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As the "leading brother" in the domestic express delivery industry, SF Express has always had no shortage of external attention, and recently it has been frequently searched because of various news. First, the stock price plunged due to the "private equity withdrawal", and recently, due to the overseas epidemic, the stock price has risen continuously.
The performance of the “roller coaster” of the capital market and its solid strength in the express delivery market are completely different. Looking at the quarterly earnings reports of SF Express, it can be found that the core of SF Express is "stable". However, judging from the performance of SF Express this year, a lot of new conditions have emerged behind its still stable.
Slowdown
According to the financial report data previously announced by SF Express, the growth rate of its total revenue from Q1-Q3 in 2020 will be 39.59%, 44.31%, and 34.04%, respectively. From this data, it is not difficult to see that after a short-term increase in its revenue growth rate, the growth rate began to decline significantly. The November performance announcement announced a few days ago has intensified its downward trend in growth rate.
Announcement data shows that in November, SF Express's operating income reached 15.373 billion yuan, a year-on-year increase of 31.11% over the same period last year. In terms of business, in November, its express logistics business revenue was 14.642 billion yuan, a year-on-year increase of 30.91%; business volume was 906 million votes, a year-on-year increase of 59.51%. In addition, the operating income of supply chain business in November was 731 million yuan, a year-on-year increase of 35.37%.
From the perspective of total revenue growth, SF Express's revenue growth rate in November was lower than the revenue growth rate of the first three quarters. This is obviously not good news for SF Express. After all, November of the calendar year is the season for the big promotion of e-commerce platforms, and it is also the traditional peak season for the express delivery industry. The high point of revenue growth for express companies in the fourth quarter often occurs in November. The decline in SF Express's revenue growth rate in November will inevitably "depress" its overall revenue growth rate in the fourth quarter.
Analyzing this year's domestic express market and SF Express's own situation, SF Express's performance is not difficult to understand.
On the one hand, affected by the resumption of work and production of the domestic express delivery business, SF Express’s previous high growth has been difficult to sustain. Specifically, during the severe epidemic period in the first half of the year, SF Express relied on its direct-operated industry advantages and always adhered to the front-line delivery, thus obtaining a large number of orders for emergency supplies, which laid the foundation for its high growth. However, as "Tongda" enterprises resumed work one after another, SF Express's original high growth rate began to suffer.
On the other hand, SF Express itself faces many challenges. For example, its traditional express business is facing the ceiling of the industry, and its growth rate continues to decline; at the same time, Tongda companies are racing to increase the high-end aging parts market, which naturally poses a certain challenge to its position in the high-end market.
Increasing contradiction between scale and benefit
In fact, in order to break the growth bottleneck of time-sensitive products, SF Express has been working hard to develop a second growth curve. E-commerce, intra-city, express, medicine and other new sectors have successively become key areas of its layout. But among many fields, the e-commerce sector is undoubtedly the one with the brightest performance in its new business.
On the one hand, the development of e-commerce business has helped SF Express become the first company in the industry with a revenue of over 100 billion yuan. According to SF Express's 2019 revenue data released in April this year, SF Express achieved 112.193 billion revenue last year, becoming the industry's first company with revenue exceeding 100 billion. According to the annual report data disclosed by SF Express in 2019, its annual economic business revenue was 26.9 billion yuan, a year-on-year increase of 31.96%; while its traditional time-sensitive parts business only increased by 5.9% year-on-year. In contrast, it is not difficult to find that e-commerce business plays an important role in its revenue.
On the other hand, after expanding its e-commerce business, SF's market share index quickly reversed the downward trend and gradually began to reverse. SF Express has not been very interested in e-commerce products with "low profit" earlier, which also made it lose the support of high-frequency e-commerce traffic, resulting in the continuous decline of its business volume and market share. According to relevant industry data, from 2010 to 2019, SF Express's market share dropped from 18.8% to 6.7%.
It was not until SF Express officially opened its e-commerce software that its ever-declining market share ushered in a reversal. In May 2019, SF Express formally cooperated with Pinduoduo to launch a "special transfer" e-commerce product that focuses on the sinking market. At the same time, it also vigorously increases its weight in other e-commerce businesses. With the help of its e-commerce business, SF Express's business volume has rapidly increased, and it exceeded the industry average in August of that year, and its market share has since stabilized and rebounded.
In August 2019, SF's market share reached 7.61%, an increase of 0.04 percentage points from the previous year, and 0.9 percentage points from 6.7% in 2019Q2. By the first quarter of this year, its market share has reached 13.7%, compared with 2019Q2. An increase of 7 percentage points. From this data, it is self-evident that the e-commerce business has brought changes to SF Express.
