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

[Foreign Language]

Thank you, operator. Hello, everyone. Welcome to J&T Express 2026 Interim Results Conference Call. I'm Haibin Chen, Director of Strategic Investment and Capital Market Opportunity Express. The company's results and investor relations presentation were released earlier today, and now available on the company by our website at ir.jtexpress.com. Before we start the call, we would like to remind you that the call 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 the variety of sources outside of J&T. This presentation also contains 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. I have with me J&T Executive President, Stephen Fan; Vice President, Charles Hou; and CFO, Dylan Keong. Our management will share strategies, operating highlights and financial performance for the first half of 2026. This will be followed by a Q&A session. Please note that we have live slides showing through webcast at this time. With that, let me turn the call over to Steven. Steven will be through his prepared remarks in Chinese before I translate for him in English.

[Foreign Language]

Hello, everyone. Welcome to today's results briefing. On behalf of the company, I would like to express our sincere gratitude for your long-term attention and support. And I'm honored to report on the group's operational and financial performance for the last 6 months. In the first half of 2026, the company achieved 2 milestone [indiscernible]. The company achieved average daily parcel volume exceeding 100 million parcels in a single quarter for the first time, making it one of the very few express operations were capable of handling 100 million parcels on a normalized basis. Second, the revenue contribution from non-China markets increased to 50% for the first time, making that the company's vision of becoming one of the world's best express enterprises has entered a new stage of development. In the first half of 2026, the company delivered an outstanding growth performance with sustained and high-quality growth. The company presented a total of HKD 17.5 billion, representing a year-on-year increase of 10.1%. And the company's total revenue reached HKD 7.67 billion, representing a year-on-year increase of 35.5%. The company's global consolidated profitability continues to strengthen. We see adjusted net profit of USD 350 million, representing a year-on-year increase of 124.3%. As the proportion of parcel volume from non-China markets increase, the company achieved an adjusted EBIT to parcel of USD 0.25. The operating cash flow reached USD 640 million, representing a year-on-year increase of 15.9%. We observed that in the first half of 2026, the global e-commerce [indiscernible] market continued to present abundant opportunities in a market where the company currently operates annual parcel model per capita in Latin America is 18 parcels, 48 parcels in Southeast Asia compared with 149 parcels in China, indicating considerable growth headroom. To capture the opportunities arising from the globalization of common and logistics, in the first half of 2026, the company accelerated the transfer of China's advanced logistics experience to global markets through multiple dimensions, including global equipment deployment, motor enablement, talent proposition and AI-enabled cost efficiency and top and efficiency gains, continuously expanding and optimizing its efficient and stable global fulfillment network. Now I will present the development of [indiscernible] business by segment. First, Southeast Asia. In the first half of 2026, the company presents a total of 5.52 billion parcels in Southeast Asia, representing a year-on-year increase of 21.2%, achieving exciting growth performance, with market share further increasing to 38.1%, representing a year-on-year increase of 5.3 percentage points, maintaining a leading market position. The company continues to serve as a core partner for multiple mainstream e-commerce platform, including TikTok, Lazada, Temu and Shein, fully capturing the gross dividends from the e-commerce sector. The company is further upgrading its service systems across Southeast Asia. Firstly, actively expanding its full [indiscernible] warehouse services to provide customers with supply chain solutions at to different industry [indiscernible], thereby enhancing stickiness between platforms and merchants. Secondly, driving brand image upgrading and rolling out a star rating system for carriers to improve the shipping experience for non-platform customers. Thirdly, simultaneously advancing automation upgrades at shopping centers and service outlets to better meet customer needs for capacity, fulfillment efficiency and visibility. Second, China. In the first half of 2026, the company projected 1.62 billion parcels in China, representing a year-on-year increase of 9.6%, achieving growth above the industry average in a complex market environment, with market share increasing to 11.6%, representing a year-on-year increase of 0.5 percentage points. The company drives quality growth in China through refined operations strengthening the network foundation by discussing professional teams to deeply participate in a [indiscernible] management process of block mill network, so to enhance the overall network service level, extending deeper into industrial chain to provide special live solutions that better met the shipping needs of industry merchants and brand customers, increasing the proportion of technology elements in production and operation with the number of unmanned delivery vehicles deployed across the network significantly increased and AI applications such as AI customer service comprehensively upgraded. Finally, other market. In the first half of 2026, the company processed 360 million parcels in other markets, representing a year-on-year increase of 19.9% and with market share increased to 8.9%, representing a year-on-year increase of 2.7 percentage points. The company simultaneously different cooperation with global e-commerce platforms such as TikTok, Shein, Temu [indiscernible] as well as local e-commerce platforms such as [indiscernible]. The company is advancing expansion of network coverage in other markets. On the other hand, actively investing to book capacity to meet strong express demand. On the other hand, combining export of proven model with localized innovation to explore and accurate effectible last-mile fulfillment collaboration system suitable for different markets, achieving synergistic improvement in management efficiency and regional capability. Today marks the company's governance anniversary. Looking back, the company has delivered on its growth promise with sustained high quarter growth. Looking forward, we remain committed to reinforcing our global network infrastructure further leveraging China's proven experience to empower our worldwide aspirations and continuously optimizing our end-to-end operational efficiency and customer experience. We believe that only by persisting in doing the difficult by rating and by taking root and cultivating deeply in every market we serve, can J&T grow into a healthy and long lasting and enterprise. and reward the continued support of our investors. Thank you. Next, I would like to invite CFO, Dylan, to present the financial data for this interim results.

