Sinotrans Limited (601598.SS) Earnings Call Transcript & Summary

Honorable investors, good afternoon. On behalf of the management, welcome to Sinotrans 2024 Annual Results Announcement. I am Huang [indiscernible]. I am honored to be the moderator for this session. Now, I'm going to introduce to you management in attendance. They are Sinotrans' head management and proposed Director, Mr. Zhang Yi. Deputy General Manager, Board Secretary, General Counsel and Chief Compliance Officer, Mr. Li Shichu. Deputy General Manager, Chief Digital Officer, Mr. Gao Xiang. Chief Financial Officer, Ms. Li Xiaoyan. In this results announcement, we are honored to have the independent directors of the company attending the event online. On 25th March at the close of market, the company already released its 2024 annual results. And the PPT of this presentation has been sent to you in electronic form. Today, we will first invite the Head management, Mr. Zhang Yi, proposed Director, to walk you through the company's performance, followed by a Q&A session. In this event, we have arranged simultaneous interpretation. So next, we will begin the presentation. Let's invite Mr. Zhang Yi.

Honorable investors online and on site, good afternoon. On behalf of the management, I would like to welcome you all to the event. So our company released our 2024 annual results after market close the day before yesterday. Investors who have been paying close attention to us will note that in 2024, we faced multiple pressures such as insufficient market demand, tightened capacity resources and intensified competition. Under these circumstances, we realized operating revenue of RMB 105.6 billion, continuing to stand firm at RMB 100 billion and above, with accounts receivable turnover accelerating by 2 days and interest-bearing debt ratio decreasing by 2.78 percentage points. Overall performance of our company was good [indiscernible] days of accounts receivables accelerated 2 days. In 2024, international political and economic situation is characterized by complex situation of turbulence and divergence and low recovery. Continuous geopolitical conflicts, intense policy gains and various structural conditions are intertwined, resulting in continued weak momentum of global economic growth. So in the air freight market, if you look at demand side in 2024, the tonnage increased by 11.3% and for international demand, up 12.2% year-on-year. On supply side, in 2024, air freight capacity was up 7.4%. And with demand increase and also air freight price support. In 2024, for European and American routes, the growth was 10% and above. In 2024, in terms of our work, let me briefly do a review. In 2024, we continue to develop the market and reinforce our market status. And given the overall pressure, we continue to work hard to turn the market stock into incremental business. So we achieved double-digit growth in terms of air freight, air channel and so on, up 13.3%, 14% and 13.7%, respectively. And we continued to create a logistic ecosystem for direct clients, they are up 15.3% in 2024. We stepped up our transformation. In terms of air freight, we enhanced cooperation with resource parties, and we introduced 6 fixed lines and with 11 charter flight lines, having 1,132 trip lines. And for air channel, 1.08 million tons. We continued our cooperation with shipping companies and with diversified cooperation way in Middle East, Southeast Asia, we are able to grab the situation, and we have created some very good route products. And then for land transport, in Changsha and Shenyang, we expanded the self-operating platform. And then for international shipping company business, we exceeded 1.7 million TEUs. And so we have been the first docked with customs single window. In 2024, we optimized allocation of overseas resources and improved layout of our overseas network. We continue to optimize overseas strategic planning and defined our positioning and direction. We optimized the resource allocation at important notes, helping our Chinese brands to go abroad, and we expanded third-party countries logistics business. In 2024, overseas investment was up 44%. Overseas revenue up 9% year-on-year, net profit up 43% year-on-year. In Southeast Asia, second phase of the warehouse in Thailand was successfully completed. In Latin America, we continue to improve the layout of our network and set up a new company in Mexico. In Europe, our operating revenue grew positively in spite of continuing economic downturn and explored opening of a physical operation in Serbia. In 2024, we led scientific and technological innovation and deeply promoted digital transformation. Intelligent logistics, we steadily pushed forward the application of pan-AI and annual processing capacity of document automation service exceeded 15 million orders, which has improved service efficiency. Accumulated mileage of commercial operation of self-driving high-speed trunk route has exceeded 2.4 million kilometers. And we accelerated construction of independent controllable core technology system. We own 230 patents and 428 software copyrights. The case of digital intelligence driving mode innovation has also been selected as one of the first typical cases of effectively reducing cost of logistics by NDRC. Our case of digital intelligence drives model innovation and empowers the supply chain of FMCG industry to improve quality and efficiency was also selected as one of the first batch of typical cases. In the field of green logistics, we provide customers with customized green logistics solution. We have built first public carbon calculator for the logistics industry. In digital transformation, we have built a total of 9 carbon-neutral parks, covering a wide range of