However, with the expansion of e-commerce business scale, SF Express has also begun to encounter some new challenges. For example, while e-commerce business has brought about an increase in business volume, it has also lowered its single ticket revenue. According to relevant financial report data, since 2019Q3, its single ticket revenue began to fall from the highest average price of 24.93 yuan per unit to 17.84 yuan in 2020Q3, a year-on-year decline of 23.89%, a record low.
To a certain extent, this shows that in the highly homogenized e-commerce market, even SF Express can hardly escape the quagmire of the "price war". While e-commerce is expanding SF's revenue, it is also to a certain extent. It consumes its profitability. With the increase in business volume and the expansion of scale, this contradiction between scale and efficiency has become more obvious. Of course, from the current point of view, this contradiction has not yet directly affected its earnings.
Still very profitable
The financial report shows that in 2019, SF Express achieved a net profit of 5.797 billion yuan. In the first three quarters of this year, SF Express achieved a net profit of 5.533 billion yuan, which is close to the net profit of last year.
In the case of single ticket revenue decline, its net profit can still maintain growth, which is not unrelated to the cost sharing caused by the scale effect. We can get a glimpse from the data of SF Express in the third quarter. According to the 2020 Q3 financial report data, SF Express achieved a non-net profit of 2.854 billion yuan in the third quarter, a year-on-year growth rate of 40.54%, which is much higher than its third quarter revenue growth rate of 34.04%.
Through the analysis of its gross profit margin and operating expense ratio, it can be found that the increase in its net profit margin is mainly due to its scale effect. On the one hand, the gross profit margin of SF Express in Q3 dropped by 1.28 percentage points to 17.15%. At the same time, its current net sales margin increased by 0.43 percentage points year-on-year to 4.42%. The decline in gross profit was mainly due to the investment in anti-epidemic costs (courier protection) , And the increase in net interest rate is not unrelated to the sharp decline in the current operating expense ratio.
As the company's business scale increased, SF Express's operating expenses were gradually optimized. In Q3 2020, SF Express’s operating expense ratio was 11.01%, a year-on-year decrease of 1.59 percentage points from 12.6% in the same period last year. In the context of rising operating costs, SF Express’s comprehensive expense ratio has dropped significantly, thereby releasing greater profit margins, which in turn boosted the current net interest rate and strengthened SF’s profitability during the current period. This profit logic has been reflected in the past few quarters, which is also an important reason for SF Express to maintain high profitability in the past.
Still under pressure
However, although the current profitability of SF Express has been strengthened, the pressure on SF Express has increased unabated.
First of all, compared with the growth space of the low-end express delivery business, its ceiling in the high-end market is lower, and the current "Tongda" express delivery companies and JD Logistics are working on the high-end market, which will naturally intensify the competition in the high-end market, and lead to Its development in advantageous areas is restricted.
Secondly, limited by the direct-operated asset-heavy model, it is difficult for SF Express to grab a larger share of the e-commerce express market. On the one hand, restricted by its own funds, its offline outlets are slow to expand, and its outlets cannot reach more low-end markets, which restricts its development in the low-end market; on the other hand, e-commerce express delivery services are currently It has also entered the stage of shuffling from incremental to stock, and the industry's "price war" has intensified. It is naturally difficult for SF Express, which has "bent into the game," to stand alone.
For example, after entering the e-commerce market, single ticket revenue has been declining. In the case of intensified market competition, the situation faced by SF Express, which adopts the direct sales model, is even more difficult. For example, after its market share reached 13.7% in 2020Q1, it soon fell to 9.1% due to the counterattack of "Tongda" logistics companies. The reason for this result is mainly due to its cost structure under the direct operating model, which is difficult to compete with franchise enterprises.
According to SF's announcement data, its single ticket cost has basically remained above 14 yuan. Compared with franchised companies (such as Zhongtong's 2020Q2 single ticket cost of only 0.71 yuan), SF Express clearly lacks a price advantage. Once the subsequent franchise enterprises continue to reduce prices, SF Express will face the “dilemma” of not reducing prices and losing the market, and reducing prices and losing profits.
Therefore, in the long run, SF Express will still face greater industry pressure in the future, especially with the completion of the IPO of JD Logistics, which also adopts the self-operated model, it will face more severe challenges. At that time, it is difficult to say whether SF Express's bargaining chips are sufficient or not under the bullish melee.
Text/Liu Kuang public number, ID: liukuang110