Guotai Haitong Securities Co., Ltd. has released a research report maintaining an overweight rating on the express delivery sector. The "anti-involution" measures are expected to effectively alleviate industry competitive pressures, with the firm anticipating that e-commerce express delivery profitability will begin recovering in the second half of the year. Future profit elasticity will depend on the sustainability of price increases, with particular attention recommended on the regulatory intensity of the postal administration.

The firm continues to favor time-sensitive express delivery leaders with confirmed performance growth, as well as profit and valuation recovery opportunities in e-commerce express delivery.

**2021-2022 Express Delivery "Anti-Involution" Previously Drove Dual Recovery in Performance and Valuation**

Since late 2019, leading companies initiated price competition aimed at widening market share gaps among top players. In 2020, new entrants joined the market with aggressive pricing strategies to capture market share, dragging the industry into sustained irrational price wars. This led to dual pressure on both performance and valuation for express delivery stocks, with network stability risks becoming particularly prominent in early 2021.

Given the express delivery industry's role as social public infrastructure, the postal administration decisively intervened in April 2021 to launch "anti-involution" measures. Q2 saw initial recovery in leading companies' market share, Q3 witnessed rising single-ticket revenue centers, and Q4 achieved both profit and valuation recovery.

Key measures included: 1) The postal administration curbed irrational price wars to ensure network stability. In April 2021, Yiwu postal administration ordered Best Express and J&T Express to suspend some sorting centers due to predatory pricing and required rectification within deadlines. Yiwu express delivery floor prices rose from 0.8 yuan to 1.4 yuan. In September, Zhejiang Province Express Delivery Promotion Regulations required services not to be provided below cost prices without justified reasons. In December, the national postal administration explicitly opposed "involution."

2) Leading companies maintained firm profit recovery objectives. Considering that irrational price wars significantly impacted franchise outlet profitability and long-term confidence, leading companies in 2022 maintained firm profit recovery goals, with industry competition moderating and networks receiving respite.

3) Express worker rights protection policies drove single-ticket revenue increases. In June 2021, seven ministries issued guidelines on protecting express workers' legitimate rights. By late August, e-commerce express companies collectively announced network-wide delivery fee increases of 0.1 yuan per ticket starting September, aimed at implementing policies to improve express worker income through coordinated price increases to pass on cost pressures.

**2025 Express Delivery "Anti-Involution" Intensity Exceeds Expectations**

Short-term competitive pressures are moderating, with continued assurance of healthy competition in the medium to long term. Since the second half of 2024, attention to leading companies' market share has again risen significantly, with price competition intensity continuing to strengthen after the Spring Festival 2025. Industry profit margins faced year-over-year pressure in Q1 2025, with the firm expecting Q2 declines to continue expanding and express network stability risks reemerging.

In early July, the National Postal Administration emphasized firm opposition to "involutionary" competition. In late July, express company symposiums were held requiring ensured stable network operations and grassroots outlet stability. According to logistics networks, Yiwu floor prices were first required to increase by approximately 0.2 yuan in July. In August, multiple regions in Guangdong followed suit with floor price increases of about 0.4 yuan, exceeding Yiwu levels.

The firm believes this round of "anti-involution" measures will continue deepening from top to bottom, with additional regions likely to follow with governance measures. "Anti-involution" will ease competitive pressures in the short term while more importantly continuing to ensure healthy competition in the medium to long term, benefiting natural industry consolidation.

**Postal Administration Regulatory Intensity May Determine Price Increase Sustainability and Future Profit Elasticity**

In 2024, ZTO/YTO/Yunda/STO achieved single-ticket net profits of 0.26/0.15/0.08/0.05 yuan respectively, with second-half pressure leading to declines and Q1 2025 levels dropping to 0.23/0.13/0.05/0.04 yuan. E-commerce express delivery is expected to begin profit recovery in the second half of 2025, with sustained price increases potentially demonstrating profit elasticity and valuation recovery.

Market concerns about price increases potentially affecting small parcel volumes and thus price increase sustainability persist. However, the firm believes that with sustained postal administration regulatory intensity and further policy guidance protecting express workers' legitimate rights, the scope and sustainability of future price increases may exceed current concerns.

**Risk Factors:** Macroeconomic fluctuations, deteriorating price competition, policy risks, oil price volatility, among others.