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

Hello. Good day. Welcome to J&T Express Q1 2025 Business Performance Conference Call. [Operator Instructions] I'll just remind you that we're providing a recording. Now I'll give the first floor to [ Sylvia ].

Hello. Good day, everyone. Welcome to J&T Express Q1 2025 Business Performance Conference Call. This is [ Sylvia. ] The meeting materials have already been distributed via e-mail and uploaded to our IR website. Also, please, I would like to introduce the management. We have Dylan, CFO of J&T Express; and also, we have Simon, Head of Investment and Financing. Today's session, we have 2 parts. First of all, Simon will provide an overview of our business performance for the first quarter of 2025. Following that, we are going to open up the floor to questions, during which the management team will address your questions and engage in discussions. Now I'll give the call over to Simon.

Hello, this is Simon. Now I will be introducing to you the performance in Q1 of 2025. The group's total parcel volume in Q1 reached 6.6 billion, representing year-on-year growth of 31%. The growth was primarily driven by the operations in Southeast Asia and China. First of all, Southeast Asia, in Q1, region's parcels volume reached 1.5 billion, reflecting 50% year-on-year growth. The growth was primarily attributable to the staggered timing of Ramadan promotions in Indonesia and Malaysia. In 2025, Ramadan occurred earlier, which is from March 1 to 29 compared to 2024, which is March 9 to April 7. And also during this 2025 Ramadan period, average daily volume rose to 20.1 million parcels, up 58% year-on-year from 12.73 million in 2024. And also, our peak daily volume in 2025 during Ramadan period reached 27.48 million parcels, marking a 63% increase over the 2024 peak of 16.8 million. The key e-commerce platforms such as TikTok and Temu continue to exhibit robust growth in 2025 and our company has grown in tandem with these partners. Also, we have been actively developing the non-e-commerce business and also the social commerce, large parcels and large corporate accounts -- only 10% of the total volume. Furthermore, in China. In Q1, we have been having 5 billion parcels in China, representing 27% year-on-year growth. This growth was driven by the following key factors. Outpacing industrial growth. The express delivery sector maintained robust expansion with industry-wide parcel volume growth by 22.4% year-on-year in January and February 2025, and we continue to deliver growth rates exceeding the industry average. Service quality has been significantly enhanced. Logistics performance metrics on major e-commerce platforms ranked among the top of the franchise-based operators. And also the operational excellence coupled with the elevated brand perception among premium and also those important customers has translated into high-quality parcel volume growth. Also we have multiple platform expanded at the same time. And also we increased the market share across core e-commerce platforms. At the same time, we have also a better quality and also a very good development of the proprietary endpoint network, and we are developing a lot of individual shipments. Finally, the emerging markets. We have recorded a parcel volume in Q1 of 77 million, reflecting 19% year-on-year growth. And also, this new market or emerging market has transitional phase from these new markets characterized by the business model adjustments by major e-commerce clients due to the cross-border policy changes and early-stage operations and newly launched sites by some of the e-commerce partners. So as these factors temporarily constrained growth visibly for the quarter, but we do have actually the confidence that we're going to reach the potential. And also we are going to have a flat EBITDA this year. So this is pretty much about the volume in Q1 of 2025. And I think that everybody is very much interested to understand the financial performance of 2025 Q1. But as a standard practice, the company only provides formal financial disclosures on a semiannual and annual basis. So we are not issuing any updated quarterly guidance at this time, and as the previous disclosed guidance will remain the same. Thank you.

Thank you, everyone. This is the introduction of the performance in Q1 2025, and now we are going to open up the floor to Q&A in the Chinese line. [Operator Instructions]. The very first question is from Liu Gangxian from CICC.

Congratulations on a very good performance in Q1. I have 2 questions. The first one is that I would like to know the major drivers behind the growth in Southeast Asian markets. We know that for the Southeast Asian market, we don't have a statistic from a third-party platform, but we would like to know that from a statistic standpoint, is it because of the overall industrial growth? Or is it because of your key focus and also investments in those key markets like Southeast Asia by getting more market share there? And also, in terms of the [ VAP ] in Southeast Asia, do you think that the overall guidance remains the same and unchanged? This is my first question. So we would like to answer this, and then we're going to give you the second question.

