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"Oligarch War" Starts: Can China Express, Which Has Raised 10 Billion Yuan, Continue To Maintain Its Advantages?

2020/9/18 11:11:00 0

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On September 17, the domestic express giant Zhongtong Express (Cayman) Co., Ltd. (hereinafter referred to as China express, 02057. HK) opened the IPO process of returning to Hong Kong for secondary listing. The 45 million share offering volume, the offering price of no more than HK $268 per share and the 15% over allotment of shares mean that the listing in Hong Kong is expected to bring about HK $12 billion in financing for China Express.

Just one day before the IPO, China Express held a customer appreciation event in Shanghai. Lai Meisong, chairman of the company, said, "compared with the past 18 years, China Telecom has made some achievements, but there is still a lot to work hard and forge ahead in the future."

What Lai Meisong said is true. From the perspective of the industry, 2020 is becoming a watershed in the change of the competitive pattern of the express industry. In the past decade or so, head express companies have enjoyed a wave of dividends from the improvement of industry concentration, and eliminated the second and third tier express delivery companies. But now, the war spread to the head of the enterprise, "oligarch war" has begun.

In the face of this war, Lai Meisong once again stressed the ecological strategy of China express and said that it would make a breakthrough in the comprehensive logistics industry in the next five years.

However, whether it is a "price war" with no decrease in short-term momentum, or the deep involvement of e-commerce giants in the express industry, the continuous emergence of variables indicates that the road for China express to realize integrated logistics service provider is not smooth.

Battle of oligarchs

Since the second quarter of this year, the domestic express industry has benefited from the demand compensation and achieved a considerable growth rate. In the whole second quarter, China's express industry completed 21.35 billion pieces of business, up 36.7% year-on-year. In this context, market concentration continues to improve.

According to the data released by the State Post Office, the CR8 of express and parcel service brands was 83.2 from January to August this year, up 1.5 from the same period last year.

What can not be ignored is that new entrants who rely on e-commerce platform have emerged in the industry this year, which, to a certain extent, eat the e-commerce parts market. In April, the emergence of Zhongyou post and Jitu, a new express force, became the catfish that Jingdong and pinduoduo, the two big e-commerce giants, put into the express business. This makes the CR8 index fluctuate slightly on a month on month basis - the CR8 in August fell 0.4 from July.

But even so, the trend of domestic express industry concentration is irreversible.

"At present, the 20% share of the express industry in China is impossible." Lai Meisong told reporters of the 21st century economic report that the share of the express industry will become more and more concentrated, and it is bound to give birth to express enterprises with a market share of more than 30%.

Nowadays, the oligopoly competition situation of domestic express industry is gradually completed: new entrants can hardly find market opportunities, and the coexistence balance of head enterprises in the competition is also being broken.

Guotai Junan believes that the domestic express industry is changing from the "spring and Autumn Period" to the "Warring States period" -- in the "spring and Autumn Period", the first-line express collectively defeated the second-line express delivery and enjoyed the industry dividend; in the "Warring States period", the first-line express will compete with "five into three" or even "three for one", and the industry will complete the clearance and settlement in the increasingly fierce competition Differentiation.

In fact, the business data in the first half of this year have shown that, at least in the market share, the growth rate of head express enterprises has opened the gap.

According to the statistics of 21st century economic reporter, in the first half of this year, the market shares of Zhongtong express, Yunda shares, Yuantong express, Shunfeng holding, Baishi group and Shentong express were 20.56%, 16.61%, 14.57%, 13.70%, 10.7% and 10.38% respectively (the market share is calculated according to the business volume disclosed in the semi annual report of each company), and the range value of market share among Cr6 exceeds 10%.

The reporter of 21st century economic report noticed that with the acceleration of the pace of returning to work and production in April, the strategy of market share priority has become the common choice of head express enterprises. A fierce price battle was triggered.

And the data of the express industry in August showed that the "price war" is still continuing.

According to the statistics of the State Post Office, the National Express business volume in August was 7.24 billion, an increase of 36.5% year-on-year, and the growth rate continued to increase compared with July. However, the single ticket income of express delivery was 10.05 yuan, down 13.6% year-on-year, and the decline rate was larger than that in July.

