A research report from Industrial Securities indicates that middle-income countries provide a favorable environment for the development of e-commerce and express logistics industries, offering a more welcoming landscape for new entrants. The firm anticipates that both the Southeast Asian and Latin American e-commerce markets are poised for double-digit growth in the near future, with the express delivery market expected to achieve approximately 20% growth.
The primary potential in Southeast Asia lies in its positive trends. Currently benefiting from economic development and increased investment in e-commerce, the region shows strong momentum, even exhibiting signs of acceleration. The report recommends focusing on J&T EXPRESS-W (01519). The key viewpoints from Industrial Securities are as follows:
Middle-income countries represent fertile ground for the express logistics industry. These nations possess a conducive environment for e-commerce growth due to underdeveloped traditional retail sectors, low labor costs, strong e-commerce expansion capabilities, and a societal focus on value for money. Over recent years, the increase in e-commerce penetration rates in these countries has generally surpassed that of other types of economies. Middle-income countries also offer a favorable setting for express logistics development. Beyond the synergistic opportunities with e-commerce growth, less developed logistics markets are more accessible to new market participants.
Southeast Asia and Latin America present significant opportunities, with express delivery demand expected to maintain a compound annual growth rate of around 20% for an extended period. Both regions are primarily composed of upper-middle-income countries. Southeast Asia benefits from rapid economic growth in its key nations and a steady rise in e-commerce penetration. In Latin America, Brazil is seeing active e-commerce investment, while Mexico demonstrates positive development trends. Both regions exhibit strong growth potential. It is projected that their e-commerce markets will experience double-digit growth, with the express delivery market likely growing at about 20%.
Southeast Asia's main potential is trend-driven. Indonesia's e-commerce market has already achieved a notable penetration rate of nearly 30%, ranking behind only China, the UK, and South Korea among major economies. Other key Southeast Asian markets still have substantial room for growth in both consumer spending power and e-commerce penetration. Current positive trends, supported by economic growth and e-commerce investment, are strong and show some acceleration. This trend is expected to continue for a considerable time. Southeast Asia's express parcel volume growth is forecast to remain around 20% annually in the coming years. By 2029, its parcel volume relative to China's is projected to increase to approximately 15%, with population, per capita consumption, e-commerce penetration, and average parcel value estimated at about 45%, 50%, 50%, and 70% of China's levels, respectively.
Latin America's primary potential lies in interconnectivity. Currently, e-commerce average order values in the region's two major markets are high, but express parcel volumes are limited. With active investment in e-commerce, the virtuous cycle between e-commerce and express delivery is expected to accelerate, propelling the express market into a high-growth phase. Parcel volume growth in the coming years could approach 20%.
The report recommends focusing on J&T Express, highlighting its ecosystem as a foundation for riding the growth wave. Beyond the opportunities in Southeast Asia and Latin America, the express delivery industry features high entry barriers and significant value, particularly from an international perspective. The development of Chinese-affiliated overseas e-commerce platforms presents an opportunity for Chinese-linked express delivery companies. Furthermore, innovation is a primary driver, and emerging e-commerce platforms are not expected to build their own logistics networks. Long-term, J&T possesses a combined local and international ecosystem capability. This is not only fundamental to its success but also a difficult-to-replicate feature that forms its competitive moat. This ecosystem capability stems from its "Benfen" corporate culture, which emphasizes long-termism and reduces risks associated with major client partnerships.
In the short to medium term, J&T's comparative advantages are clear. It has ranked first in the Southeast Asian market for six consecutive years and demonstrates strong growth capabilities, currently operating in high-potential markets like Southeast Asia, China, and Latin America. Key factors not to be overlooked include: 1) The scale and social value of J&T's delivery network and its ecosystem; 2) J&T's布局 and potential in non-e-commerce parcel segments; 3) Its strategic positioning for potential entry into developed markets.
Risk warnings include significant fluctuations in exchange rates and oil prices, a slowdown in e-commerce growth, and deterioration in the global economic and trade environment.