Guosen: The express logistics industry has strong resilience, focusing on the stimulating effect of OPEC's expansion of production on oil transportation demand.

Guosen released a research report stating that the oil shipping industry is expected to see a rise in shipping rates due to factors such as the OPEC+ production cut compensation plan, and the future industry shipping rate center is expected to rise. Despite carriers raising prices, trade risks are increasing, and the industry supply pattern may deteriorate. In the aviation sector, supply and demand are optimizing, and domestic jet fuel prices are expected to rebound by 2025. In the express delivery industry, Shunfeng's performance is growing, and the overall competitive landscape is improving. There are advantages for high-quality leading companies in the logistics field, making them worthy of investment. Based on this, it is recommended to be optimistic about value stocks with stable operations and growth potential, and to consider investing in several transportation and logistics stocks such as S.F. Holding (002352.SZ), ZTO EXPRESS-W (02057), Spring Airlines(601021.SH). Key points from Guosen are as follows: Shipping This week, all oil shipping companies disclosed their 2024 annual reports, and the performance is generally in line with expectations. In terms of spot market conditions, oil shipping rates continue to maintain an upward trend, mainly due to the OPEC+ production cut compensation plan involving seven countries. This arrangement involves monthly production cuts ranging from 189,000 barrels per day to 435,000 barrels per day, and will continue until June 2026, opening up a phased increase in production, eliminating previous factors suppressing shipping rates. Despite charterers adjusting shipment schedules and exerting pressure on rates through private deals and public market leasing of older oil tankers, shipping rates continue to rise against the backdrop of the current shortage of new shipping capacity. The shipping rate from the Middle East to Ningbo was around $42,000 per day this week. Considering that new delivery capacity in 2025 accounts for only 0.5% of existing capacity, the bank believes that marginal changes on the demand side are expected to have a multiplier effect on shipping rates and continue to maintain the view that the industry shipping rate center will rise in 2025. It continues to recommend COSCO Shipping Energy Transportation, China Merchants Energy Shipping, and keeping an eye on Nanjing Tanker Corporation. In terms of container shipping, this week, due to the approach of the peak season for U.S. routes, carriers have raised prices for suspended sailings, resulting in a large increase in rates for U.S. routes without a clear improvement in cargo volume. However, given that the U.S. just announced auto tariffs last week, trade risks are actually escalating, and the economic outlook in Europe is still uncertain. It is advisable to observe the sustainability of price hikes. In the medium term, industry supply patterns may continue to worsen, and profits of container ship owners may come under pressure within the year. For investment targets, COSCO Shipping Holdings is expected to distribute a cash dividend of RMB 1.03 per share at the end of 2024 (inclusive of tax), and with cash dividends already distributed in the mid-year of 2024, it is estimated that the cash dividend for the year 2024 is around 50% of the net profit attributable to the shareholders of the listed company for the year 2024, providing support for the investment value of the company. It is recommended to wait for the industry fundamentals to bottom out. Aviation Last week, overall and domestic passenger flight volumes increased compared to the previous week, with overall/domestic passenger flight volumes up by +1.3% / +1.2% respectively. Overall/domestic passenger flight volumes are equivalent to 107.0% / 112.8% of the same period in 2019, and international passenger flight volumes increased by 2.0%, equivalent to 81.7% of the same period in 2019, with international oil prices significantly lower than the same period last year. Recently, the three major airlines released their 2024 annual reports, and due to macroeconomic growth pressure and weak consumption, Air China Limited, China Southern Airlines, and China Eastern Airlines Corporation saw significant year-on-year declines in ticket prices, resulting in losses of RMB 240 million, RMB 1.70 billion, and RMB 4.23 billion respectively for the year. Thanks to the optimization of supply and demand patterns, profits showed varying degrees of reduction in losses year-on-year. Looking ahead to 2025, the supply and demand pattern will continue to optimize, coupled with the industry regulators proposing at the national civil aviation work conference to "regulate the pricing behavior of key time slots and special situations in aviation transport, strengthen price fee supervision, and maintain order in the aviation transport market," the bank believes that domestic jet fuel prices in 2025 are expected to stabilize and rise. In terms of investment recommendations, the future civil aviation supply and demand gap will continue to narrow, airline profitability will continue to recover. Considering that the downward risks of the aviation sector fundamentals are controllable and the downside space for stock prices is limited, it continues to recommend