Production | Tiger Sniffing Research
Author | Ding Ping
On the evening of March 23, SF Holdings disclosed its 2019 annual report. During the reporting period, operating income was 112.193 billion yuan, a year-on-year increase of 23.37%; net profit attributable to mothers was 5.786 billion yuan, a year-on-year increase of 27.23%.
In recent years, SF has been in the dilemma of continued shrinking market share and weak main business growth. However, in this epidemic, SF made breakthroughs through the direct operation model and the entry of e-commerce, but is the lead at this time sustainable? SF’s dilemma is pain? Still painful? Can future development go smoothly? Let’s find out through the 2019 earnings report.
This epidemic has brought SF to a high light moment. But the lead at this time is not sustainable, and SF’s long-term performance concerns remain.
The State Post Bureau released data for February: SF’s business volume reached 475 million votes, a year-on-year increase of 118.89%, and the market share reached 17.15% , a record high. In contrast, Tongda Express was overshadowed by the impact of the epidemic: Yuantong Express’ business volume reached 233 million votes, a year-on-year decrease of 21.9%; Yunda Co., Ltd. completed 297 million votes, a decrease of 13.41% year-on-year; Shentong Express completed 158 million votes, a decrease of 37.26% .
Why the express industry was so down in this epidemic examination, SF was able to produce such a brilliant result?
There are two main reasons for this:
The first is SF, which has a direct sales system, and has more stability and anti-risk capabilities. Under the direct operation mode, SF has complete control over all links, and employeesMore stable. In addition, SF not only did not stop during the Spring Festival, but also increased the investment in manpower and material resources in the case that the major franchised courier companies could not fully resume work.
The second is the e-commerce special offer launched in May 2019. In November 2019, it took over the order business of Vipshop, increased the e-commerce business volume, and expanded the e-commerce parts market share. strong>.
The epidemic highlights the advantages of SF Express’s direct sales model, with a significant increase in market share, but it is difficult to continue the trend of continuous increase in market share. Mainly due to the serious homogeneity of the express industry, there is almost no conversion cost. After the epidemic, franchise-based express companies will resume work, and SF will face the risk of continued squeeze of market share.
I. How does SF grow?
Lack of e-commerce bonus period and lack of e-commerce traffic support have led to SF’s market share shrinking in recent years. The slowdown in business volume growth and sluggish core business growth resulted in weak revenue growth.
SF’s business volume market share fell from 18.8% in 2010 to 7.6% in 2017, a drop of 60%, after which it has maintained its market share in the past three years.
Data source: company announcement, State Post Office
There are two main reasons why SF’s market share is gradually shrinking: First, the homogeneity of products in the express industry is severe, and the market environment is fiercely competitive; second, the booming demand of the e-commerce industry has driven the business of other express companies. Volume increase , but SF’s direct sales system, higher costs and the demand for e-commerce parts do not match very well, missing the bonus period for the surge in demand for e-commerce parts.
From the data point of view, SF’s 2018 and 2019 business volume growth rates were 26.8% and 25.4%, respectively.It also means that its market share remains unchanged.
Data source: company announcement
Keeping the market share unchanged is also the “war result” of SF’s multi-pronged approach.
Under the pressure of performance, SF launched e-commerce preferential products, but in 2019 it did not drive market share expansion. This means that the market share gained at the expense of profit is offset by the market share lost in the competition.
SF’s business volume market share continues to be squeezed by e-commerce courier companies, mainly because it missed the dividend period of high-speed development of e-commerce. In order to fill the gap here, in May 2019, SF launched electricity prices below 10 yuan. The special products for commercial preferential distribution are positioned in the mid-to-high-end distribution products, and the service and timeliness are better than those of Tongda e-commerce. At the same time, the price is higher than that of Tongda.
In response to SF’s entry into the e-commerce parts market, in November 2019, SF undertook the express delivery business of Vipshop, increasing the number of e-commerce orders to expand the e-commerce express market.
This measure has reduced the dimensionality of franchised express delivery companies, and has gained a certain share of the e-commerce market, but it has also lowered the average unit price of SF Express.
Due to the serious homogeneity of the express delivery industry and the increasing competition in the market, the average unit price of the entire network has continued to decline, from 14.65 yuan in 2014 to 11.80 yuan in 2019. However, the average unit price of SF tickets has remained high and has been firm, but it fell by 1.26 yuan to 21.92 yuan year-on-year in 2019, mainly due to the introduction of lower-priced special e-commerce special products, which lowered the overall average unit price of SF tickets.
