J&T Global Express Limited (1519) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Q4 2024 business date -- update of J&T Express of today. [Operator Instructions] Now I turn the call over to [ Sylvia ], the Head of Investment and Financing of J&T Express.

Welcome, everyone, to the Q4 2024 business data update of J&T Express, and this is [ Sylvia ]. The meeting materials have been sent to everyone by e-mails and also updated to the website of the company. Today, we have the management from J&T Express, [indiscernible]; and also the Head of the Investment and Financing, [ Simon ]. Today, we're going to have 2 parts. First of all, [ Simon ] will provide an overview of our business performance for Q4 2024 and also the full year. Following that, we're going to proceed to the Q&A session, during which the management team will address your questions and engage in discussions. And now I would like to turn the call over to [ Simon ].

Good day. This is [ Simon ]. Now I'm providing the overview of our Q4 and full year business performance for 2024. In Q4, the group's total parcel volume reached 7.4 billion, representing a year-on-year increase of 32.5%. Full year volume reached 24.6 billion, reflecting a year-on-year growth of 31%, primarily driven by Southeast Asia and China. First of all, the Southeast Asia. If I take a look at Page 6 of the material. With handling, 1.4 billion parcels making 62.5% of increase year-on-year and volume totaled 4.5 billion in the whole year, up 40.8% year-on-year. The key drivers in this region include, first of all, the low base in Q4 last year due to significant business disruptions faced by the key client caused by local policy changes. Second, the robust growth of a major client due to Q4 peak season promotional period. Third, we have continued expansion into the segments such as social media shipments and parcels and some of the key accounts, most of which recorded a strong growth and also focus areas for future development. Next, in China. The Q4 parcel reached 5.9 billion, an increase of 27.4%. For the full year, the volume were 19.8 billion, up 29.1% year-on-year. The growth in China can be attributed to, first of all, relatively high industry growth of 21.4% on January to November. Second, sustained rapid growth in platforms such as [indiscernible] and [indiscernible], where J&T enjoys a strong brand presence and customer [ variation ] enabling growth alongside these platforms. Third of all, with the expansion of reverse parcels and individual parcels which maintain a high growth rate in Q4, the average sale for reverse parcels reached 33.9 million in Q4, up [ 34% ]; and 3 million for the full year, reflecting [ 80% ] of year-on-year increase. Next is New Markets. Q4 parcel volumes were flat year-on-year, with full year volume growth by 22.1%. Partly, these markets were impacted by short-term factors such as the Shopee's shift to in-house logistics in Brazil and fluctuations in cross-border policy. Additionally, ramping our volumes from new clients taking time, leading traditional [ fees ] as the new and existing clients overlap. Despite these challenges, emerging markets enable a very good potential due to lower e-commerce penetration and per capita parcel volumes significantly below those of China and Southeast Asia. And also during the period, we remain focused on optimizing our logistic networks, enhancing operational efficiency and improving service quality to ensure seamless scalability when e-commerce platforms experience rapid growth. So this concludes the overview of Q4 and full year business volumes for 2024, and we understand high level of interest in the company's financial performance for 2024. However, as a matter of policy, we do not provide quarterly updates on financial guidance. Furthermore, the full year financial data of 2024 is still on the preparation. But now we fully maintain the market guidance provided during midyear results announcement in August, and the full year financial data for 2024 with the guidance for 2025 will be released in early March. We encourage everybody to stay tuned. Thank you.

Thank you very much, [ Simon ]. And these are introduction of our performance in Q4. And now we're going to have the Q&A session and welcome all the investors and analysts to ask questions. I look forward to engaging with you.

[Operator Instructions] The first question comes from Fan Tso from Bank of America.

I have several questions. The first one is about the Southeast Asia market and help us to talk about the key accounts in Indonesia, which were impacted in 2024. So if we exclude these key accounts for the performance and had a comparison, what about growth in Southeast Asia market? And second question is that what is the nonbranded parcels like [ ARPU ] and also the other operators? What about the growth for these like businesses? And also comparing with the traditional platforms, how to compare your business with them?