Air China Limited, China Eastern Airlines, China Southern Airlines, and Spring Airlines. Express Delivery Recently, S.F. Holding released its 2024 annual report, with annual revenue of RMB 284.42 billion (up 10.1% year-on-year) and net profit attributable to the parent company of RMB 10.17 billion (up 23.5% year-on-year). The company's net profit margin for the whole year and the fourth quarter of 2024 were 3.58% and 3.29% respectively, up 0.45 percentage points and 0.39 percentage points year-on-year, mainly benefiting from: 1) the company divested the unprofitable FENetwork business in the second quarter of 2023, returning to focus on profitable high-end express delivery services; 2) at the same time, the company persisted in lean resource planning and cost control, implementing measures such as multi-network integration (with cost reductions exceeding RMB 600 million, RMB 800 million, RMB 1.1 billion, and RMB 1.3 billion from 2021 to 2024), operational model transformation, organizational structure innovation, and incentive mechanisms to reduce costs and increase efficiency; 3) the operation of express delivery and same-city businesses has gradually matured and entered the profitability stage, with the express delivery business achieving positive gross margins in 2024, and a substantial increase in net profit from same-city business. Currently, the join-in express delivery market is still in a stage of benign competition, and this year's industry price competition may experience fluctuations, but the long-term competitive landscape of the industry remains positive. It is recommended to closely monitor industry price changes and seize short-term investment opportunities. In terms of investment recommendations, considering that the valuation of leading express delivery companies is still relatively low, it is recommended to invest in S.F. Holding, a high-end express delivery service provider with strong pro-cyclical qualities and continuous cost optimization, as well as benefiting from consumption downgrading, such as ZTO Express and YTO Express.Xpress Group and STO Express Co., Ltd., with a focus on YUNDA Holding Group.Logistics The industry remains optimistic about the development opportunities of high-quality logistics leading companies: 1) The industry is bullish on Deppon Logistics from the bottom up. Due to weak macroeconomic growth and lower-than-expected business volume contribution from JD LOGISTICS, the company's revenue and profit growth performance for 2024 are under pressure. However, the industry believes that the company's operating low point has passed, with a significant seasonal stabilization and rebound in the fourth quarter. With the stabilization of the macroeconomic situation and the fast recovery of related business volume from JD LOGISTICS, the company is expected to achieve double-digit revenue and profit growth in 2025. Furthermore, as competition issues with JD LOGISTICS are resolved in the future, the company still has promising development space. Currently undervalued, it has investment value. 2) The industry also recommends Jiayou International Logistics from the bottom up. Jiayou International Logistics achieved a net profit attributable to the parent company of 1.089 billion yuan in the first three quarters, an increase of 44.23% year-on-year. Although the performance in the third quarter is average, the trend of high growth for the whole year is expected to continue, with employee stock ownership showcasing confidence. The net profit targets for 2024-2026 are 1.56 billion yuan, 2.10 billion yuan, and 2.63 billion yuan respectively, with year-on-year growth rates of 50%, 35%, and 25%. The industry believes that the company's asset layout model combining light and heavy assets, along with the business model of locking in logistics demand through trade and infrastructure, is replicable. The industry is optimistic about the company increasing performance growth points through regional expansion. 3) The industry also recommends Eastern Air Logistics from the bottom up. Recently, the U.S. President Trump decided to impose a cumulative 20% tariff on goods imported from China, and there is a possibility that the U.S. may cancel the "de minimis" tariff exemption for goods valued below $800. This new tariff policy may have a negative impact on China's international air freight volume, leading to pressure on freight rates. However, the industry believes that the overall impact is controllable because high-value-added goods in air transport demand are often relatively rigid. Furthermore, China's cost advantages are significant, and there is still room to pass on tax costs. Lastly, China is accelerating the development of new markets for foreign trade. Due to the uncertainties in the current China-US trade war, market expectations for the company's performance this year vary greatly. Nonetheless, the company's current stock price and valuation already reflect the uncertainty risk quite adequately. The industry believes that due to the continued prosperity of cross-border e-commerce and the relatively rigid demand for high-end goods transportation, China's international air freight rates are still expected to steadily increase this year, indicating that the company still has investment value. Risk warning: Macroeconomic recovery falls short of expectations, and there is a sharp fluctuation in oil prices and exchange rates.