parks, yards, terminals and other types of facilities. And for digital system, our [ CIM ] system further expanded its coverage and initially became a working platform that effectively empowers sales staff. Now let's take a look at performance of various sectors. Professional logistics, revenue reached RMB 27.95 billion. Segment profit RMB 720 million in 2024. This segment faced great pressure on profits and the profits of each subsegment declined to varying degrees, mainly due to lack of domestic demand in 2024 and vacancy rates of warehousing and other related assets increased. We seized the market and expanded scale of cooperation with customers. This has led to a steady rise in revenue. However, profit margins have narrowed due to decline in prices of market segments, market elements and intensified competition in the industry. Looking into the future, as overall economy picks up, we'll focus on improving customer stickiness and dig deeper into our internal operating potential to drive a steady rebound in business performance. For forwarding and related businesses, that is our core business, revenue RMB 67.2 billion, up 8% year-on-year. Segment profit, RMB 2.25 billion, down 2% year-on-year. So revenue growth in 2024 was driven by rising ocean and air freight rates and business volume growth, while increasing competition put some pressure on profit. For e-commerce segment, revenue was down 14%. Segment profit down 20%. This is because of poor performance of cross-border e-commerce logistics business in terms of cargo volume as a result of e-commerce customers' direct contracted capacity as well as the decrease in government subsidies. At present, external environment became more and more complicated with more uncertainty. The impact of geopolitical conflicts, unilateralism and protectionism continues to rise so that steady growth of foreign trade is facing serious challenges. Customers' multidimensional demands are dynamically evolving. They pay more attention to resilience and security of supply chain and diversified subjects in the market are competing. In face of such complicated situation, we'll adhere to the general tone of seeking progress amidst stability. And first, we will promote strategic marketing system based on market demand and promote construction of strategic marketing organization to improve service efficiency and enhance customer satisfaction. We'll leverage our digital marketing system to promote development of marketing organization, to improve service efficiency. With the help of digital tools, we optimize management mode of strategic customers and expand the scale of strategic customer groups. We formulated industrial level solutions and established mutually beneficial and win-win partnership. Second, take business transformation as the starting point and develop a new carrier model. The water transport business will increase the scale of route operations and explore innovative value bundling modes with shipping companies. For airfreight, we'll focus on high-value industries and strengthen specialized solution. For land freight, business focused on creating high-quality channel products and enhancing controllability of the whole process. And third, we'll take overseas development as the new engine and cultivate new growth points. On one hand, we'll strengthen layouts of overseas network and resources and enhance our resource support capability. We'll improve the logistics network in Southeast Asia and complete establishment of relevant organizations and improve global network layout and accelerate land purchase and warehouse construction. On the other hand, we'll promote integrated overseas operation, build core competitiveness overseas. For airfreight, on the basis of stabilizing the operation of existing routes, we'll continue to enhance the capacity of Western Europe channel and build an air transport channel to Africa from the hub in [ leash ]. We'll intensify our effort in customer development and vigorously develop local contract logistics and third country business. We'll accelerate construction of overseas management system and set up a settlement system that is based on unified overseas settlement. Fourth, driven by scientific and tech innovation will provide and promote intelligent and green development of our business. Taking intelligent logistics innovation as the lead will bring into full play effectiveness of digital intelligence. We'll promote pan-AI technologies, expand application scenarios of autonomous driving and launch construction of an automation innovation center, continue to iterate business operation delivery system and formulate end-to-end visualization solutions. We'll focus on building the core competitiveness of green logistics and release a new version of the green logistics white paper. Fifth, we'll accelerate process of network-wide operation based on digital transformation. Focus on key projects systematically promote construction of 4-tier operation system, accelerate transformation and promotion of business models and consolidate results of transformation. We'll continue to strengthen construction of transformation organizations and teams. Looking into 2025, we will insist on zeroing mentality, sprinting attitude and catching up state, keep right in innovation, transform and breakthrough, insist on moving towards newness and quality and strive for a new era of Sinotrans reform, innovation and high quality. We'll continue to work hard and pay back to shareholders with better performance. That's all in my presentation. Thank you.

Thank you, Mr. Zhang, for the detailed presentation. Next, we'll move on to Q&A session. We'll first take questions from investors on site. Afterwards, we will take questions online.