Thank you, Haibin. Thank you, Steven. Thank you all for joining today's conference call. Next, I would like to present the key financial highlights of the group. As always, please note that unless otherwise specified, all the figures are in U.S. dollars, and the percentage changes represent year-on-year changes. The group's detailed financials, unit economics, cash flow, capital expenditures, have all been disclosed on our investor relations website. Here, I will only briefly summarize the group's core performance highlights for the first half of 2026. Now looking at this page, overall, the group's revenue for the first half of 2026 increased from USD 5.5 billion in the same period of 2025 to $7.7 billion this year, representing a year-on-year increase of 39.5%. Core express delivery revenue increased from $5.3 billion to $7.5 billion, representing a year-on-year increase of 39.6%. The core driver of the growth was the rapid growth in our parcel volume from non-China markets driving the related revenue contribution of 43% in the first half of 2025 to 50% in the first half of 2026, representing a year-on-year increase of 7 percentage points. This is the first time that our non-China markets revenue have reached this historical high of 50%. In terms of regions, the China -- revenue from the China segment in the first half increased from $3.1 billion in the same period of 2025 to $3.8 billion this year, representing a year-on-year increase of 22.4%. Revenue from Southeast Asia segment in the first half of 2026 increased from $2 billion last year to $3 billion this year, representing a year-on-year increase of 53.8%. Revenue from other market segment in the first half of 2026 increased from $0.36 billion to $0.72 billion this year, representing a year-on-year increase of 99.3%. Next, turning into our profitability. The group continues to advance its strategic upgrade, where we continue to empower our regional business development and centrally coordinate resource allocation and implement centralized management and resource sharing with the aim to unlock economies of scale and enhanced across regional synergy. So accordingly, profitability related metrics have been adjusted to be disclosed at a group level to objectively reflect the overall competitiveness of the group's resources. The group's profitability continued to strengthen in the first half of 2026. Gross profit was $1.01 billion, representing a year-on-year increase of 88.4%, with a gross margin rising from 9.8% to 13.2%, representing a year-on-year increase of 3.4 percentage points. Next, on adjusted EBIT. Our adjusted EBIT reached $430 million representing a year-on-year increase of 121.7% with adjusted EBIT margin of 5.7%, which is representing a year-on-year increase of 2.1 percentage points compared to last year. Finally, our adjusted net profit. Our adjusted net profit was $350 million for the first half of this year, which represents a year-on-year increase of 124.3%, with adjusted net profit margin of 4.6%, representing a year-on-year increase of 1.7 percentage points. Next, turning to our [indiscernible], In the first half of 2026, our group revenue per parcel was $0.44, representing a year-on-year increase of 11.5%. Our adjusted EBIT per parcel was USD 0.025 representing a year-on-year increase of $0.11 or 77.2%. The China market saw more rational competition under the anti-evolution policy while the rapid growth in the parcel volume from our non-China regions with higher profitability contributed to the continued improvement in the group's per parcel profitability in the first half of 2026. Turning to our balance sheet. In the first half of 2026, our net cash flows from operating activities was $640 million, which represented a year-on-year increase of 50.9% compared to USD 420 million in the same period of 2025. This reflects our significant improvement in our cash generation capability. As of June 30, 2026, the group maintained a strong cash position with our cash and cash equivalents, restricted cash and bank wealth management products totaled USD 2.91 billion. This represents a year-on-year increase of 64.2% from USD 1.77 billion in the same period last year, which also included a $1.25 billion in the bank wealth management products. Finally, I would like to turn our commitment to shareholders' return. The company has always placed great emphasis on shareholders' return. In the first half of 2026, we completed repurchase of 99.32 million shares, and we canceled 115 million shares on August 12, 2026. On June 25th of this year, we also announced that the Board has approved new share buyback, increasing our net -- increasing our repurchase amount to HKD 2 billion. We continue to deliver shareholder returns at the back of our strong financial performance. So all in all, the above are some of the key financial highlights of the group for the period. Thank you for your attention. I'll hand back to Haibin.

Now we can open the question to the analysts.

[Operator Instructions] Our first question comes from the line of Lu Sijia of Changjiang.