Data source: company announcement
Reduced volume and price, revenue “slowed down.”
Compared with franchised express delivery companies, SF is far ahead in terms of revenue scale . In 2019, SF achieved operating income of 112.193 billion yuan, exceeding 100 billion yuan, becoming the first express company with annual revenue of more than 100 billion yuan.
SF’s revenue scale is ahead of other franchise express companies. The main reason is that SF adopts the self-employed model, and the courier fees collected are counted as revenue, while franchise express companies only include face-to-face charges, transit fees and delivery. Fees like Zhongtong did not even include delivery fees. Coupled with the high-end positioning of SF, the average unit price of tickets is close to twice the industry average. Therefore, it is reasonable that SF’s revenue scale is ahead of that of Tongda.
Since March 2019, SF’s DHL business has been consolidated. SF’s 2019 operating income growth rate was 23.26% year-on-year, but it has slowed compared to 2018, mainly due to the increase in business volume in 2019. The combination of a slowdown and a decline in single ticket revenue .
Data source: company announcement
The growth of core business is weak, and new business needs to be scaled up.
Aging parts are the core business of SF, and the revenue growth rate in 2019 is only 5.9%, which is only a quarter of the overall revenue growth rate. It faces a growth bottleneck.
And new business (including express, coldAnd pharmaceutical, international business, same-city express delivery, and supply chain business) revenues reached 27.462 billion yuan, a year-on-year increase of 59.77%. The rapid development is the same-city rapid delivery and supply chain business, especially the supply chain business increased 11 times year-on-year, but because the revenue ratio of the two is less than 10%, it is difficult to reverse the sluggish overall revenue growth trend < / strong>.
Data source: Oriental Fortune
Second, how is SF’s profitability?
The profitability is getting stronger, but it is still in a weak position compared to Tongda.
The year-on-year growth rate of net profit attributable to SF Holdings slowed significantly in 2017 and 2018, and was much lower than the year-on-year growth rate of revenue, and net profit attributable to mothers experienced negative growth in 2018.
The company mainly launched an independent operating model dedicated to economic products during the reporting period, and increased investment in new businesses such as heavy goods and cold chains. Therefore, labor costs, site lease costs, and transportation costs were higher than in previous years. Significant growth. Among them, the operating cost of SF in 2018 increased by 31.17% year-on-year, which is much higher than the year-on-year growth rate of operating income of 27.60%.
In 2019, SF achieved a net profit of RMB 5.797 billion, an increase of 27.23% year-on-year, and the growth rate increased significantly year-on-year. There are two main reasons: First, the net profit of mother-in-law decreased by 4.57% year-on-year in 2018 The second is that thanks to the improvement of cost management and control capabilities, the cost rate during 2019 decreased by 0.56 percentage points year-on-year.
Data source: company announcement
Although SF’s profitability will strengthen in 2019, its profitability is at a low level in the industry compared to Tongda. The direct management model brings higher management and operating expenses, which are the main reasons why SF’s net interest rate is always lower than its peers.
In 2019, SF’s net sales margin was 5.01%, a slight increase year-on-year; but from the following data, since 2016, SF’s net sales margin has been significantly lower than that of Tongda (except Best).
Data source: Oriental Fortune
3. How does it compare with Master’s Department?
Compared with the access system of deep-cultivating middle- and low-end e-commerce parts, SF, which focuses on high-end business parts and time-efficient parts, is at a disadvantage in terms of scale and profitability, but the average ticket price and service quality are in absolute advantages.
(1) In terms of scale, SF’s business volume and market share are behind the reach department.
Without considering the contingency factors of the epidemic, analyze the pros and cons between SF and Tongda based on normal data.
From the data of 2019, SF’s business volume is the lowest, with a market share of only 7.6%, both behind the Tongda Department; and its business scale is larger than that of the Tongda Department, with the growth rate maintained at 35% -45% , Far faster than SF’s 25.4%, further widening the market share gap.
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However, due to the high-end positioning of SF, its average ticket price is far higher than the industry average, and it has a full advantage compared to Tongda.
Although the market is fiercely competitive and the industry’s prices are slowly declining, the average unit price of SF Express remains strong. Although in 2019, the average unit price of SF tickets decreased due to the influence of e-commerce, but it was 85.76% higher than the average price of the industry, and the average unit price advantage was more obvious.
