Shenwan Hongyuan Group Co., Ltd. has released a research report indicating that, according to the China Express Development Index report from the State Post Bureau, the volume of express deliveries in September is expected to grow by approximately 12% year-on-year, while express revenue is projected to grow by around 7% year-on-year. This translates to an average revenue per parcel of 7.58 yuan, reflecting a month-on-month increase of 3%, or an increment of 0.22 yuan. The ongoing reduction in overcompetition continues to push up nationwide express prices, leading to an upward trend in industry pricing. Based on monthly operational reports from express companies, single parcel revenues were notably low in July, reaching some of the lowest levels of the year. However, from August to September, these figures improved monthly under the push for a reduction in competition. In Q3, express companies are expected to begin reaping the profits from recent price increases, with continued attention on Q4 profit flexibility.

Key points from Shenwan Hongyuan include the following events: In September, YTO Express handled 2.627 billion parcels, marking a year-on-year growth of 13.64% with a single parcel revenue of 2.21 yuan, a year-on-year increase of 1.4%; Shentong Express achieved a business volume of 2.187 billion parcels, a 9.46% increase year-on-year, with a single parcel revenue of 2.12 yuan, up by 4.95%; Yunda Express processed 2.110 billion parcels, an increase of 3.63% year-on-year, with a unit revenue of 2.02 yuan, which is an increase of 0.50%. The growth rate of delivery volume continued to follow the trend established in August, with significant year-on-year increases driven by reduced competition.

In terms of parcel revenue per unit, Yunda showed the highest month-on-month improvement (+0.10 yuan), followed by YTO and Shentong (both +0.06 yuan), reflecting an upward trajectory in pricing. The volume growth continued, with year-on-year increases led by YTO (+13.6%) followed by Shentong (+9.5%) and Yunda (+3.6%).

For Q3, express companies are anticipated to begin seeing recovery in profits resulting from increases in pricing, with a focus on Q4 performance flexibility. The reduction in overcompetition has entered a new phase, where attention should be paid to third-quarter financial results and pricing during peak seasons. Short-term considerations include potential secondary price increases in key production areas and seasonal pricing strategies, alongside third-quarter earnings reports from express firms.

Shenwan Hongyuan posits three scenarios for this new phase of reduced competition: 1) The elimination of industry price depression leads to continued profit corrections, ultimately transitioning towards a more utility-like model that ensures substantial dividends while maintaining the rights of delivery personnel; 2) Many regions persist with previous competitive dynamics, resulting in increased industry differentiation; 3) Greater opportunities for high-level consolidation and mergers may arise, optimizing supply-side conditions.

For investment, the report recommends companies with greater profit flexibility: Shentong Express (002468.SZ), YTO Express (600233.SH), and Jitu Express (01519), which stands to benefit from high growth in Southeast Asia's e-commerce and favorable domestic profit expectations, with a particular focus on ZTO Express (02057) and Yunda Express (002120.SZ).

Risk factors include the potential for greater-than-expected industry price competition, declines in express demand, significant changes in industry dynamics, and rising labor costs.