[Operator Instructions] First question, right. First row, the lady on the first row, please.

I'm from Huatai Securities. Congratulations on your very good results amidst the very complicated macro situation in 2024. I have 2 questions. First question about changes in the management. We noticed that the Chairman and General Manager have changed. There are some changes in the management. What is the main reason? Mr. Zhang Yi, regarding your future development and operating strategies, will there be some big change? Second, this question is about businesses. We are interested in e-commerce business. In 2024, as you mentioned, profits declined. So for this business, how do you see will be the plan for medium to long term? Now tariffs will cause impact on cross-border platform. So how do you see this business?

First of all, thank you very much for your interest and care for Sinotrans. This time, concerning change in the management, we have already announced the related information. Chairman Wang and [ Mr. Shen Hong ] had done a lot to promote the company's development. The work has been very effective. We sincerely thank them. Now concerning the related work arrangement, [ Mr. Chen ] is no longer the Chairman and Mr. [ Shen Hong ] is no longer the General Manager. So in relation to our corporate governance and also from election, we are going to have new directors and General Manager. For me, well, my work experience in the announced information has been introduced to you. So this is the first time I am meeting with investors. And I would like to briefly introduce myself, taking this opportunity. First of all, I am a Cantonese. And in the past, I have been working in Zhanjiang port in Guangdong for a long time. It is a big port and basically focused on bulk cargo, bulk freight. And then in 2017, I joined a Hong Kong listed company. The stock code was 144. It was a company within the China Merchant Group. In 2020, I was sent to Liaoning Port Group and served as CEO in that company. In 2022, I was sent to China Changjiang Shipping Group as the Chairman. So from port operations to shipping and aviation. So this time, I'm happy that I am transferred to Sinotrans to work. And in terms of my work experience, even though I have not worked directly for Sinotrans, I have not worked for any large-scale logistics company before. But when it comes to logistics business, I have some knowledge. I have been in this company for a short period of time only, but then concerning this company's development, I have some feelings. These thoughts may not be very mature because I have only joined for a short time. First of all, I think Sinotrans is a good company, an excellent company. Over the years, for Sinotrans in the industry, well, we have one recognition from customers and investors. We have got very good comments from them. So there is good brand effect. In China logistics industry, well, we are actually a top company in the field, and our financial performance is very sound, as you can see. Even though right now, the external environment is very complicated and difficult. But if you look at our revenue, we have a platform of RMB 100 billion profit, a RMB 5 billion number. So when it comes to our operating cash flow and also our balance sheet, well, they are controlled at a very good level, a healthy level. In recent few years, there were a lot of complex changes in external environment. In China, we are trying to build a first class -- world first-class intelligent logistics platform. And I think we have achieved very good results as a whole. In the future, I think the main tone of our development is to seek progress amidst stability. Now we have already built good relationship with our investors and with our customers. And on this basis of communication, we will continue to develop ourselves into a world first-class enterprise. We'll continue to work for that, and we strive to deliver better results and better return to our investors. So that is a basic introduction of myself and also my understanding about the company. Your second question is e-commerce business development. Well, Mr. Gao is responsible for that. So I will defer to him to take your question.