So there are 2 questions. The first one is about the business excluding the key account in Indonesia. So what about the growth rate if we exclude that in 2024? All right. So basically, it is outperforming the guidance. Previously, we had our guidance and we outperformed the guidance if we exclude the performance of the key account in Indonesia. Because of the privacy and also classified information of the key account, we will not give any data for that key account. But actually, this impact was limited because even if we exclude that business, we would outperform the guidance still. Second is the nonbranded parcels' percentage of mix against the total. Now it's single digit at the current stage. So still, we have big room for further improvement. That's why you can see that we're going to be focusing on this area of nonbranded business in the future. All right. So whether the [indiscernible] is actually better than the platform parcels, yes. And also for the operators, we're going to actually provide the financial guidance later.

Next question is from Changjiang Securities, Mr. [indiscernible].

I have several questions. The first one is that we can see that via the Southeast Asia and also China market comparing with the businesses of others, you can see that the total point of service number reduced and also the volume parcels per point of service have been increasing. What about the reasons behind? And second question is in Southeast Asia, we've been seeing a more direct operational percentage. What were the reasons behind? And do you think that you have been reaching your expectations?

All right. Thank you very much. So your first question is that you've been seeing that in China and also in overseas, the franchisees number and also the point of service number have been reducing. But actually, the total parcel number was increasing, right? So you're asking the reasons behind it. Okay. So the reasons are that, first of all, in Southeast Asia and also in China, we are now integrating the point of service and also the number of networks and also franchisees, hopefully, that we will have better [ visibility ]. And also, we are going to work together with those franchisees that would like to work with us for a very long time so that we are able to increase the total percentage. So because of that, we are going to actually see the particular number of the franchisees and also the point of service, too, deductive by the total number. And you can see that the overall revenue and also the promotions have been increasing. All right. So could you actually please repeat your second question?

All right. My second question is that you can see that in China and also in Southeast Asia, you were actually increasing the [indiscernible] and also the total number of the fleet that you own. So have you reached your expectations?

All right. So in 2025 and 2026, we're going to increase the number of fleet. And this is exactly a very important method for us reduce key logistics cost. And in China, around 60% are self-owned. And in Southeast Asia, the -- now half of the fleet were self-owned. And comparing with the other express delivery companies, we still have room for improvement. And also, a very large portion of our CapEx each year will be spent on increasing the fleet volume.

The next question is from [ West ] Securities, [ Jun Fung ].

This is [ Jun Fung ]. The first one is about the growth in Southeast Asia market. So in Q4, first of all, congratulations on your growth. What I would like to ask you is that do you think that this high growth will be diluting your EBITDA per parcel. And also, what is about the situation now for the overall business?

So this is [ Simon ]. Thank you very much for this question. First of all, in Southeast Asia market, the high growth was attributed to the key accounts and also the low base of the previous sessions throughout the whole year of 2024. If you are able to see the slide of -- my slides, in the trough, we had a key account business volume data released. And we had 96% of the increase, increasing from 60 million to 5 billion with 77% of the increase on average in Southeast Asia market. So you can see that we still had a very organic growth in Southeast Asia market, attributable to growth of e-commerce platforms in Southeast Asia market. And for the financial data, at the current stage, we are not releasing them. So still at the current stage, we maintain the guidance that we provided in August of last year. So you were asking some of the questions in Thailand. So in Thailand, we were talking about a very competitive market in Southeast Asia market. And also, after several years, we thought that it was pretty good. But still, we are preparing for the overall market share for December. So actually, we are now having a very good performance in Thailand. And also, comparing with the peak season of last year still, we had a very good performance in Q4.

So the second question is about China. In China, we have observed that the overall parcel in the East and also in West is unbalanced, especially in [ other ] region in China. So my question is that how are you going to balance the investment and also cost reduction in middle and the West part of the country. If you had a lot of productivity investments, it will have redundancy, but it will have less investment. There will be lack of productivity. And also, at the same time, the overall cost reduction is quite unlikely. So how are you able to balance the relationship between the West and the East in terms of the investment and also productivity?

So in terms of the network construction, it is particularly dynamic. So I think that there are several points that are very important. The very first thing is that we had investments. And also, we had a very low entry and also [indiscernible] entry. So we had a very small investment upfront. And also, at the current stage, we are actively engaging with more investment, and this is the very first point. Also, second is about -- and first thing is the CapEx on the self-construction and also the franchisee. And also, you know that we have just started putting investment on the cellphone construction and establishments. And also for those sites, the [indiscernible] locations are pretty much highly performative. So from a long-term standpoint, we are going to have a very good template. So in the foreseeable future, I still believe that we will need a very big and also highly efficient management capabilities in place. Also, comparing with that, I think that you must know that we have also been using a strategy of relying on our own capability and also the strength of the construction in terms of assistance and also equipment. So we are going to announce that result later. By having the in-house built equipment, we are able to increase our efficiency and also productivity at the same time.

