reviewed the history of entrepreneurship at the Customer Open Day event, he still said with emotion that (China) Express is a history of entrepreneurship and innovation for farmers.

The first offensive and defensive battle in the market for several years

ZTO Express was born in 2002. Before ZTO, Shentong (founded in 1993), Yunda (founded in 1999), and YTO (founded in 2000) had all started. Before deciding to establish Zhongtong, Lai Meisong also went to Wenzhou to inspect Shentong outlets, and even the source of Zhongtong’s name was inspired by Shentong: “The character’shen’ represents Shanghai, and the character’zhong’ represents China.”

Why can a company that started late can be the largest in the industry in a short time? On the customer open day in mid-September this year, Lai Meisong answered this question. Lai Meisong divides the entrepreneurial journey of the past 18 years into several stages.

From 2002 to 2009, it was the first few years that Zhongtong started its business. Lai Meisong defined it as the “following” stage and the first stage of Zhongtong’s “survival”. 2009 was a watershed in the express delivery industry. Before that, the express delivery industry was in a gray area. On October 1, 2009, the revised New Postal Law was formally promulgated and implemented, confirming the legal status and role of private express delivery.

It was from then that the express delivery industry ushered in the spring of development. Lai Meisong and his team predicted that in the future “rich people” will come to do express delivery, and investment capital will enter the express delivery industry. “I myself said that in the past, people in cities did not do express delivery, rich people did not do express delivery, and those who could basically find a job did not do express delivery. So express delivery is a history of entrepreneurship and innovation of farmers.” Lai Meisong said with emotion.

Smelling the opportunity of the historical market, Zhongtong began to implement the “shareholding system reform” that is different from the traditional express franchise system. In short, it is to merge the transit centers of important node cities from multiple stakeholders into a common interest body.

In 2010, ZTO Express launched the development strategy of “integration of the entire network” and successfully completed the national network shareholding reform in the industry, forming three unifications: unified decision-making power, unified personnel power, and unified financial power.

From 2010 to 2016, ZTO’s growth can be said to be the fastest in the industry. During this period, the “top spot” of the express arena experienced unprecedented fierce competition and changed owners several times.

The 2016 ZTO US prospectus revealed that in 2015, ZTO express business volume was 2.95 billion pieces, accounting for 14.3% of the Chinese express market share, which was almost the same as YTO Express (14.7%), which had the largest market share at the time. In this context, at the end of 2016, Zhongtong took the top spot in China Express and has continued to this day.

“From 2016 to the present, our annual business increment absolute value is also the industry’s first. From the original 6% market share (doing) to 19.1% market share in 2019.” Lai Meisong recalled.

It was also this year. On October 27, 2016, the rapidly offensive ZTO Express sounded the opening bell on the New York Stock Exchange, becoming the largest IPO of a Chinese company in the United States after Alibaba.

Speaking of the reason why ZTO has been following and catching up to the number one position in the market for four consecutive years in the past 18 years, Lai Meisong also mentioned the management concept of “fairness, efficiency and results” advocated by ZTO. This is really valuable for the franchise system that China’s “Tongda System” used to be “scattered, chaotic, and poor” in the past.

Different from other Tongda companies, Zhongtong proposed in 2018 that the organizational structure of franchise express delivery is a new concept of “federalism”. According to Zhongtong’s definition of “federalism”, federalism is the fission of the system within an organization. Member links are synchronized with the establishment of the organization. It is a strong endogenous link. The mutual link and the scale of the organization are smoothly symbiotic. It is a flat network distribution.

When Lai Meisong talked about management, he also compared the two modes of “direct operation” and “joining” in China’s express delivery arena. In Lai Meisong’s view, no matter which model, the express delivery process is the same: receiving, transferring, shipping, and dispatching four processes. “The outlets are doing their own affairs well, dispatching the pieces well, and serving the customers who collect them. What we have to do is to do as much better than our peers in the timeliness of the transit link and the optimization of routing. “Lai Meisong said.

Lai Meisong revealed that in the past three or four years (2016 to present), Zhongtong outlets have clearly done three things: first, how to stimulate the endogenous motivation of the front-end couriers so that their income is higher than that of their peers. The path of implementation is to handle it well. The relationship between stock and increment; the second thing is that ZTO’s site is going to do terminal construction. In recent years, ZTO has vigorously opened Cainiao Station and Tuxi Express Supermarket. There are already many terminal stores, which greatly improves the collection of outlets. Timeliness saves costs and improves efficiency.

