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

Good day, and thank you for standing by. Welcome to the J&T Global Express First Half 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, [ Hai Bin Chen ], Director of Strategic Investment and Capital Markets. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to J&T Express First Half 2025 Earnings Conference Call. I'm [ Hai Bin Chen ], Director of Strategic Investment and Capital Markets. The company's results and our Investor Relations presentation was released earlier today, and are now available on the company's IR website at ir.jtexpress.com. Before we start the call, we would like to remind you that the company may include forward-looking statements which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of resources outside of J&T. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS. And with me J&T's Executive President, Steven Fan, Vice president, Charles Hou; and CFO, Dylan Tey. Our management will share strategy, operating highlights and financial performance for first half 2025. This will be followed by Q&A session. With that, let me turn the call over to Steven. Steven will read through his prepared remarks in Chinese before I translate for him in English.

[Foreign Language]

[Interpreted] Hello, everyone, and welcome to J&T Express 2025 Interim Results Presentation. On behalf of the company, I would like to extend our sincere gratitude for your long-standing attention and support. It's my great honor to present to you the operational and financial performance of the group for the first half of the year. Looking back at the past 6 months, the global economic environment remains compressed and volatile. Persistent geopolitical conflicts, uncertainties in international trade policies and evolving tariff regimes continue to post challenges to economic development across various countries. Despite these numerous external variables with clearer strategic positioning, efficient, operational execution and continuous network enhancements, we achieved significant growth in both scale and profitability in Southeast Asia and the New Markets, while also demonstrating resilience in navigating the intense competition in the Chinese markets. In the first half of 2025, the group's parcel volume reached 13.99 billion parcels, representing a year-on-year increase of 27%. Revenue reached USD 5.5 billion, representing a year-on-year increase of 13%, and the adjusted net profit was USD 160 million, representing a year-on-year increase of 147%. Now please allow me to provide an overview of the development of our operations in each region. Starting with the Southeast Asia market. In the first half of 2025. Our parcel volume in Southeast Asia reached 3.23 billion parcels, representing a year-on-year increase of 58%. Our market share reached 32.8%, representing a year-on-year increase of 5.4 percentage points, securing our position as the industry leader for the sixth consecutive year and gradually widening the gap with competitors. Our robust growth was primarily driven by the continued empowerment of Southeast Asia through cost reduction experience from China. Our cost per parcel in Southeast Asia decreased by 16.7% year-on-year, while service quality continued to improve. For instance, the average delivery time for parcel further decreased and is now under 2 days in Southeast Asia, with continued decline in lost parcel rate and damaged parcel rate. We show the benefits of our cost reduction with customers maintaining a reasonable profit margin level. That strategy further deepened our cooperation and mutual trust with customers, driving parcel volume growth and fully demonstrating the virtuous cycle brought by economic of scale and operational refinements. Looking ahead, we will focus on 2 core strategies: first, continuous cost reduction. As cost reduction method in China continue to evolve, we will further learn from China's automation and digital management experience to persistently drive down cost in Southeast Asia. Second, vigorous developing non-ecommerce platform customers, including small and medium-sized sellers on social media, branded customers, retailers and individual customers. These customers offer higher profit margins and will further optimize our customer