So now I'll answer the very first question. As you have mentioned, the major drivers behind the growth in Southeast Asian market. So you know that in Indonesia and also Malaysia, we've got also the impact for the Ramadan campaign because in 2025, actually, we've got an earlier Ramadan campaign than 2024. So during 2024, you could see that aside from the 9th of March to 1st of April, and also in 2025, we had earlier dates on that. So there's an impact on that. And also, second of all, the major customers like TikTok and Temu, they had a very robust growth in 2025. And pretty much, we have been growing together with these fast-growing partners and customers. So you can see that for TikTok for instance, in Southeast Asian market, this year, I believe that they had a very good contribution to our overall growth. And third reason is that still, we are also developing the key accounts and also those other non e-commerce customers business and also parcels. So the absolute number of these businesses have been growing. So that's to say that now, we are optimizing our total business structure. Also you had a question about the overall growth of the industry and also our company's growth. So we had the statistics of the monthly growth of the business in the industry on average. And also we had about 17% to 20% of the growth for the industry average for this industry according to the third-party statistics. So the whole year growth in Southeast Asia will be -- remain the same as for the guidance that we have provided by the end of last year. No problem. And also for the ASP guidance. In Southeast Asian markets, which is a pretty much -- as for the leader e-commerce cross-border platform, we have a very good advantage and also the entitlement of the pricing in the Southeast Asian market. So in terms of the overall pricing in this year, we are going to maintain a guidance of a little bit decrease of the ASP. So that is to say that in terms of the overall ASP, I think that there is going to be 5% to 10% of the reduction happening this year. So this marks the answers to your first question.

So my second question is also about the Southeast Asian market. Now recently, we've been having tariffs and other policies that are geopolitical. So we would like to know that also, there is a big fluctuation of the ForEx rates in Southeast Asia as well. So I would like to know that whether there's any impact on your business in the Southeast Asian markets, given the background of a change in tariffs and volatile ForEx rate. And second question is that from the foreign exchange standpoint, whether there will be any impact to you from a finance and accounting standpoint?

All right. So this is Simon again. So with regards to your second question, which is about the impact of the tariff. And now the trade tariff war is still ongoing. And also now you could see that now we are paying attention to the timely response from Southeast Asian markets and also the gaming between China and also the United States. So we do not have an affirmative conclusion, but we have 2 opinions. First is that impact on the business model of J&T Express because you know that J&T Express is a global local network. So we are actually doing the final terminal delivery of each location. And also we might have the cross-border delivery or the other business, but we merely have any cross-border delivery business even within the countries in Southeast Asia. So be it it's the Southeast Asia to the U.S. or vice versa. In the future, there will be no direct impact because we merely have any cross-border parcel delivery because most of our business or all the businesses are actually coming from each and different locality. So the impact was quite limited. And my second answer is that about the indirect impact. So if this particular trade war is still going on -- an indirect impact on the overall growth of e-commerce platform business and also there's impact on the growth of the parcel volume. But actually, it's difficult for us to make that conclusion because from another standpoint, we already know that the e-commerce penetration is pretty much lower than that of China's, and also with -- we still have an irreversible trend of increase in parcel volume and also e-commerce penetration so especially during the downward trend. And also young population is in favor of the online shopping mall and this trend is irreversible. So while we have this trend continued, we believe that while we have a consumption downgrade happening and also the impact from the trade tariff business or issue, there will be an offset in between these two. So that's why we believe that the penetration is going to be growing quite rapidly in Southeast Asian market for the e-commerce business. So still, the second conclusion was quite limited in terms of impact. Also let me answer this question. So now we operate in 7 countries in Southeast Asian markets, and the major revenues were driven by the local currency used in those countries. And the overall cost was still calculated by the local currency. So from a certain standpoint, I believe that there is a little bit offset. But still, we do have the continuous profitability in Southeast Asia. So the major part of the impact will be on the profit. And also, second of all, we do have a legal and also legitimate arrangements on taxation and also other spendings. And at the same time, we have also arrangements of the cross-border transactions with our mother company. And this is going to be legitimately handed out by the controlled and the holding company. And we're going to have certain measures in lowering down the ForEx risk. Also with different commercial banks and also financial institutions, we've been arranging the ForEx trade and also arbitrage activities as well and hedging activities as well. So these are some of the countermeasures that we have.

Now we are welcoming the second question. We have Lu Sijia from Changjiang Securities.