Now we're going to have the next question, [ Lisa Lee ] from [ Blackhead ] Securities.

This is [ Lisa ]. I have 2-plus questions about market shares. I don't know whether we are able to see the total market share of Q4 in Southeast Asia market. And also, previously, you have already mentioned that in Southeast market, you are able to increase the market share very quickly. So we would like to ask you that one of -- it is the case that it's quite okay for you to improve your market share if you focus on ASP. So what are the methods for you to reach the expectations of market share in the Southeast Asia market? So the second question is, do you have latest updates for us? It's the first week of 2025. Now we are about to have the spring festival in China. And what about the pricing now in China?

Okay. So thanks. For the very first question -- there are 2 parts to the first question. The first one is that still we are preparing for the data of the market share in the second half of '24. We're going to announce that later together with our financial data. So we expect to have a very good improvement. And second point is that as you have already mentioned. So on the market share, you also talked about ASP. So the question is that whether we are able to realize the parcel increase and also the total market increase by reducing ASP. Actually, by reducing ASP, you're able to get some of the business increase and parcel increase from the big e-commerce platform [indiscernible]. If you have very good capability and productivity and also the part of handling capability, you do not necessarily need to reduce ASP. So we need to have -- first of all, the overall price was quite competitive. And also, at the same time, we need to increase your capability of handling locally. These are very important also in Southeast Asia market. This is one of the biggest markets in the world, and we have a very strong capability for years there for the operator. And also now with new investments, we have a very clear [indiscernible] among our customers in Southeast Asia market. So this is important. I hope I answered your question.

Yes, no problem for that.

Okay. So the answer to the second part is about China market and in terms of the pricing in China. So it's just been several days in 2025. We don't have the data now available. Overall speaking, we have been in a similar performance versus our peers in China. So overall speaking, my understanding is that we want to have a [ clear ] growth in 2025 and maintain a similar pricing strategy. But still, we tapped a dynamic strategy. And also, we're going to perform our existing strategies as usual.

Next question is [indiscernible] from UBS.

So I have several questions from my end. First of all, we had an expectation for the growth of business in Southeast Asia and also China. So we want to clarify this data. The number of parcels increasing in Southeast Asia market, the major growth was attributable by some of the key account performance in Indonesia. And also, the second is the nonplatform parcels increasing, right? And for China market, you had actually the outperformance than the industry and also the increase of the reversing parcels, right? I'd like to clarify that.

Yes. So part of the reasons after that for the important customers, in 2023, we had an increase because one of the key account's performance in a certain region or certain country was impacted and posting a low base number in 2023. But as we have already introduced in our prepared remarks, that we still had other positive expectation of growth for the other segments. And also, my second is that apart from the reasons that you have mentioned in the Q for the major e-commerce platforms, customers have a very good growth in the peak season. So we have multiple customers that are growing at the same time that we attributed to this good growth in China market. And also for the China market, the overall picture is that the overall platform and also the overall network, quality is pretty good. And also, the handling capabilities are good. Also, the franchisees' operational capabilities are pretty good. And the point of service capability were improving. So these are also important reasons. Nonplatform parcels, of course, these were helpful. But still, we have to rely on our overall organic growth of our own capabilities. These are very important for us.

So for the Southeast Asia market, if you take a look at Shopee's performance, what is the percentage of the business as a percentage of the total? Was it growing quite steadily or flat performance?

As I have already mentioned that because of the requirements of our customers, we cannot give you the details from our customers. But what we could expect is that in Southeast Asia market, we are collaborating with multiple platforms and brands, [indiscernible] and also Shopee and also the other brands. Also, we are collaborating with [indiscernible] platforms and cross-border operators as well at the same time.

Another one is in China market, we have seen that for the reverse parcels, it is becoming more competitive. So at this stage, what about the situation versus the normal parcels?

First of all, for the reverse parcel, this is not accounting for a very good proportion of the total parcels. And my second is that the reverse parcels, actually, we can see that the competition is becoming more severe in recent quarters. And of course, we are able to give you the financial performance and also the guidance later this year.