structure and enhance profitability. Next, the Chinese market. In the first half of 2025, our parcel volume in China reached 10.6 billion parcels, representing a year-on-year increase of 20% with market share up by 0.1 percentage point year-on-year to 11.1%. Since the second half -- second quarter of the year, price competition in China express delivery industry has been exceptionally intense with industry price continues to decline. We dynamically adjusted prices according to regional market competition to maintain relative stability in market share. In the first half of the year, our revenue per parcel decreased by approximately RMB 0.3 year-on-year, but our cost of parcel decreased by over RMB 0.2 year-on-year. Specifically, transportation and sorting cost per parcel decreased by approximately RMB 0.13 year-on-year, coupled with effective expense control, which should reduce expense per parcel by RMB 0.04 year-on-year, partially offsetting the adverse impact of price decline. From an operational perspective, despite the challenging external environment, the Chinese market remained profitable, demonstrating strong operational resilience, while stabilizing our core business, we actively expand high-value individual parcels and reverse logistics parcel business. Currently, individual parcels and reverse logistics parcels average 4 million parcels per day, representing a year-on-year increase of 60%, accounting for 7% of total parcel volume. To promote the development of individual parcels and reverse logistics parcels business, we implement a series of measures such as first, encouraging network partners to establish service stations to enhance control over last mile services and customer reach; second, increasing the proportion of direct sorting and delivery by optimizing delivery route allowing carriers more time to develop individual customers, actively expanding cloud warehouse service capabilities to provide customers with one-stop solutions, including returns, quality inspection and delivery. Our cloud warehouse reverse processing service can save customers over 40% of the work time, significantly enhancing customer experience and loyalty. Finally, the New Market. In the first half of 2025, our business in the New Markets reached a significant turning point. Parcel volume reached 170 million parcels, representing a year-on-year increase of 22%. With an increase of market share of 6.2%, we not only reached steady growth in parcel volume, but also achieved positive EBITDA for the first time. Such major turnarounds was primarily attributable to our successful replication of China's cost reduction experience in the New Markets, including investments in automated sorting equipment, optimization of routing planning and improvements in terminal pickup and delivery efficiency. In the second quarter, with new e-commerce customers entry in Latin American market and our cooperation with the largest local e-commerce platform, business growth in Latin America has noticeably rebounded. We believe that with J&T's strong local network operation capabilities, deep cooperation and trust with local e-commerce platform, the Latin American market is expected to resume rapid growth in the coming quarters becoming an engine for J&T's global growth. We are confident about the future growth of potential of the New Markets. Looking ahead, we will continue to invest in our network deepening the empowerment of overseas operations through China's experience and continuously optimize end-to-end operational efficiency and customer experience. We firmly believe that only by adhering to long-term vision and doing a difficulty yet right thing, can we continue to create value in a seriously competitive global express delivery industry and deliver returns to every investor and partner who trust and support J&T. The year 2025 marks the tenth anniversary of J&T's establishment, a significant milestone. Taking this interim performance as a new starting point and remaining true to our original aspiration, we will forge ahead and continue to support ourselves to embrace an even bright future for J&T. Thank you again for the support. Next, I will hand over to our CFO, Dylan, to walk you through the financial details of this interim performance. Thank you all.

