MN

19 Dec 2023

CMB International Global Markets | Equity Research | Initiation

J&T Express (1519 HK)

Largest express delivery operator in SEA to
expand globally Lar gest exp ress deliver y op era tor i n SEA to ex pan d glo bally

Target Price HK$14.20

With a solid track record in Southeast Asia’s express delivery sector, we believe Up/Downside 4.4%
J&T Global Express (“J&T Global”) is set to replicate its success story in Latin Current Price HK$13.60
America and the Middle East market. Meanwhile, we expect J&T Global to
narrow the loss significantly in China market, which will serve as a risk reduction China Logistics
driver. We forecast J&T Global to achieve net profit in 2024E. We initiate Wayne FUNG, CFA
coverage on J&T Global with a HOLD rating and SOTP-based TP of HK$14.2. (852) 3900 0826
We believe the high valuation premium over peers has largely reflected J&T waynefung@cmbi.com.hk
Global’s promising outlook in overseas markets.
Katherine NG
 Largest express delivery operator in SEA with a competitive role in (852) 3761 8725
China. Established in 2015 in Indonesia, J&T Global is a global logistics katherineng@cmbi.com.hk
services provider. J&T Global was the largest express delivery operator in
Southeast Asia (SEA) by parcel volume in 2022, with market share of 22.5%. Stock Data
Following the acquisition of BEST China in 2021, J&T Global ranked 6th in Mkt Cap (HK$ mn) 121,079.2
Avg 3 mths t/o (HK$ mn) 67.9
China’s express delivery market by parcel volume in 2022, with market share 52w High/Low (HK$) NA/NA
of 10.9%. J&T Global’s major e-commerce platform partners include Shopee, Total Issued Shares (mn) 8812.2
Lazada, Pinduoduo, Taobao, Tmall and Shein, as well as live streaming Source: FactSet
platforms, such as TikTok, Douyin and Kuaishou. Shareholding Structure
 E-commerce growth continues to be the key driver of SEA express Jet Jie Li 11.1%
delivery market. With increasing e-commerce penetration and the rise of Source: HKEx
social e-commerce, the e-commerce retail market in terms of transaction Share Performance
value in SEA is expected to reach US$374bn in 2027E (CAGR in 2023E- Absolute Relative
27E: 18.6%), according to F&S. The parcel volume of SEA’s express delivery 1-mth 14.5% 23.3%
3-mth NM NM
market is expected to grow at a CAGR of 15.5% in 2023E-27E.
6-mth NM NM
 Expanding into fast-growing New Markets. New Markets include Saudi Source: FactSet
Arabia, the UAE, Mexico, Brazil and Egypt. Driven by rapid economic growth, 12-mth Price Performance
infrastructure improvement, and growing demand from e-commerce, the
express delivery markets in terms of parcel volume in Saudi Arabia/ the UAE/
Mexico/ Brazil/ Egypt are expected to grow at a CAGR of 20.6%/ 21.0%/
18.7%/ 16.1%/ 15.3% in 2023E-27E, according to F&S. We expect New
Markets to be J&T Global’s growth driver over the coming years.
 Earnings projection: Stripping out (1) the fair value change of convertible
preferred shares, (2) listing expense and (3) share-based payment, J&T
Source: FactSet
Global’s adjusted net loss was US$1,488mn/264mn in 2022/1H23. We
forecast the adjusted after-tax loss to be US$494mn in 2023, and potentially
turn to profit of US$78mn/474mn in 2024E/25E.
 What will make us more constructive on the stock? We see China market
as a swing factor to the valuation given the fierce price competition in 2H23.
We will turn more positive on J&T Global when the parcel ASP is stabilized.
Earnings Summary
(YE 31 Dec) FY21A FY22A FY23E FY24E FY25E
Revenue (US$ mn) 4,852 7,267 8,479 10,062 12,578
YoY growth (%) 216.0 49.8 16.7 18.7 25.0
Adjusted net profit (US$ mn) (1,177.7) (1,488.3) (493.8) 77.7 473.8
EPS (Adjusted) (US$ cents) na na (5.71) 0.88 5.38
Consensus EPS (US$ cents) na na (5.51) (0.45) 4.68
P/E (x) na na na 190.1 32.1
P/B (x) na na 6.2 6.0 5.1
Yield (%) na na 0.0 0.0 0.0
ROE (%) na na na 3.2 17.1
Net gearing (%) na na (13.9) (2.7) (13.1)
Source: Company data, Bloomberg, CMBIGM estimates

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19 Dec 2023

Contents

Executive Summary ................................................................................ 3

Valuation .................................................................................................. 6
Industry Overview ................................................................................... 7
SEA Express delivery market ...................................................................................... 7
China express delivery market .................................................................................. 10
Express delivery industries in New Markets.......................................................... 12
Cross-border logistics market................................................................................ 13
Competitive Landscape ........................................................................ 16
SEA express delivery market ................................................................................. 16
China’s express delivery competition.................................................................... 18
Express delivery industries in New Markets.......................................................... 23
Key Entry Barriers .................................................................................................. 24
Business Overview................................................................................ 25
J&T Global’s regional sponsor model ................................................................... 26
Key Services ........................................................................................................... 32
Infrastructure .......................................................................................................... 35
Customers ............................................................................................................... 38
Suppliers ................................................................................................................. 39
Competitive Edge .................................................................................. 40
Growth Strategies.................................................................................. 42
Financial Analysis and Earnings Forecast .......................................... 43
Risk Factors ........................................................................................... 50
Appendix ................................................................................................ 52
Company background ............................................................................................... 52
Employee.................................................................................................................. 53
Financial Summary ................................................................................ 54