Thank you for your question. Well, if you look at e-commerce business in 2024, there was business decline. Well, if you look at total business volume, it did not decline. If you look at airfreight business, it had a 14% growth. And first of all, for transport model with our customers, it has changed from that in the past in Europe. And besides with some of the customers, at the end of last year, we took the initiative to reduce our low profit margin business. For e-commerce business, gross profit margin was relatively lower. So we took the initiative to give up some of those businesses. For e-commerce, well, it is included in airfreight business. So our airfreight business grew quite significantly. Besides, you also asked a question about a hotspot in the market, and that is U.S. tariff and also customs clearance issue. I think many of you are concerned about that. In early February, the new tariff policy was announced. And concerning Chinese and Hong Kong products, the tax-free policy was abolished and there will be new tariffs. So overall speaking, well, if this policy is implemented, then for Chinese products and e-commerce customers, there will be 25% to 40% price increase. Then the situation will be different for different categories. So the ratio may also be different. And to a certain extent, for China e-commerce development, there would be some impact. And for the sellers, there are so many customers. We have been in close communication with our customers. For some customers, for example, Tmall and those other customers that you are familiar with, the situation right now is still not certain. So relatively speaking, not much sales promotion has been done, especially in the U.S. Right now, I think people adopt a wait-and-see approach. Secondly, for sellers, well, they may increase price. And it is possible that some Chinese products, especially low-priced products, competitiveness may be affected to a certain extent. And for Sinotrans business, we believe that at this current stage, there will be certain impact. We closely monitor our customers and the overall progress in the policy. In April, there will be some new policies coming up. And well, it has been 9 months already concerning that policy. In February and January, the situation was not good. In March, there was some recovery. And then later on, for the newly announced policies that would be -- there will be a bigger impact. For our capacity procurement and rhythm policy, starting the end of last year, we made adjustment. We have been forward-looking. In the future, we will communicate with our customers and the resource owners. We will communicate more with them. Looking from our business point of view, when it comes to all our customers, they are also responding to the increase in tariff. The American market is still there. Well, some might be diverted to overseas warehousing business, but the overall market is still there. So higher quality products will get into different markets. In Europe, there might be impact from 150. But for Made in China products, I think our quality will also go up. For companies like us, a big part of our cost is from our procurement of freight capacity. In the past few years, I think capacity grew fast for e-commerce and also capacity was high as well at present. So for the e-commerce companies, cost, it has been 30% of logistic cost. And I think this is good for us. For a company like us with good overall integrated service capabilities, I believe there will be better opportunities for us. In the short run, we are under pressure. For the long term, we will monitor closely changes in the market.

Thank you management for the answer. Now let's take the second question. So the gentleman in front on the first row.

I'm Zhang Wenjie from CICC. I have 2 questions. First, about dividend policy. Last year, your total dividend amount did not decrease and dividend payout increased further to 55%. So in the future, what is the dividend outlook? That's my first question. Second question, in your presentation, you mentioned that there was a growth by 15% from your core direct customers. This is better than the overall growth rate. So now when you develop direct customers, what is the major approach and way?

Well, concerning dividend, I will defer to my colleague to answer it.

Thank you. Let me take this question. Since listing, all along, we have been paying a lot of attention and putting into place a lot of measures to increase shareholders' return. Since listing till now over 20-odd years, we have maintained a stable and progressive and continuous dividend policy. So all along in the past 10-odd years, 30% roughly, -- in these 2 years, with our improvement in operating efficiency, our overall cash flow position and financial position are very good. So we raised dividend payout from 30% to 40% this year. Last year, almost 50% this year, 55% in order to pay back to shareholders and investors care for us. So we will look at our overall operation, cash flow position and overall CapEx position in making decision. We will offer to investors some continuity, so you can expect a relatively good dividend policy.

Thank you. Mr. Li, for the answer. Let me supplement to the dividend matter. This time, in terms of the absolute amount, we maintained stability and dividend payout ratio went up. I think this is giving you the message about our confidence and our promise. This shows that we have confidence in future development prospects. Even though there is pressure externally, we think that our business is good, especially our cash flow. Our relevant metrics are all satisfactory. So this means that we have confidence in our own development. At the same time, with this move, we would like to express our thanks to investors for your interest and love. As I said earlier, in the future development, by achieving better development and better results, then we can better pay back to our investors.

The next question is about direct customers, Mr. Gao, please.

Thank you for your question. Well, for direct customers and change of its ratio, well, it shows the operation and business transformation of our company. In the future, from Made in China market perspective, we have 2 points to make. first. In globalization strategy and also Chinese companies going abroad, end-to-end demands are very important for us to develop direct customers. We have a lot of production capacity, not only in China but also overseas. So when it comes to our service and our sales chain, they are all over the world. And for our direct customers, their supply chains also undergo big change. So given these 2 insights about the market, we have made much adjustment. So our organizational transformation and our business transformation are based on these 2 judgments. First, we have made big change to our organization. At the headquarters, we have set up our strategic customer department. So for key customers, important industries, we have teams to work on them. Originally, our capabilities are scattered all around. Our teams and resources now are centralized, so we can focus on new energy vehicles, technology, semiconductors and health care industries, well, they are our main development directions. And then concerning solutions for different customers' solutions, well, our strength is in overall integrated service. In the past, our customers' trade model and their business models are homogeneous. So in the past, logistics service is divided among different segments. But with COVID-19 and also now there is much uncertainty in international trade, customers have adjusted their procurement model. So we can do sea freight, air freight, air channel and cross-border, land freight and also overseas warehousing, overseas services, all these we can do. So from raw materials, semi-finished goods, components and parts and finished goods of customers, we offer to customers different solutions in order to help them lower cost and improve efficiency, we can enhance their resilience and efficiency. In the past 2, 3 years, we have been doing all these. At the same time, today, customers attach much importance to safety of their supply chain and their technology capabilities and also data security. So with scale like ours, we do not only offer logistics and transport service. We also do for our customers data connection. And then when it comes to deployment of the transport and warehouses, right now in the supply chain, in terms of data connection in the past 1 to 2 years, it has been greatly enhanced. So if you look at our organization, operation model, solutions, technology, now we are actually doing all these changes in order to meet new changes, new needs of our direct customers.