Thank you, Steven. Thank you, [ Hai Bin ]1812. Hi, everyone. Thank you all of you for joining the call again today. I will take you through our financial highlights. Before I start, please note that unless specifically mentioned, all the figures are in U.S. dollars and percentage changes are on a year-on-year basis. Detailed financials, including our financial performance metrics, unit economics, cash flow and capital expenditures are available on our IR website. Here, I will only focus on the key highlights. For J&T Global Express Group overall, we are pleased to report that our total revenue increased by 13.1% year-on-year from USD 4.9 billion in the first half of 2024 to USD 5.5 billion in first half of 2025. Core express delivery revenue grew by 12.7% over the same period from USD 4.7 billion to USD 5.3 billion. This performance was primarily driven by the parcel volume growth across the 13 countries in which we operate. We have captured opportunities presented by the globalization of e-commerce with revenue from Southeast Asia and New Markets, now accounting for 43% of our total revenue. Gross profit reached USD 539 million in the first half remaining stable compared to the prior year period. However, the gross margin -- the gross profit margin declined 11% -- from 11% to 9.8% due to the intensive competitive pressures in the China market. Our total adjusted EBIT for the group increased by 65.4% year-on-year from USD 118 million in the first half of 2024 to USD 196 million in the first half of 2025 largely attributable to the strong profit contribution in Southeast Asia and our first breakeven in new markets, which in combined, more than offset the China market segment decline. Adjusted net profit also showed a significant improvement, reaching USD 156 million in the first half of 2025, which is a 147% increase from USD 63 million last year first half. Next, I will present our segment results. In Southeast Asia, supported by the strong volume growth highlighted by Steven, our revenue increased by 29.6% year-on-year from USD 1.5 billion in the first half of '24 to USD 2 billion in the first half of '25. Gross profit reached USD 351 million in the first half compared to USD 287 million in the same period last year. Adjusted EBIT amounted to USD 235 million, which is a year-on-year increase of 74% in the first half. As you can see, we have achieved a healthy and sustainable level of profitability in the region with adjusted EBIT margin improving from 8.9% in the first half of 2024 to 11.9% in the first half of 2025, thanks in part to the growing contribution of the non-e-commerce platform parcels. As an independent e-commerce enabler with flexible pricing, we continue to benefit from growth across the e-commerce platforms. All at the same time, we are actively expanding our customer base to include the non-e-commerce customers by leveraging our established network and quality services. Furthermore, we are continuously reducing costs by capitalizing on economy of scale and applying operational expertise from China to Southeast Asia. So this approach enhances our unit economics and allow us to pass on the cost savings to our customers, thereby strengthening our market position. Next, let's move to China. In China, the express delivery market experienced intense price competition during the period. Amidst this pressure, we continue to optimize our customer mix and implement more refined operational management. These initiatives helped partially to offset the top line pressure and sustain our profit resilience. In the first half of 2025, revenue grew by 4.6% year-on-year to USD 3.1 billion compared to the first half of 2024. Revenue per parcel in China was $0.30, down from $0.34 in the same period last year, which is in line with the persistent industry-wide pricing pressures. In response to competition, we dynamically adjusted pricing across different regions to maintain our competitiveness, while also focused on attracting higher-quality customers. At the same time, we continue to work on our cost per parcel, which decreased from $0.32 in the first half of 2024 to $0.28 in the first half of 2025. This is driven by the improved operational efficiency, enhanced network stability and ongoing capacity investments as highlighted earlier by Steven. Key initiatives included expanding our self-owned line haul fleet and increase automation in our sorting centers and our networks. Nevertheless, the extent of the cost reduction was insufficient to offset the price decline, which is resulting in the year-on-year decrease in our EBIT per parcel. As a result, the adjusted EBIT was USD 13 million in the first half of 2025, a decrease of 78% from USD 60 million in the first half of 2024. Next, let's move to our New Segments. For New Segments, our revenue increased by 24.3% year-on-year from USD 292 million in first half of 2024 to USD 362 million in the first half of 2025, mainly driven by the growth in the parcel volume. We're happy to report that our New Markets achieved adjusted EBITDA breakeven for the first time indicating that the economy of scales are beginning to materialize. We further -- we expect further improvement in unit economics going forward. Adjusted EBITDA reached USD 1.6 million in the first half of 2025 compared to a loss of USD 7.8 million in the first half of 2024, with margin improvement from minus 2.7% to 0.4% positive. To support this growth, we expanded our network capacity during the period by investing in automated sorting equipments, we added new outlets, and we also continue to increase our line haul fleet. Last but not least, let's talk about our cross-border business. We are now exclusively focused on just the B2B sector, primarily in the international freight forwarding. Although this is a modest and stable segment, we maintained this presence to stay engaged in the cross-border landscape. Consequently, revenue in the first half of 2025 was USD 29 million, down 43% year-on-year from USD 52 million in the first half of 2024. We delivered a positive adjusted EBIT of USD 2.5 million in 2025 despite this decrease, which is a significant improvement compared to the loss of USD 30 million last year as we refine our business. Finally, let me return to our consolidated numbers. As a result of the factors outlined above and the combination of what I said, our adjusted net profit reached USD 156 million in the first half of 2025, representing a 147.1% increase from USD 63 million in the first half of last year. Total net profit for the period was USD 89 million, which is up 186% from USD 31 million last year. Moving to the cash flow. So I think we -- as a group, we have maintained strong cash flow numbers. We maintained a strong cash flow. The net cash flow from our operating activities amounted to USD 421 million in the first half of 2025, which is an increase of 21.8%. [Technical Difficulty]