Congrats on such a very strong growth momentum in 2025 Q1. We'd like to ask a question about China region. And there are 2 little questions. First is that we know that there is an enhanced price war in China. We would like to know that whether or not the guidance for China market will be updated. My second question is about the details because we know that the overall delivery fee has been reducing quite a lot. And also, as we have already mentioned that we've been having a lot of development on those delivery local sites. So we would like to know that whether or not you have any further information about this point. And also my third question is about the overall cost reduction. Also we know that the headquarters is reducing cost of about CNY 0.1. And also on the terminal side, what about the overall measures that you are going to take to reduce the overall cost to a further level?

Let me answer the very first question, which is about the price competition here in China and also whether or not we are going to update the overall guidance for China. Answer is that, no. We are still observing what's happening now and keep an eye on the overall competition and competitive landscape here in China. And if there is any update, we're going to timely notify everyone. Second question is about the delivery charge, right?

And also the proprietary endpoint service network. How do you think about the overall kind of arrangements? And can you share more details about this point?

So with regards to the delivery charge, as you have observed in the front line that all the other fast delivery companies have been having some changes and adjustments. We do have our countermeasures. As we have already mentioned that when the overall volume in China has not reached a 50 million to 60 million, we're going to have a very good management measures in place. And now we have been already exceeding the threshold of 60 million, and we have enough power to do so. Also in the beginning of this year, we are also trying our best to take some of the measures for the China market. And also we're going to have about the year-on-year growth of 80% for the individual parcel deliveries and also the reverse business. Also we had about 1.6 million business in Q1. So throughout the whole year in 2025 versus 2024, I think that versus the same period, we had even doubled this particular part of the business. And also the major part of the reason was due to the establishment of the proprietary endpoint service network. And also we are going to also take some of the other measures like fleets and some of the other measures like the counterparties that are using to reduce the overall cost. Also for the longer term, the overall objective is that we are going to enlarge the total volume and hopefully that we're going to increase over 20,000 endpoint service stations and to hopefully satisfy the needs of our customers and also finally reduce the overall cost of delivery charges and deliveries. So the final question is about the overall scope for cost reduction this year. So this year, we're going to have about CNY 0.1 difference in terms of the delivery cost. And also, this is pretty much on track. That's why we keep the guidance for China market unchanged.

The next question is from [indiscernible] from the West Securities.

This is [indiscernible] from West Securities. I have 2 quick questions. The first question is that Simon introduced in his presentation, he has mentioned the growth of the e-commerce platforms in Southeast Asia apart from TikTok. We would like to know that what is the growth momentum of Temu? And also for those service countries that Temu is on, whether there's any contribution from these countries that Temu is operating to your overall business?

Right. Thank you very much, [indiscernible] for this question. Actually, Temu has a very good contribution to our overall growth of the Southeast Asian market business, but still the other platforms are growing stronger. So I think that the other e-commerce platforms are going to be growing more obviously. So Temu is still taking a very little proportion out of our overall business in the Southeast Asia market.

All right, understood. And my second quick question is, in Q1, we have seen that for the partners and service network stations number has been reducing. So there are 2 little questions. So the decrease in number of partners, whether this is decided by the headquarters or the regional franchisee can actually decide whether or not they are able to cancel that particular service site. And also, we would like to know the reason for the cancellation. Is it because of nonprofit making so that particular service network sites has been canceled?

All right. So thank you for this question. Actually for this year in Q1 comparing with that of last year, as we have been seeing that we have been reducing 100 service network sites and also reducing 100 franchisees number. And this is something that we actively conducted by the China company because we want to have a sorting out and also reshuffling of this service station and also franchisees because we hope that the franchisees are able to deliver very wonderful business here in China. And if you're a good performer, you're able to cover more locations and sites with more strength. You're able to have those automated machines installed and the overall cost could be reduced. So this is actually an active campaign that we are doing. As you can see that the number of franchisees and also the service network number has been reducing also in the past years. This happened before.

And we have the next question. Aaron Luo from UBS.

First of all, congrats on such a wonderful performance in Q1 of 2025. I would have a very quick question. Shortly before, we noticed that we had adjustment on the collaborations with Shopee in certain regions. And some of the investors are quite paying a lot of attention to this. So we would like to know that whether there is any impact on the overall business performance and operation and whether there is any kind of a risk in the future? Also I would like to have another very quick question. We know that for the emerging markets in Q1, that overall speaking, you had a guidance of 25% on the overall growth in the emerging markets. But when the tariff is implemented, whether or not there is any impact on the emerging markets business? And how do you think about this?