An express industry analyst told the 21st century economic report that the "Tongda series" express companies, which have serious homogenization of products due to the epidemic situation, will focus on the price after the epidemic. In addition, the sinking of SF products and the emergence of new entrants have led to the strong willingness of "Tongda series" express enterprises with cost advantages to carry out price competition.

However, Lai Meisong thinks that the "price war" is temporary, and the express price will definitely return.

Financing competition

"The development trend of express delivery industry is scale effect, network effect and future synergy effect." In the future, the competition of the whole express industry must be Meisong.

The so-called whole road chain competition requires express enterprises to transform into comprehensive logistics service providers. This means that the business of express enterprises is not only the single line of express delivery, but also the diversified configuration of express transportation, cold chain and warehouse distribution indicates that the front line of express enterprises must be extended.

In fact, as early as a few years ago, leading domestic express delivery enterprises have called out the goal of "committed to become an integrated logistics service provider", and take action for it. But up to now, there are not many leading enterprises that can really form "ecology".

According to the 21st century economic report, as of the first half of this year, there were about 30000 network service outlets, 90 transfer centers, and more than 9900 trunk transport vehicles. The network covered 98% of the counties and 91.3% of the towns and townships in China. Lai Meisong said that in the past, China Express made the largest express delivery scale in the "1.0" era, but in the next five to 10 years, it hopes to establish absolute advantages and ecological advantages.

Zhongtong Express's ecological strategy began in 2016. Up to now, the company has formed the capacity of timeliness service, cold chain and cloud warehouse.

In 2018, Zhongtong express opened up the market of medium and high-end time effective products by establishing Starlink air cargo company (hereinafter referred to as Starlink). According to Meng Feng, executive president of China Telecom cold chain, star link is a high-end time effective product service brand of China Telecom express. It provides "8h, 12h, 48h" door-to-door express service in the same city and 48-72h in the world.

In terms of cold chain, Zhongtong express uses the mode of "self operated warehouse + CO construction of production and marketing places" to build a national warehouse network. Meng Feng said that from 2020 to 2021, China Express's five core DC intelligent warehouses and 17 RDC intelligent warehouses will be built and put into use.

With the help of express, air freight, cold chain and other businesses, China Express hopes to form multi-level products and differentiated competition. Compared with other "Tongda" express companies, the ecological construction of Zhongtong express is temporarily one step ahead.

But the capital expenditure on ecological construction is not increased.

In the past two years, China Express's capital expenditure has maintained a high growth rate, with a year-on-year growth of 41% and 31% respectively. Even in the second half of this year, the company's capital expenditure was still higher than that of other companies.

In the first half of this year, "Tongda series" express enterprises focused on their respective focus, respectively increased fixed assets investment. The capital expenditures of Zhongtong express, Yuantong express, Yunda shares and Shentong express were 3.987 billion yuan, 2.369 billion yuan, 2.22 billion yuan and 884 million yuan, respectively, with a year-on-year increase of 129.9%, 103.7%, 16.0% and 10.6% respectively.

However, on the one hand, the "price war" will inevitably affect the cash flow of major express enterprises in the short term, on the other hand, the diversification of business forms will test the long-term capital strength of each enterprise. Anxin Securities pointed out that at present, "Tongda" express enterprises are still abundant in hand capital, and Zhongtong Express has obvious capital advantages. If we consider the price competition continues, we will compete with each other's financing ability in the future.

According to the 21st century economic report, since this year, Yunda has issued 500 million US dollars of bonds. Shentong express and Yuantong Express have successively obtained capital support from Ali. Baishi group also hopes to open the financing road to Hong Kong.

Zhongtong express said that the net raised funds will be used for infrastructure and capacity development, enabling network partners and strengthening network stability, investing in logistics ecosystem and general corporate purposes.

The aforementioned analysts told the 21st century economic reporter that the capital expenditure ability is the key factor determining whether the leading express delivery enterprises can maintain their competitive advantages in the future. In addition, Ali's deep involvement in the equity of "Tongda" express companies has also become a factor that affects the leading enterprises who can take the lead.

However, whether it is the external environmental impact or endogenous power differences, when the most fierce competition between leading enterprises comes, the strength of capital will eventually become hard power.

 

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