Please standby, your conference will resume shortly.

Can you hear us?

Please continue, we can hear you now.

Okay. So as I was saying, after deducting cash -- capital expenditure, our free cash flow reached USD 192 million, which underscores our ability to maintain healthy cash generations amidst our rapid business expansion. As of 30th June 2025, we maintained strong cash balance with our total cash, cash equivalents and restricted cash and investments amounting to USD 1.7 billion. This concludes our prepared remarks. Operator, this concludes our prepared remarks.

[Operator Instructions] We will now take the first question. From the line of Brian Gong from Citi.

[Foreign Language] I will translate myself. Congratulations on solid earnings. I have two questions. First one is, after domestic policy, there has been price hike in a few regions. Can management share yourselves how the policy can help -- how does the policy help our sequential improvement on earnings ahead and our overseas parcel volume has performed quite decently, especially for Southeast Asia. For Latin America, actually, TikTok Shop has been there for a while and Temu seems to have performed quite well. So how does management think about parcel volume and the financial performance ahead.

[Foreign Language]

[Interpreted] I will -- yes, this is Dylan. Thanks, Brian. I will translate for Charles. Thank you for your question. I think your first question is about the anti-involution and the pricing. I think since -- so Charles was saying that since July, I think the State Post Bureau has been actively promoting anti-involution policy. So currently, we have -- we have observed varying degrees of price recovery in provinces such as Guangdong, Zhejiang and Fujian. And we're also seeing other provinces actively engaged in the price negotiations. So the industry competition has become more rationale in his view, which is also conducive in high-quality developments in the long run. However, I think he mentioned that this is likely going to be implement in phases and the exact impact of these changes on our results still need to be observed. As a company, we will continue to continuously upgrade our network structure and also improve our service quality. So Brian, this is Charles answer to your first question.

[Foreign Language]

[Interpreted] Okay. So Brian, I think the second question is about our growth perspective of our Latin American market. So Charles is saying that in the first half of 2025, we have achieved a parcel volume increase of 22% year-on-year in our new markets. This is based out of the deepening collaboration with some of our existing customers, but also as well as establishing a new partnership with new key players such as TikTok and Mercado Libre. And I think we -- as you heard, we have successfully achieved adjusted EBITDA breakeven, which is going to lay a strong foundation for our future business development in the Latin America market. So you further commented that the Latin American market is also a very -- is developing and growing very quickly with major platforms continue to increase their investments in the region. And J&T, we will maintain our strategic position as a third-party logistics provider, providing high-value express services to help all our clients to better serve merchants, consumers and others. Since the second quarter, we have also observed a noticeable increase in our parcel volume growth in Latin America. We are very optimistic and confident that the region is able to grow further in the coming quarters, and it will serve as another key growth engine for J&T's global expansion. Yes. Brian, so I hope we answered your questions?

[Foreign Language]

We will now take the next question from the line of Fan Tso from Bank of America.

[Foreign Language] Let me translate myself. I have two questions. First one, could you provide a latest update and outlook for the non-e-commerce platform businesses in the Southeast Asia. And second, just wanted check whether the operational capacity in Southeast Asia, whether it is sufficient to cope with the strong volume growth year-to-date and whether we need to accelerate CapEx investment?

Thank you, Fan, for asking. I think Dylan can take that question.