[Foreign Language] Let me translate myself. Congratulations on very strong performance in the first half. My question is on Southeastern Asia. We continue to see very strong test volume growth in the first half, and the market is quite focused on the success [indiscernible] on this growth. How should we think about the pace of rolling growth trajectory in the Southeast Asia going forward?

[Foreign Language]

I'll translate for Charles. Your question is about Southeast Asia -- the future growth potential. So Charles was saying that we continue to believe that the e-commerce and express delivery industry in Southeast Asia will continue to remain in a very rapid growth trajectory. And with our e-commerce platforms -- with e-commerce platforms we are continuing to invest very actively into the region. So according to the industry consultants data, both the social e-commerce and the express delivery industry in Southeast Asia will be expected to grow at approximately 35% in 2026. And are also projected to maintain a high double-digit CAGR over the next 5 years. So from a company perspective, we are very confident that we will grow faster than this -- than the average industry growth. We have also observed that alongside the booming and development of the e-commerce platform, the demand of the logistics service quality, the logistics efficiency, the network stability, the capacity, all these expectations and the demand is also increasing. So leveraging from our robust network capabilities, we continue to benefit from the development of the e-commerce on one hand. And on the other hand, we continue to help our e-commerce customers and platform to expand coverage and also to stimulate online consumption, thereby achieving healthy and sustainable development for the entire express industry in Southeast Asia. Of course, Charles has just emphasized that other than e-commerce, we will continue to actively -- we continue to actively expand our non e-commerce or we call the nonplatform parcels. So the demand exploration for nonplatform parcels in the region is still at a very early stage and will serve as an effective supplement to our parcel volume growth over the long term into the future. So that's Charles response, Sijia.

Next question will come from the line of Fan Qianlei of Morgan Stanley.

[Foreign Language] Let me translate for myself. Thank you, management question congratulations to the very strong profit growth. So my question is about the CapEx outlook. For this year and next few years, specifically, can you please break down by region when guiding about outlook?

[Foreign Language] So I will use English to respond to your questions. So yes, -- we have seen an investment CapEx increase in the first half of the year in response to in tandem with our expansion and also the high volume growth across our regions. So our CapEx, as everyone knows, is primarily allocated to automated sorting machines, equipment in our sorting centers, vehicles, sorting equipment at our outlet level as well as in terms of IT and AI spending. All this will deliver immediate benefits for our efficiency improvement and cost optimization. So to your point about the breakdown by regions. Obviously, we start with South Asia. South Asia, we continue to see strong demand in our business there, and we have allocated capital expenditure to commensurate with the high growth in this business. So in terms of the geographies that we spend more in South Asia, it will be Thailand and Vietnam, where our parcel volume has grown rapidly over the last few quarters. Next, for the other markets. Other markets, we also kept seeing strong demand, just like what Steven mentioned, the parcel the passive capital in the other markets, especially LatAm is still very low. So we continue to invest in our capacity there and the specific market that we have done quite a bit of CapEx spending in Brazil, where our parcel volume has also grown rapidly in the last few quarters. So that's one area in terms of our demand. So adding on to that, just to maybe add more color as well for Southeast Asia, other than the sorting centers and the vehicles, we also have continued to build out our last-mile automation capabilities in our Southeast Asia, which we now have 38 plus market share. So we are deploying more automated equipment across our outlets, enhancing the efficiency of the couriers, the outlet processing and the management customer. So among our 10,800 outlets in Southeast Asia, right now, we have only several dozens of automated equipment that we deploy. Compared to a few thousand in China, there's a significant room for us to invest in this space, and we'll continue to do so over the next few years. Next, moving on into China, which is another big area where we spend our CapEx. We are focusing on our investments on more advanced sorting centers to drive upgrades and also to refine the density of our network. In first half of this year, we continue to advance the construction of our new Yiwu [indiscernible] Sorting Center. We have benchmarked to our domestic peers in terms of efficiency and service quality. And we continue to upgrade at the critical geographies or hubs in China in building out our own sorting centers and EU is one of them. So finally, I think for the new markets, I think we have mentioned before that we will use an asset-light operating model in the newly entered countries to manage our return on investment of our investment deck. At this moment, our -- is actually quite low in proportion in terms of the investment in this space. So overall, our CapEx spend, we're expecting this year, we will spend about $800 million to $900 million of CapEx all in all, slightly higher than what we have guided earlier on this year.

Our next question will come from the line of Steve Qiu of Goldman Sachs.

[Foreign Language] Congrats on the very strong results. My question is on your other markets, especially Latin America. So I understand that your revenue and shipment volume growth remained robust and some innovative initiatives in your business model, such as the loss [indiscernible] networks in these markets. So can management please explain how this model defers on the approaches that we use in Southeast Asia as well as China? And provide an update on our current business progress.

[Foreign Language]