Now the lady on the third row.

I'm Yen Ling [indiscernible]. I have 2 questions to ask the management. First, for REITs, you have already got CSRC's approval. So in the future, in terms of scale and rhythm, how will they be? My next question is, in 2024, looking at your sea freight and air freight forwarding, profit margin has come down. So what will be future outlook? And what will be some measures and moves to restore profit margin?

Okay. Xiaoyan, please?

Yes. Let me take the question about REITs and also its progress. Well, there has been a few years' time when we introduced REITs, and I think you have expressed a lot of concern last year till this year, we have got some concrete progress. Early this year for the REITs project, well, NDRC had already submitted it to CSRC and the stock exchange at the beginning of the year. The stock exchange accepted our REITs project. And in February, some responses were given to the questions. And recently, we are in close communication with the stock exchange, hoping to get approval for the REIT project as soon as possible. So that's the progress. And so we are pushing for approval, we are also doing sales roadshows. And based on the roadshows, overall speaking, investors showed a lot of interest and passion to our REITs project. Now our plan is we hope to complete the issuance of REITs within this year. Thank you. For REIT's issue scale, it will be around RMB 1.1 billion. That's the approximate size. Right. Your second question is about our forwarding business, correct?

Yes.

Okay. Now I'm not familiar with airfreight. So I have worked in ports and also shipping company. My first job is to be responsible for deployment of the vessels and my counterparts are forwarders. Well, freight forwarding is a very traditional industry, but it is also a very fundamental node. So it is a very important business foundation for logistics company. We serve many customers, but very often, they started from freight forwarding. So for a long period of time, for the forwarding business, it has been a very important foundation of our business growth. So as presented just now last year, for sea freight forwarding, air forwarding and air channel, there was growth by double digits. So this means that we reinforced our market base, and we enhanced our connection with our customers. So we have maintained a good development momentum. But when customer demands upgraded and also there are a lot of other changes. So the demands, the requirements on the forwarding business are getting higher and higher. There are a few points here. First, very often customers are no longer satisfied with forwarding service of only one area. They want us to offer extension from forwarding business and also other areas in the logistics chain. So I think this is a common change faced by many companies in our industry. Customers' demands are at the targets of our efforts. We started from freight forwarding and then we extended into different businesses. We have achieved good progress. The overall total volume is not very big. The share is not very big. However, I think the share is rising. So in the whole logistic chain, we are extending on different directions. Secondly, for forwarding business, we need to offer better digitalized service capability. In the '90s, when I did the work, at that time, there were a lot of processes about forwarding. They are paper-based. We have to carry thick piles of papers in our bag and took them to the vessel for signature. And then for many enterprises, top companies, big companies who are our strategic customers, hope that our digitalized system and digital service capability can tie in with their production and supply chain. So they hope to see interconnections. So that means we need to offer safer, more efficient and lower cost service for forwarding. These are challenges for our industry. At the same time, for Sinotrans, which has already got strong digital service capabilities, I think this is also a very important opportunity. Overall speaking, for the forwarding business, if you look at the sea freight, air freight internationally, if the market continues to have development, I think there is always the market structure. What we are facing now is change in market structure and also a reshaping in the competitive landscape. So with this round of reshuffling, I guess, top companies in this rather traditional industry can create a bigger business value, and they will enjoy more development opportunities. Do you have anything to add concerning airfreight?

At present, for airfreight last year, in terms of gross profit margin, it came down. This is mainly because of procurement cost, which was relatively high. After a few years of high-speed growth in 2023, there was some decline in 2024 for cross-border e-commerce and also Chinese companies going abroad, there are a lot of such incidents. So the overall capacity being invested into the market is at higher price. So overall speaking, oil price also is relatively high. And as a result, GP margin came down, but the overall business is relatively healthy.

