As China’s biggest shopping festival of the year approaches, analysts are beginning to favor Chinese logistics companies as a way to tap into the trend of online shopping. Their reasoning? Regardless of how much consumers spend per purchase, the number of packages delivered by delivery companies is increasing. “Since 2019, express parcel volume growth has been outpacing online parcel (total merchandise value) growth as consumption downgrades have led to continued declines in parcel volumes,” JPMorgan analysts said in an Oct. 30 report. Chase’s report first reported on U.S.-listed ZTO Express, which analysts say is China’s largest express package company with more than 20% of the market share. The report said ZTO Express, also listed in Hong Kong, has higher profitability than rivals YTO Express Group, STO Express, Yunda Holdings Co., Ltd. and J&T Global Express Ltd. JPMorgan Chase set a target price on ZTO US shares of $30, nearly 30% higher than the stock’s closing price on Friday. ZTO YTD Shanzhongtong Express will be listed in the United States in 2024. Black Friday in America. Meanwhile, China’s online tech giants, once under scrutiny for alleged monopolistic practices, have tried to cool things down this year by reducing barriers to competition and allowing rival mobile payment systems onto their platforms. Morgan Stanley analysts said in a report last month that China’s online shopping pattern has created a huge express delivery market, and logistics companies that are good at leveraging technology can benefit from economies of scale. Morgan Stanley’s research ranked Chinese logistics companies based on an “artificial intelligence matrix” that attempts to measure the willingness and ability to invest in artificial intelligence, as well as the size and scale of a company’s proprietary data. Among the three companies that stood out, ZTO Express has also become Morgan Stanley’s first choice in China’s logistics industry. Morgan Stanley analysts said: “We believe that in a winner-take-all express delivery market, ZTO will continue to benefit from its greater scale, more advanced infrastructure and investment in technological innovation.” Morgan Stanley analysts said Lee set a price target on ZTO shares of $27.50. Analysts also believe that logistics companies with ties to China will face opportunities for global expansion as Temu, owned by Pinduoduo, and TikTok, owned by ByteDance, enter the international market. “TikTok Shop’s strong expansion in (Southeast Asia) should solidify J&T’s dominance in the express delivery sector,” Nomura analysts said in a report on October 25, which first reported on Hong Kong-listed J&T Global Express. YTD 1519-HK Shan J&T Global Express will list in Hong Kong in 2024. Mr. Li is also the executive director, chief executive officer and chairman of J&T. status. “Given the considerable parcel volume in China’s express delivery market, improvement in profitability in the Chinese market may become a driving force for J&T’s net profit growth.” Nomura Securities rated the stock a buy with a target price of HK$7.30 (94 cents). That’s more than 16% higher than Friday’s closing price. Morgan Stanley is less optimistic, giving J&T an equal weight rating while pointing to competitive risks in China and potential challenges in Southeast Asia. Morgan Stanley analysts said: “The downgrade in overseas earnings prospects weakens our investment thesis.” They set the target price of J&T at HK$7.40.