Data source: State Post Office, company announcement
(2) Profitability
It has been explained above that compared with Tongda, SF’s profitability is at a disadvantage.
(3) Quality of service
The direct operation model helps SF to control various business links, which can effectively guarantee service quality and customer experience, and improve customer stickiness. According to data from the State Post Office, the effective complaint rate of SF in 2018 was the lowest in the industry, only 0.49, and the effective complaint rate of Yuantong was the highest, reaching 2.70.
Data source: State Post Office
Benefiting from the direct sales model, SF’s average ticket price is much higher than the industry average, and its service quality ranks first in the industryHowever, these advantages have not given SF an advantage in business volume growth and profitability. This shows that the advantages of SF’s direct mode have peaked.
Can SF go all the way?
With the courier market gradually becoming saturated and homogeneous competition intensifying, it once served as the direct operation model, time-effective parts, and high-end positioning of SF’s “troika”. The advantages have peaked, and the disadvantages have gradually become prominent.
(1) Direct sales mode. Although the advantages of the direct marketing model in the epidemic are prominent, the disadvantages of the direct marketing model cannot be ignored.
The direct operation model is an asset-heavy model, with a large amount of investment in the early stage and a high proportion of labor costs, leading to high management costs. Therefore, due to financial constraints, the network expansion speed is relatively slow, and SF outlets cannot reach more low-end markets, which makes it difficult for SF to deepen its cultivation in the e-commerce field.
(2) Aging. As the core business of SF Express, aging parts are only growing at a 5.9% growth rate in 2019, which is only a quarter of the overall revenue growth rate. The aging parts mainly rely on air transportation, so the weak growth of the aging parts business means that excess air transport capacity will amplify the disadvantage of high aviation costs.
(3) High-end targeting . Due to its high-end positioning, SF missed the dividend from the surge in e-commerce demand, and its market share was gradually squeezed. At present, many franchise-based courier companies and JD Logistics are also working in the high-end market, and market competition has intensified.
SF is facing a gradual slowdown in business volume growth, weak core business growth, and its main business is in a bottleneck. Under the pressure of performance, SF has tried to break through through a diversified layout, but progress has not been smooth.
In 2010, SF launched the “SF Business District E”, which mainly sells food and tests the water and electricity market, but it ended without problems.
In 2012, fresh food e-commerce company “SF Select” was launched; in May 2014, the offline convenience store “Heike” was renamed, and in 2015 it was renamed “SF Express” and in September 2016 it was renamed “SF Express”. According to public information, SF Preferred and “Heike” lost a total of more than 1.6 billion yuan in the three years from 2013 to 2015; in 2015, it launched the cross-border e-commerce “Fengqu Haitao”. All were eventually stripped of the listing system.
It can be seen that on the road of diversification, SF has many fatalities, but it has not stopped SFSteps to find new performance growth points. Since 2018, SF has successively entered the same city distribution business, increased the cold chain business, cut into the supply chain business and the e-commerce parts market .
In July 2018, SF launched the “City Express Delivery” business.
In August 2018, SF invested 940 million yuan to purchase 75% of Xia Hui Hong Kong, completed the acquisition of Xia Hui’s cold chain business in Mainland China, Hong Kong, China and Macau, China, to establish a new Xia Hui and strengthen the cold chain. Business layout.
In February 2019, the company invested 5.5 billion yuan to complete the acquisition of Deutsche Post DHL Group’s supply chain business in Mainland China, Hong Kong, China and Macau, and establish the SF DHL business to lay out the To B-side supply chain business.
In May 2019, SF launched special special products with prices below 10 yuan to return to the e-commerce express market.
However, due to the direct asset management model of SF Express, First, it is difficult to spread outlets to more low-end markets and fully penetrate the sinking market; second, higher costs will give profitability Bring some pressure . And The decline in the growth rate of the e-commerce industry will cause limited growth in the e-commerce express market. Therefore, it is still difficult to expand its market share.
Furthermore, the same-city express delivery, cold chain and supply chain businesses currently contribute less to SF’s overall revenue, accounting for only 10% of the overall revenue, so it is difficult to reverse the sluggish growth of the main business.
So, the short-term performance brought by the epidemic is dazzling, but long-term performance concerns remain . From the current point of view, the promotion of new business is also difficult to break through the current plight of SF, SF is still far from sailing.
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