Yes, thanks for the two questions. The first question is about -- you asked about the non-platform -- non-e-commerce parcel volume in Southeast Asia. Short answer is that we continue to actively develop -- continue to develop this customers group, including social e-commerce and also key accounts. While the absolute contribution from these customers have increased. Their growth rate is behind -- lags behind those of the e-commerce parcel because the e-commerce parcels are growing a lot faster, right? So as a result, I think our non-e-commerce business accounts for less than 10% right now in our Southeast Asia total parcel. Okay. However, from a profit contribution perspective, the non-e-commerce parcels have higher margins and the contribution to the overall margins is steadily increasing. In fact, the profit contribution for this segment significantly exceeds the volume share. Yes. So I think building on, I think we talked about this a lot of times. I think building on the strong non-e-commerce customers require a sustained effort over time. At J&T, we'll continue to expand our non-e-commerce segment as a long-term and strategic focus for our business in Southeast Asia. And then I think your second question is about -- let me see. Okay, the capacity in Southeast Asia, right? So yes, I think we have maintained very frequent -- as you know, we plan our capacity by talking frequently with our -- especially our e-commerce customers because they make up a big chunk of our capacity. So we talk to them very frequently and about their needs and their product -- their needs in the coming peak or the next certain time frame. So based on those communications, we will update our volume forecast and proactively carry out capacity upgrades in advance of time. During the peak of Ramadan in the first quarter this year, our daily volume exceeded 27 million parcels, right? And we didn't have any capacity-related issue. So as you can see from our disclosed quarterly operational data, I think we added 1 extra sorting centers in Southeast Asia, precisely to expand our capacity expansion efforts. I would say, at this moment, our daily capacity in the region, we now comfortably can handle more than 30 million parcels a day, which fully positions us to handle the upcoming peak during the fourth quarter shopping season, especially in the second half, right? I think -- but it's also just on the as a side note, right? So I think our capacity in Southeast Asia is spread across multiple countries. And we don't evaluate the overall utilization based on a single aggregation metrics. But overall, I would say our capacity is at a very healthy level. And also, given the rapid expansion of our parcel volume, we will expect the demand of the CapEx continue to build on our capacity gradually quickly as well, yes. So we'll continue to upgrade and continue to expand our capacity to make sure that we can meet our customers' needs, right? Last but not least, I will -- I think I would just add. Capacity, one of the things that we have done, I think we talked about this a lot is we continue to invest significantly in the automation equipment and our fleet to make sure that while we increase the capacity, another very important factor is the cost, the unit cost. So are we driving down our unit cost? Yes. So we are very active on that and so we'll continue to do this.

We will now take the next question from the line of [ Hu Junling ] from [ Changjiang Securities ].

[Foreign Language] I'll translate myself. I have two main questions. The first one on the domestic front, what is potential for cost reduction and efficiency improvement in the company? How do you view the -- current anti-involution momentum and policy sustainability. The second, what are the growth expectations and the market share expansion spends in the Southeast Asia? Are there any plans to enter new countries in terms of our market expansion?

Thank you for asking. I think Charles can take the two questions.

[Foreign Language]

[Interpreted] Let me -- let me try and see whether I capture everything, okay. So I think Charles was saying that as everybody know, we entered the Chinese market in March 2020. Over the last 5 years, J&T -- we have tried to benchmark ourselves against our -- the industry leaders here, our peers who have been operating in this 30-year industry in China. I think we try to actively learn the best practices we can and so that we can really drive down our costs. But I think as our team continued to execute its strength, we will -- we have optimized our network. And as a result, in the first half of 2025, our transport and sorting cost per parcel has decreased to RMB 0.70 down from -- down by RMB 0.13 year-on-year, narrowing the gap with the leading peers. Also, he mentioned that our transportation costs per parcel is around 40 -- dragged down to around RMB 0.40 per parcel, but still behind our top players by around RMB 0.03. Sorting costs, on the other hand, per parcel, now we are around RMB 0.30. We are also behind our peers by about RMB 0.03 to RMB 0.04, right? So that's -- that's the cost side. And I think as -- and he also mentioned that we have a very clear goals, and we have -- we obviously want to reduce this cost gap further. We'll continue to do benchmarking and we continue to benchmark how we do our business and against our -- to try to learn from the industry leaders here. There are about 4 fronts that I think you will -- that we continue to -- that will drive the 4 directions. One is on the transport front. So the transportation front, we continue to expand our fleet size. We will better coordinate how to balance the self -- our sell fleet, our own fleet as well as a third-party resources and also increase the loading rates and also try to use the higher -- more higher proportion of high-capacity vehicles to improve our logistic efficiencies. So that's the first one. Secondly, I think you talked about the sorting. I think the sorting -- so we continue to deploy more automated equipment. We will continue to train our operators better through trainings and other measures. And so that's the second one. And the third one is the network. So the network is also very important. So as we continue to optimize the scale and density of our network, we will continue to drive down -- sorry, drive up the investment in the automated equipment at our network, right? Because at this scale, we need to continue to improve on that. With that, our -- he commented that the network partners' operating service qualities as well as the consistency has improved significantly over time, right? Last but not least, you mentioned that we will continue to invest in digitalization and the smart automations particularly in our industry. We continue to adopt these new technologies to continue to drive down the cost. So we will continue to do all these things across the different parts of our value chain to make sure that we can break down the cost. So I think his final remark, I thought he finished, but he's talking about anti-involution. So I think yes, we did observe some of the price recovery in some regions, but we think that -- but he thinks that more time is needed before we can really see how sustainable and how big the margin recovery can be because it also depends on the -- how this policy will be implemented across the geographies, yes. So that hopefully, hopefully, I covered the first question. Yes.