Next question, please. The gentleman there.

I have a question. Actually, 2 questions. One is about contract logistics. The other is about DHL. For contract logistics, usually on price, it is based on long-term agreement. In 2025, when you sign contracts with customers [indiscernible] what is the price compared to 2024? For contract logistics, how do you see the outlook of volume growth for DHL? Well, it is an investee view, but then there are a few changes. European countries increased the overall expenses and for small parcel, tax-free threshold for DHL company, is that something favorable? How do you see DHL's development this year? These are my 2 questions.

Okay. Thank you very much for your questions. First, about contract logistics segment's overall performance. In our presentation, we talked about contract logistics business results in 2024. It had declined. Well, for this segment, it is closely related to China's domestic demand. In 2024, domestic demand was relatively weak. In many industries, there was surplus capacity. So on the revenue side, customers wanted to lower cost. So in logistics, they wanted to compress costs. Overall speaking, in some contract and agreement, there was a lower price renewal, and we face pressure in pricing. And in terms of cost, in contract logistics for warehousing resources, there is bigger need. And so there is more rigidity in the cost. Then in terms of both pressure in both the income and expense side, this segment is under pressure in terms of results. So in 2024, there was a decline. You mentioned 2025 and our performance overall speaking, during the 2 sessions in 2025, our country wanted to revitalize the economy and a lot of positive signals have been released. This is favorable to contract logistics. And when it comes to customers' operation performance, well, there are both ups and downs. When consumption recovers more significantly, then in 2025, I think there will be positive contribution and impact on contract logistics. Secondly, your question is about DHL. Well, if you have been following up our company, well, DHL in our overall results contribution accounted for quite a high share. It accounts for 1/3 of our profit. So every year, investors are concerned and interested in DHL. In 2025, for DHL, overall speaking, I think the approach, the attitude is prudent. In 2024, profit decline of DHL, the factors behind those still exist in 2025. In 2024, DHL faced uncertainty in the external environment. DHL's business volume in 2024 declined to a certain extent, mainly in the American routes. So business volume decline led to revenue decline. On cost side, many DHL's routes and freight deployment is in Europe and U.S. And in Europe and U.S., inflation had been high. As a result, this means that cost also was subject to impact. In 2025, with uncertainty in the external environment, it is still big. As said just now, you are concerned about U.S. tariff policy. That would also impact DHL's business volume. So on the revenue side, there is this factor, and it still exists in 2025 on the cost side. Just now I talked about inflation in Europe and U.S. and such inflationary pressure in 2025 within the short term will still exist. So in 2025, if you talk about DHL's results, well, we adopt a prudent approach or attitude.

Thank you, Ms. Li for the answer. Next, this investor, please.

Have you been able to withdraw capacity and costs at the same pace? That is my first question. Second question is, again, on the forwarding side, sea and air relatively held up well in 2024 despite the challenges, but the challenges are much more in 2025. So do you think there would be a significant decline for 2025 in the forwarding air and sea forwarding business? And thirdly, with respect to your approach in the overseas markets, in the past few years, I recall that you had invested in Europe and some places in Lat Am as well. How are those offices or businesses generating volumes for you? And what is the outlook given all the challenges which we are seeing with tariffs, particularly your business in Europe?