“The third thing is that we believe that the capacity building of outlets is very important. From the past to this year (annual business volume), Zhongtong will achieve about 17 billion pieces. This is inseparable from the capacity building of outlets.” Lai Meisong That is to say, ZTO has hard targets in terms of personnel equipment and site construction of its outlets.

If you want to deconstruct the golden rule that Zhongtong has come to the top and ranks first in the market for four consecutive years, it is true that you cannot rely solely on the understanding of the “price war”. Perhaps as summarized by GF Securities, the production capacity chassis and management philosophy are the killers for Zhongtong to become the “long-distance running champion”.

Silent contest of China Express Capital Bureau

The “Daily Business News” reporter noticed that after four years of listing on the US stock market, although Zhongtong continued to maintain its No. 1 position in the domestic market, its share price performance has been lacklustre. Returning to the Hong Kong stock market, for companies, in any case, it is closer to the operating market. Investors have a certain cognitive foundation, which is conducive to enhancing investor confidence and overall liquidity.

According to many industry insiders, the deeper reason behind the second listing of Zhongtong’s return to Hong Kong lies in the China Express Capital Bureau, which is more like a silent contest. In particular, competition in China’s express delivery industry is currently intensifying. It’s not just a battle for market hegemony between “Tongda systems”. SF Express cuts into e-commerce parts, JD Logistics is open to third parties, and Pinduoduo introduces Southeast Asia Extreme Rabbit Express. The price war brought about by industry battles eventually evolved into a competition between capital under the ecological blessing of giants. The price war has caused the profits of various listed companies to also begin to diverge, which has been transmitted to cash flow.

Based on the data in the first half of 2020, the year-on-year changes in non-net profits of Zhongtong, Yunda, YTO and Shentong deducted were -0.67%, -52.87%, 8.15%, and -95.94% respectively; the year-on-year changes of operating net cash flow were -45.55% , -79.95%, 12.13% and -149.16%.

From a cash perspective, Zhongtong’s cash-like balance is still much higher than its peers. GF Securities believed in a research report issued in September this year that the price strategy of the express delivery industry is of short-term nature, and the differentiation of operating net cash flow and cash-like balance is a strong signal for the leader to break through. Without considering external financing, operating net cash flow determines the express delivery company’s potential for continued expansion and the resilience to participate in price wars. Judging from the data in the first half of the year, as of June 30, 2020, Zhongtong’s cash-like balance is 85% of the total of YTO, Shentong and Best.

However, this does not mean that Zhongtong’s market position is absolutely safe. Many people in the industry believe that the e-commerce express delivery sector is in the final stage of oligarchic competition and fighting among the leaders. The “leftover is king” may be getting closer, which is bound to trigger an unprecedented battle. Zhongtong ranks first and will face the frenzied counterattack from multiple parties.

On the customer open day not long ago, Lai Meisong’s words left enough suspense about the possible future market differentiation. “It is impossible for Chinese express delivery to remain the same as it is now. Each of them has a market share of ten to twenty percent. This is unrealistic. Now the three companies in the United States and Japan have more than 90% of the market. There will also be express delivery companies with a market share of 30% or even more than 30%, which is inevitable.” Lai Meisong said.

In fact, in the current stage of the scale of the dispute, other “Tongda” companies, and even SF Express, have also joined it with unprecedented intensity. From the perspective of current industry competition, the market share and profits of express delivery companies are still like “fish” and “bear paws”. At the same time, each company is well versed in the principle of “cash is king”.

In this context, whether it is the second listing of Zhongtong’s Hong Kong stocks, raising 9.8 billion Hong Kong dollars, or Shentong and YTO’s holdings of Alibaba’s 3.3 billion and 6.6 billion increase in September this year, they are all “Guangjiliang” preparations. The performance of a fight.

On the evening of September 24, YTO Express announced that the company’s application for non-public issuance of shares was accepted by the China Securities Regulatory Commission. YTO Express plans to raise a total of no more than 4.5 billion yuan this time.

According to the “Daily Economic News” reporter, YTO, which once missed the market’s first position, is currently full of internal morale, with the goal of “competing for two and looking for one”, and not only preparing to challenge the price war, YTO is working on the construction of bottom-level big data and the expansion of its aviation fleet. , The same increase in horsepower. This is also in addition to the price war, another “equipment competition” that also depends on capital to get tickets.