[Foreign Language]

[Interpreted] Okay. For the second question, yes. The second question is about the growth rates of Southeast Asia and also whether we have plans to open a new market. So Charles was commenting that I think the according to the industry reports, I think we also published that. The e-commerce market in Southeast Asia is expected to grow very quickly at maybe CAGR of 10%, 15% between 2025 to 2029. So it indicates that the e-commerce and delivery sectors in this region will continue to enjoy the high growth, right? So I think as we continue to adopt our -- or replicate our experience from China into the region, we hope that we can continue to increase further our market share. We can continue to increase our quality, reduce our costs and we continue to enhance our market leadership in the region, right? And he also, secondly, he mentioned that Steven said -- he echoed what Steven said earlier, that this is the 10-year, very significant year J&T [Technical Difficulty]

Please stand by, your conference will resume shortly.

Can you hear us?

Yes, we can hear you now. Thank you. Please continue.

Apologies guys. So yes, just final thing about -- so as we cross the 10-year mark, so Charles was commenting that we continue to evaluate potential markets across the globe for feasibilities, for suitable timing, et cetera. So I think as soon as we have something concrete, we will announce it to all of you, yes. Hopefully, that answers your question. The second question? Can you guys hear us?

Yes, we can hear you.

Okay. We answered the second question.

We will now take the next question from the line of Gangxian Liu from CICC.

[Foreign Language] So let me translate for myself. Congratulate on the strong growth. I have two questions. The first one is about Southeast Asia on the unit economic guidance about unit costs. And for the units -- for the ASP, is there any principle or baseline for us to balance our parcel volume growth and the drop in our ASP. For example, are we anchoring on any kind of metrics, for example, margins or unit profit? And so this will help us on the modeling and the forecast? And my second question is about the franchise model adoption in Southeast Asia. Can you share with us the company's status and if possible, any future expectations.

Thank you, Gangxian for asking. I think Dylan can take the two questions from you.

Okay. I will answer your two questions. Okay. I think the first question is on the UE, right, Southeast Asia UE. I think, as you know, we continue to -- we have -- for the last few years, our EBIT per parcel has been very stable. I think we try to balance the -- to balance our growth alongside our ASP strategy along with our cost reduction strategy, right? So as you know, we continue to be the leading player in the region. And in fact, we continue to expand our market share and we get cost advantage from this scale increase. In the meanwhile, we continue to share this cost benefit with our anchor e-commerce platform customers so that we can continue to stay very efficient to build the most efficient network that we can in Southeast Asia, right? On the cost front, I think our unit cost stands around USD 0.50. We think there is still a big room that we can further reduce, right? For example, I think as you can see, our parcel volume has increased 58% year-on-year. And we have -- we can greatly increase the utilization efficiencies of all our sorting centers, vehicles and outlets and drive down our costs, right? So as we continue to adopt those various cost strategies, I think we talked about this many times, we have continued to expand our own fleet. We continue to put in automated sorting equipment. We continue to optimize our network, we can continue to drive down those costs. And we think that there's still a lot of room for cost reduction. And all these efforts will help us to maintain a relatively stable per parcel profit going forward. That is -- this is our thinking. And then your second question is about, you call it the franchise, right, we call it a network partner, but doing the same thing, right? So you're asking how the network partners are implementing in the other -- across the non-China markets. So I think it's twofold I think in the -- so we actually -- the short answer to answer your question is that we are actually implementing this network partners model across Southeast Asia and even our new markets, right? But we will be very careful with that. We will adapt it very carefully to the local -- depending on the local situations and also how -- and based on our local insights. So I think the most important thing that we think is selecting and developing the very high potential and good quality network partners to join our network, right? So maybe just give you a sense. I think currently, I think our -- the network partners across Southeast Asia, we have about 30% of our network that is run by our network partners, 30%. And Mexico and Brazil, we are also steadily replicating this model into Latin America, Mexico and Brazil, right? So for us, from our perspective, the -- it's very important that the network partners continue to demonstrate the ability to improve efficiencies and reduce costs alongside with us. Because once we absorb the network partners model, it's not just our cost at our centers, our line haul, we also need them to manage the cost at the delivery end as well, right? So we also -- that's one area we look at them. Second thing, we also look at whether they can do business development because the beauty of these network partners is they are able to bring in new business, because they're highly incentivized to work like us, to think like us as entrepreneurial company. So we look at how they're bringing new customers, how they're bringing growth into our network, right? Yes, I think overall, I think we are -- we believe that this is one of the network partner strategy. I think we're only 30% there in Southeast Asia. And I think we will continue to use this to adopt it across our network to continue to lower our costs for your first question earlier on. Okay, Gangxian?