Thank you for your questions. [Foreign Language] I will first take the question about e-commerce. So as mentioned just now, in Q4, basically, we have given up some low gross profit margin business. And at that time, we understand that this year, there would be a lot more uncertainty in relation to e-commerce. But overall speaking, for our company, well, we have built our cross-border e-commerce system and our overall direction has not changed. Today, we are still working with our working partners and many customers in order to maintain our relatively stable supply volume and also in face of external tariffs and also right now, there is much uncertainty, we are in close communication with them. For some routes, we will actually adopt some new methods. For example, we will focus in our own hubs. So now we are building our own air freight business hub in order to centralize our operations to lower cost and improve efficiency. At the same time, we want to enhance the possibility of getting government subsidies. And in terms of our communication with airlines since February, based on our communication, we realized that there was some change in the market pricing system, but everybody is still adopting a wait-and-see approach. Overall speaking, we maintain a resilient business model, and we will continue that. Now concerning forwarding business, just now an investor already asked a related question. We have already shared our understanding. But on that point, well, let me comment on Sinotrans' differentiation advantage. Now in -- among logistics companies, our company is rather strong. We can offer an integrated solution in terms of mode of transport, for example, in terms of sea freight, railway and air freight, we have strong service capabilities. Besides, we have globalized layout in Mainland China and overseas, our network is quite comprehensive. So comparing with other integrated logistic providers, we offer different types of solutions, many different options. So when we do forwarding business, we are doing full chain extension. And I think our own strengths and advantages are quite obvious. With our forwarding business, we can create value for our customers and also our own company's business value as compared to other competitors should be more superior. Besides, as you are aware, over the long run, we insist on a public carrier positioning. So in building the ecosystem and also in selection of our working partners, we have strong advantage as a result. After the past decades, deep cultivation in the industry at present with various partners in the industry, we have built very virtuous relationship. So when we develop related business in terms of acquiring customer resources and also getting a better freight capacity, I think we enjoy our own unique advantages. So we have a very good confidence in the medium to long term. This year, there are many uncertain factors, especially right now, we still cannot come to a very clear judgment. So that's why we adopt a prudent attitude, and we adopt a wait-and-see approach. Right. We have attached a lot of importance to our overseas business development in the past decade. Our overseas development was of high rate, high pace. Now this is the main trend in relation to Chinese enterprises. Chinese enterprises globalization is getting faster. And then with that, of course, supply chain will also see a globalized layout. Chinese enterprises will have to meet the needs of globalization, need of Chinese manufacturers. And so we have increased our investment into overseas market, including the network and resource allocation. By making overseas investment, we can also avoid the uncertain risk in relation to international policy and also in the domestic market, the very fierce competition. Now in the past few years, in terms of network layout in overseas market, we took into consideration European trains development. And also, we also completed our layout in Central Asia and also Russia and other areas. And then in line with China's cross-border e-commerce development in Europe, America and Middle East, we have created a very reasonable strategic layout. In 2019, we completed KLG's acquisition in Europe. So in Europe, Western Europe, Eastern Europe, the overall network layout is completed already. In the next stage, we'll continue to optimize it. And in these years, we will gradually increase logistic infrastructure investment at key points. As you know, there is adjustment in tariff policy as a result, there would be change in product structure and also trade policies of China as well. Now for building of overseas warehouse, you are interested in that, it is very related to U.S. tariff policy. For Chinese enterprises, after their industrial chain is shifted, the localized supply chain arrangement and contract logistics arrangement, well, they are going to be of much larger scale. In the past, we satisfied their forwarding need. And now there are other demands as well. For example, in Thailand, Dubai and this year in Malaysia, we will invest more into infrastructural building to satisfy local customers', logistics and cross-border e-commerce logistic needs. Thank you.

Thank you, management. Now we will pass the floor to investors online. Today, there are already 90 investors joining us online. So sorry for keeping you waiting for so long. Assistant, meeting assistant can you give instructions. [Operator Instructions] Citic Securities, please.

Mr. Zhang, executive leaders, greetings. I'm from Citic Securities. I have 2 questions, which are about numbers. First, about revenue. We can see that in Q4, revenue has declined a bit. Well, it has offset the revenue growth in the first 3 quarters. Mr. Gao said just now that for cross-border e-commerce, you have made some adjustments. And then when we analyze the data in terms of rail forwarding and air freight forwarding, there was decline. So apart from you taking the initiative to make adjustment, are there other factors? In the future, what is the year-on-year outlook in terms of your results? Can you give a guidance? That's my first question. Second question, subsidies. In Q4, if you look at subsidies, it has come down. So on one hand, for charter flights, subsidy income was affected. So that was more reflected in 2024. Besides a related question to the previous one. In the second half of the year for railway -- rail freight revenue, it has come down. So in the future, do you think that would also affect subsidies? So I would like the management to confirm subsequent subsidy structure. These are my 2 questions.