All right. So another following question is that in terms of price increase, the volume was good in Q4. So we [indiscernible] you have the more robust and also more aggressive pricing strategies in Southeast Asia or it is still the same?

For Southeast Asia market in Q4, the business growth was very good. But still, in terms of pricing, we kept pretty much similar guidance, 5% to 10% of this base adjustment for the ASP. Actually, it was not because of the pricing strategy that we had a big volume increase because of -- but because of the peak season, some of our customers multiply were increasing. And they were having a very good promotional growth. So that was primarily due to the high performance during peak season.

All right. This is my last question, about the new markets. So the emerging and new markets, what about the situation now, especially Blibli? And what about the planning for that? Do you have any news that could be provided and updated?

All right. So update from last year, in a short period of time, we had the major impact from Brazil market. And also, from a macro standpoint, we had a little bit change of the cross-border policies. So it is more short term impacted. And also, at the same time, for some of the potential customers, we are preparing [ elaborations ]. Still, if you look into the future, all the platforms are actually preparing and planning quite actively. And now I think that we are doing some of the preparations, and it is expected that the cross-border platforms in new markets in 2025 will become also bigger.

Next question is from the [indiscernible].

Right. I have 2 minor questions. The first one is that as you have already introduced, for the nonplatform parcels, the business was increasing. And the Blibli now has become the second-largest partner. So we would like to know that in China market, what is the cost of parcel? And also in the future, because it is becoming small and smaller for the volume of the parcels and it is becoming a trend, so how do you expect that in the future for you? Second question is that in December, you can see that the other express delivery companies are adjusting their strategies. So in Guangzhou and also [indiscernible], what is about the accepted price for J&T Express?

Let me ask the question first -- let me answer the second question first. Actually, in November and December, our company had the adjustment on the price. So we had some of the advantages as well. Together with the other companies, overall speaking, we are just followers as we were followers on the profit margin and also the total volume of the parcels. And also, the overall profit margin is important for us. So we are not going to just close the other [indiscernible]. We want to increase the market share but still focusing on pretty good profit. And another question is about the key accounts. Sorry, could you please repeat the first question?

You can see that the volume of parcel for Blibli has actually quite increased. So I would like to know the weight cost per parcel.

So actually speaking, we have it higher than the average. So on average, it's [ 0 ] kilo for the peers, but we have the weight per parcel about more than a kilo. And actually, the average weight for us is pretty much quite stable without a very big kind of increase. And I think that is also relevant because of the structures of our customers and also some important [indiscernible].

Next question is from Guo Rachel from Nomura.

All right. So the question is about the Southeast Asia market. Could the management share with us that from the Shopee platform, how many parcels belong to you and also whether China is continuing in Q4. And if we exit Shopee in Southeast Asia market, what about the sources of the growth of the parcel number? Was it due to the parcel increase of existing platforms? Or you were talking about very strong performance of the parcels of the existing platforms? And also, do you expect some of the newcomers of any other platforms that could contribute to the business?

So I think that you have 2 questions, right? So the first question is about the percentage of Shopee and also the total mix of Shopee. Also, what about the in-house logistics of Shopee, right? First of all, we are not convenient to comment on our customers, but we think that the in-house logistics is still quite high. And the overall plan is that Shopee is going to be increasing that. And this is the plan that we have been observing right now. And the second question is this growth in Southeast Asia market and what about the sources of the growth. So we have actually both, I think. So first of all, we are attributable by the increasing of our customers' contribution, first of all. And also secondly, we have an increase in the total number of key accounts. Of course, because of the full mix from the key accounts is still quite low. And also, now we've been having the growth of the promotional seasons, especially 60%, and also the key accounts business are increasing quite steadily but not as far as the 60% of the total platform. So that's causing the results of the low mix of -- and this contribution from key accounts. But if you're talking about absolute number from key accounts, these were increasing quite big. And for several countries, they have the total increase. So not only we had the contribution from the -- also new customers for us but also in key accounts as well.

All right. Thank you very much. All right. So there is no further question from online. Now we are going to hand the call over to the management to give you the conclusion remark.

Thank you very much, everyone, for staying with us for this conference call. And we encourage everybody to stay tuned to the 2024 full year performance that we're going to be announcing in March of this year. Thank you very much, everyone.

Thank you. And you are now able to be disconnected. [Statements in English on this transcript were spoken by an interpreter present on the live call.]