That was very helpful.

We will now take the last question. From the line of Aaron Luo from UBS.

[Foreign Language] So let me translate myself. First of all, congrats for the strong H1 results. And I have two questions. The first one is about your recent cooperation with Mercado Libre. I mean now from the recent news and you also just mentioned earlier, so just could you please share a bit more of the background and the current progress on this? This is the first question. The second one is about AI technologies. We know that the market has a lot of hope that development AI, including the unmanned delivery vehicles that could bring bigger improvement in logistic network efficiency. So just curious about what kind of initiatives you have taken and your future plans for further increasing AI technologies and also unmanned delivery vehicles.

[Foreign Language] Thank you for asking. I think Steven will take your questions.

[Foreign Language]

[Interpreted] So I'll translate for Steven, right? So he is saying that the Mercado Libre, as you know, that Mercado is the largest e-commerce platform in Latin America. The average order value is higher and they also have relied historically on their own in-house logistics systems. But in recent years, as the e-commerce competition intensified across the region, Mercado has lowered the free shipping cost to capture the lower tier market segments. This shift has increased the demand for the cost effective 3PL services like the one that we provide, right? So as you know, we continue to operate with Chinese excellence replicating also into this, and we have good success in replicating the Southeast Asia. So we continue to take all these abilities that we have and continue to replicate that into Latin America by offering them high-value express delivery solutions, right? So as we continue to benefit from the economy of scale and also optimize our network, we will continue to further our cost -- or further -- we have room to further reduce our costs as well. While we continue to enhance quality and also our competitiveness, right? Right now, so Steven commented that the Mercado Libre's volume is still relatively very small just as -- and it's also a very small share of their total business. So -- but the collaboration has progressed smoothly, and we see a significant potential, and we look forward for further expand this relationship with them.

[Foreign Language]

[Interpreted] Okay. So for the second question about smart logistics. So I think Steven mentioned that -- so I think we continue to focus on deploying -- to adopt these advanced technologies that we can get from China into the different markets, the Southeast Asian markets and New Markets, but of course, in varying degrees, right? So first, but let's talk about China first. So I think you first start off talking about China. He said that we first pilot -- we started piloting the autonomous delivery vehicles, I think back in 2023. And some of these network partners have received a very significant cost savings benefit from this. And the -- but the way we work is the -- the network partners are responsible for procuring those vehicles independently, and we will continue to provide encouraging support policies to help them to do so. So to date, I think we have deployed over 900 autonomous delivery vehicles. And this has greatly enhanced the last mile delivery network -- efficiency in our network, right? And going forward, we also further support our network partners to continue to adopt and promote more usage of this according to the operational needs. Then he commented about Southeast Asia and New Markets. But that's not -- probably not on the autonomous front, I think he mentioned about equipment, we will try to localize the proven auto sorters and the equipments and operating system from China into Southeast Asia and New Markets. At the end of June, we have deployed 57 automated sorting equipments in Southeast Asia. We have deployed 10 in the New Markets and substantially improved the efficiencies in these markets, these places. We continue to see strong potential to use different technologies into different regions. We'll continue to stay robust and also open in applying all these innovative applications and technologies so that we can continue to maintain our technology leadership and our cost leadership and our market leadership, right.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you, everyone. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]