Lai Meisong revealed that at present, Zhongtong is the company with the most factories with independent property rights in the industry, and the company with the most self-owned vehicles and automatic sorting equipment. And Zhongtong is still vigorously increasing infrastructure capacity building, “this year is the most invested year in the past, it may be the sum of the previous two years.”

In the Hong Kong Stock Exchange listing prospectus submitted by Zhongtong, regarding the use of capital raised, first of all, it is still infrastructure and capacity development, such as the purchase of land use rights, the construction of modern logistics components, the purchase of transportation vehicles, and the addition and upgrading of sorting center machines. Wait. The second is to empower network partners and strengthen network stability, including incentivizing franchisees to invest resources and providing financing support for franchisees.

Behind these real money investments, all companies are hoping to build long-term barriers through capital expenditures, and the core goal is still direct market share.

Industry differentiation Who is the “king of express delivery”?

The oligarchic struggle in China’s express delivery era has become more and more obvious. On the first day that Zhongtong returned to Hong Kong to go public, there were still people from the “Tongda Department” who bluntly told reporters of the “Daily Business News” that next year might soon usher in the “year of decisive battle”.

In fact, this is not alarmist. From the perspective of the market value of listed companies, the differentiation of several major express companies is already obvious.

As the market leader with the largest market share in the current industry, when Lai Meisong answered questions from brokers about the risks and opportunities in the next 5 to 10 years and the evolution of the industry structure, he first emphasized: “There must be determination.”

Lai Meisong said that from the initial stage of its business to 2015, ZTO has only done one thing, how to maximize the efficiency of express delivery, but since 2016, ZTO has started to build its own ecology.

At the Customer Open Day on September 16 this year, Lai Meisong and a group of senior executives attended the meeting and introduced Zhongtong Express, Zhongtong Express, Zhongtong Yuncang Technology, Zhongtong Business, Zhongtong International, Star Alliance, Businesses in various sectors of the group ecosystem including Zhongtong Technology, Zhongtong Finance, and China Express Media.

As Lai Meisong believes, ZTO 1.0 version has maximized the scale of express delivery. Then, Zhongtong hopes to use five years to make a breakthrough in integrated logistics. It is hoped that Zhongtong can go from leading edge to absolute advantage in 5 years, and ecological advantage in 10 years.

“The future competition of express delivery must be a full-link competition. It must not be a single fight, but a group fight, because only when you have a richer format, your resources in the entire logistics sector will be fully utilized.” Lai Maison said.

According to industry insiders, Lai Meisong’s emphasis on ecology is, on the one hand, to adapt to the evolution of market demand and to maximize the benefits of scale, but it may also be inseparable from Internet giants such as Ali, JD, Suning, and Pinduoduo in recent years. Frequent penetration of the logistics field. The giants’ group play and ecosystem construction will more or less bring some enlightenment, and will directly bring a sense of conflict and opportunity coexistence to express companies.

This sense of conflict is perhaps the most representative in Ali. Since 2020, Ali has successively invested in Yunda and increased its holdings in Shentong and Yuantong, and finally gathered the shares of “Tongdabai”.

In this context, behind the ambition and ecological layout of Zhongtong’s “30%+” market share, the goal is directed at the “king of express delivery.” However, no one is willing to give up the opportunity to be the “king” easily. If the market share is aside, SF Express is undoubtedly leading the way just from the perspective of market value. From the perspective of ecological construction, SF Express’s ambitions are also not defeated by Zhongtong.

Even from the perspective of the ecological layout, with the huge commercial attraction of Ali’s “Tao Department” and all the shares of “Tongdabai”, coupled with the digital control of Cainiao.com, it seems that Ali can be called the “express delivery” at a certain level. King”. In this regard, the “king of express delivery” still has suspense.

In an interview with the reporter of “Daily Economic News”, Huo Tingjie, investment director of Qingtong Capital, believes that the red sea of ​​the express industry has enabled the participants in the industry to implement their own strengths and grow rapidly. SF Express is working hard on the sub-tracks of intra-city logistics and special logistics, while Zhongtong is rapidly expanding its scale in its own market; Jitu has entered the Chinese market in a very short time by lowering the unit price, and has grown rapidly. Each company has developed rapidly on its own basis, indicating that the market has not yet reached the saturation of scale and structural balance, and each company still has a lot of room for development.

“The king of express delivery in the future will probably be called the’king’ only on the premise of wide coverage of comprehensive business capabilities, healthy profit system, huge business volume, and good customer service.” Huo Tingjie said.

Before that, although it was a “fighting by the princes”, it was still promising.