All right. So let me answer this question. So first of all, about the particular overall announcement of Indonesia regarding Shopee in Indonesia. So actually, we had -- we are the biggest 3PL in the Southeast Asian market. So I think that according to the overall business volume in Indonesia, originally, it was very important, Shopee in Indonesia. And it is -- but still, it is actually taking a very little proportion out of our total volume in those countries in Southeast Asia. While we had the guidance for 2025, actually, at a very early stage, we already got notified -- notes from Shopee Indonesia. And before we actually conducted the guidance in 2025. So I have to respond that this impact is quite limited because we have already taken that into consideration. And also with regards to TikTok in Indonesia, it is actually growing quite rapidly. So we can see that the TikTok is also growing very fast continuously in 2025 in Indonesia. So I believe that TikTok's growth is able to offset partially this lost business of Shopee in Indonesia. And also, except for these big platforms' growth, we have also the other non-platform business are growing a lot, and total number of this non-platform business is actually 2x as that of the platform business. So this particular impact from Shopee Indonesia is quite limited. And also, still, we are keeping a very good collaboration continuously with Shopee in other countries, including the emerging markets as well. So overall speaking, the operation is quite stable. So I have to say that, please do not worry about this impact from this key account, Shopee in Indonesia. And your second question is about the overall growth momentum in those new and emerging markets. Actually, I believe that we maintained around 20% of the growth guidance in those newly opened markets. And why we had this precautious guidance in those newly opened markets because still, we believe that for those customers since last year, they have been adjusting their business models according to the changing policies of cross-border transaction and e-commerce. And also for some of the big sites like Latin America and Mexico, some of the operating sites were just operational shortly. So still, we believe that there is going to be a certain time before the final growth rapidly. And for Brazil and Mexico, for these 2 new markets, we have confidence that these 2 markets are going to fulfill our expectations for the full year of 2025 and also they're going to be reaching EBITDA breakeven in 2025. So this is our point of view of these newly operated markets.

Congratulations again on such a wonderful performance in 2025 Q1.

So we have [indiscernible] question, which is [indiscernible], please.

Hello, everyone. So we had already very thorough questions already asked, and I have 2 little quick questions. The first question is, we'd like to know that for Q1 and also in the forward-looking areas, how do you think about the overall change of ASP in different regions? Can you share a little bit more color on this? And also my second question is now for Q2 and Q3. What do you expect the ASP momentum? And also second, we'd like to know something about the kind of separations of the [ sporadic ] shipments or parcels versus the other kind of different types of parcels, returned goods parcels.

All right. So let me actually answer the question about the ASP. So we know that now we are in the reporting period, so we cannot talk to you about any financial figures, but I can provide some of the colors. First of all, we had expectations on the price competition this year. So [ ZTO ] is actually initiating, right, a certain player is actually initiating this price competition. And also, as you can see that the overall price reduction has also some impacts and pressures on the other players in this industry. And also this price impact, pricing competition impact started from the top all the way to the bottom ranked companies. So I think that when it's passing through the whole chain, when you get to the downstream of that particular chain, the impact is going to be very limited. So overall speaking, I believe that overall speaking, it is impacting on our overall business. But if we would like to provide an expectation, anticipation for the full year of 2025, it is very difficult for us to make such anticipation. We had an intensified price competition going on in the following quarters. But still, we are going to be very precautiously adjust our own ASP and price in the full year 2025. So we're going to take countermeasures and also we make the guidance unchanged. And also, let me answer the second question and also supplement the answer to the first question. I believe everyone is paying attention to the price. And also for China's price, we are still observing quite actively because actually, in China, the overall momentum is quite dynamic. So that's why I believe that it is very difficult for us to actually get a very clear and affirmative anticipations of the price. The only answer is that we're going to be actively take measures to overcome the difficulties and risks of the price competition in China. And also, second question, we have already updated the overall particular number of reverse plus [ sporadic ], and 3.5 million. So 1.7 million for the reverse parcels and 1.8 million for the [ sporadic ] parcels. And this has been growing a lot versus that of last year.

So we do not have any further questions now. Let's give the call back to management to give a conclusion.

Thank you. And sorry for a lot of technical glitches that happened during this earnings call. Of course, thank you very much for attending our conference call at early 8:30 a.m. in China time. Thank you for your continuous attention. Thank you for your time. And also on 20th of May, we're going to have the open day for investors in Indonesia, and it's the first time for us to have this open day for investors in Indonesia. Welcome everyone to participate.

Thank you very much, everyone. Now you may disconnect. [Statements in English on this transcript were spoken by an interpreter present on the live call.]