Let me answer the questions. Okay. Thank you very much for your questions. First, Q4 revenue decline and the reasons. There are 2 main points. First, if you look at our revenue, forwarding business accounted for a bigger share. Sea freight forwarding accounts for a more important share of the overall forwarding business. So in Q4, if you look at China Containerized Freight Index, comparing with Q3, Q3 is 2,000, Q4 only 1,500. So the decline was 27%. So that is one reason why Q4 revenue has come down. Just now Mr. Gao also mentioned the point, at present, overall market environment is still very uncertain. Given such backdrop, well, the risk and challenges that we face is big. So we place risk control as a very important priority. In our operations, we hope to allocate resources to high-value or high-quality industries and high-quality customers. In Q3 2024, we sorted out some low profitability businesses. So low profit and high-risk businesses have been foregone by us. So that's why in Q4, in terms of clearing less profitable businesses, the effects have been realized. We have given up some of those businesses. And in terms of long-term high-quality development strategies, I think what we have done is effective. So just now I explained the reasons behind the revenue decline. Your second question is about subsidy. In terms of our subsidy, there are 3 major components. First, subsidy for freight trains. So it's around [ 21 ]. Its share is quite big. And then air freight subsidy. Number three, warehousing logistics assets. So in the operation and building process, some subsidies were obtained. Now for our various business lines, they are subsidies to our operating costs. And in developing the overall market, with decline and phasing out of subsidies gradually, these business segments that used to get subsidies will become more market-oriented in their operation. And in terms of the decline, I think airfreight subsidy last year was because of some cultivation subsidy from the government. But when those routes become more mature, this kind of cultivation nurturing subsidy will no longer exist. As a result, there is decline in subsidies. That is the reason for the decline in subsidies and also our views about subsidies.

Thank you, Ms. Li. Because of time, we will take the last question now, please. Last question, Changjiang Securities.

I have 2 questions. First, about overseas strategies. Now we can see that you continue to optimize overseas strategic plan, and it is placed on #1 priority. Can you share more information besides just now? You said that in terms of overseas deployment and layout, you have basically completed the layout in the future. When it comes to revenue from overseas business and its share, can you give an overall guidance and also growth rate? And then for investment gains, apart from DHL, there are other investments. In 2024, some projects performed very well as well. Can you give more information and elaborate more? Can you tell us about the future development trends, too?

Last year, regarding overseas overall development strategies, we have rectified them. There are a few points. First, we clarify our future business development positioning. So we service China's national strategies and Chinese enterprises going out. Second, our full network operation and our overall strategic transformation. Number three, it serves local countries, logistic infrastructure enhancement. So these are the 3 things we serve, and this is the major change in positioning. For overseas business, it is very important in our overall system. So we are talking about whole network operation, offering end-to-end service to customers, and we attach much importance to it. It is not an independent unit. It serves our overall strategic transformation. This is a big change in our overall positioning. Secondly, we need to satisfy customers' needs. So when we allocate resource and make overseas deployment in Southeast Asia, Europe, Middle East, basically, we satisfy customers' service needs overseas. And then in local countries, logistic service capabilities, as I mentioned just now, our customers themselves have local logistic needs, which are a lot higher than before. So in overseas, our operation capability and service capabilities, if these are not improved, then we cannot satisfy our customers' global supply chain needs. So last year, we made some arrangement in these regards. And with this strategic change, we will also increase investment of resources. Our future CapEx will also be inclined towards overseas. Within China, as you know, domestic demand is not very strong. But for overseas development, it is actually flourishing. So we will increase investment. When time is right in the future, we will also increase our effort in M&A. Through M&A, we can very quickly expand our network and expand our overseas service capability. This is the development direction that we would insist on. Earlier on, back then, the time was not right. In 2019, we acquired KLG, and we very quickly opened up the Europe market. We'll continue to do this. For overseas business share, it is rising. Our overall overseas business revenue and profit growth, well, they are at 2 -- double digit or even big double-digit growth rate, a lot higher than our overall growth rate, a lot higher than our China growth rate. So in the future, we'll increase our overall share of overseas revenue and profit of the total. Of course, there are also related tax arrangements and also some reasonable tax avoidance arrangements, and there are also arrangements related to FX control. So those income is not reasonably reflected in our financial statements. But in the future, based on compliance, we will make the necessary arrangements. So I think we need to be confident in our overseas business development. Investment gain, yes. Right. Okay. For [ Lukoil ], it is a very important company for Sinotrans. Their investment gain has increased amidst stability. In terms of their business, they have high market share globally. They have a big industry influence and industry status. So in terms of the overall contribution, I think it is sound and steady. Overall speaking, I think it's income, it's predictable. When it comes to the contribution to Sinotrans, comparing with DHL's contribution to Sinotrans, of course, they are lower than DHL by quite a large margin, but still they are significant.

All right. Thank you, investors, for your questions. Thank you, management, for the answers. The 2024 annual results announcement of Sinotrans is concluded here. Once again, thank you for coming. And in the future, if investors still have questions, please contact the IR team any time. Thank you very much.