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19 Dec 2023

Executive Summary
J&T Global ranked 1st in SEA express delivery market and 6th in China market by
parcel volume in 2022. Established in 2015 in Indonesia, J&T Global Express (J&T Global)
is a global logistics services provider, with the full network coverage of seven Southeast
Asian (SEA) countries (namely Indonesia, Vietnam, Malaysia, the Philippines, Thailand,
Cambodia and Singapore) and a geographic coverage of 99% in China. Leveraging its
highly scalable regional sponsor model, the Company has also tapped into Saudi Arabia,
UAE, Mexico, Brazil and Egypt (“New Markets”) in 2022. According to Frost & Sullivan
(F&S), J&T Global was the largest express delivery operator in SEA by parcel volume in
2022, with market share of 22.5%. Meanwhile, J&T Global ranked 6th in China’s express
delivery market by parcel volume in 2022, with market share of 10.9%. The Company is
also the first Asian express delivery operator of scale to expand into the New Markets.

J&T Global provides comprehensive express delivery services to leading e-

commerce platforms. J&T Global’s major e-commerce platform partners include Shopee,
Lazada, Tokopedia, Pinduoduo (PDD), Taobao, Tmall and Shein, as well as short video
and live streaming platforms, such as TikTok, Douyin and Kuaishou. Moreover, to capture
the growth opportunities in cross-border logistics, J&T Global has also expanded its
businesses to cross-border logistics services, covering small parcels, freight forwarding
and warehousing solutions services.

Figure 1: Market landscape of SEA express delivery Figure 2: Market landscape of China express delivery
by parcel volume (2022) market by parcel volume (2022)

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

E-commerce growth will continue to be the key driver of SEA express delivery
market. With continuous economic growth, increasing e-commerce penetration and the
rise of social e-commerce, the transaction value of the e-commerce retail market in SEA
has witnessed robust growth in the past five years (CAGR in 2018-22: 41.8%), and is
expected to reach US$374bn in 2027E (CAGR in 2023E-27E: 18.6%), according to F&S.
The express delivery market in terms of parcel volume in SEA is expected to deliver a
CAGR of 15.5% in 2023E-27E.

Strategically expanding into New Markets and cross-border services market. In 2022,
J&T Global strategically expanded into other fast-growing New Markets, including Saudi
Arabia, UAE, Mexico, Brazil and Egypt. According to F&S, the express delivery markets in
terms of parcel volume in Saudi Arabia/ UAE/ Mexico/ Brazil/ Egypt delivered a CAGR of
20.2%/ 18.5%/ 22.3%/ 18.7%/ 12.7% during 2018-22, respectively, and is expected to
continue to grow at a CAGR of 20.6%/ 21.0%/ 18.7%/ 16.1%/ 15.3% during 2023E-27E,
with the expected benefit from a range of key trends including sustainable economic growth,
infrastructure improvement, and growing demand from e-commerce. Meanwhile, J&T
Global is tapping into the cross-border logistics market, of which the global cross-border
logistics market is expected to reach US$681bn in 2027E (CAGR in 2023E-27E: 10.5%).

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19 Dec 2023

Figure 3: Market size of express delivery market in Figure 4: Market size of express delivery market in
SEA by parcel volume China by parcel volume

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

Figure 5: Market size of express delivery market in Figure 6: Market size of global and China cross-border
New Markets by parcel volume logistics market by transaction value

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

Company’s growth drivers: (1) Solidify leading positions and expand into New
Markets: J&T Global aims to solidify its market leadership in SEA and China by diversifying
service offerings and improving service quality. Meanwhile, the Company seeks to expand
into New Markets by collaborating with e-commerce partners that also seek business
opportunities in such markets. J&T Global also plans to develop cross-border services. (2)
Expand capacity and enhance network efficiency: Apart from building new sorting
centres and optimizing the density of pickup and delivery outlets, J&T Global will also invest
in advanced, automated sorting machinery and transportation facilities to improve network
efficiency. (3) Improve technology and innovation capabilities: J&T Global aims to
upgrade key functions, such as address digitalization algorithms, within its self-developed
JMS system. J&T Global will continue to invest in automation technologies and software
upgrades to reduce unit costs.

Earnings projection: Stripping out (1) the fair value change of convertible preferred shares,
(2) listing expense and (3) share-based payment, the adjusted net loss was US$476mn/
1,178mn/ 1,488mn/ 264mn in 2020/21/22/1H23. We forecast the adjusted after-tax loss to
be US$494mn in 2023, and potentially turn to profit of US$78mn/474mn in 2024E/25E.

Major risk factors include: 1) high dependence on the development of the e-commerce
industry; 2) risks in managing global operations; 3) dependence on certain customers; 4)
relationship with network partners; 5) fierce industry competition; 6) seasonality; 7) failure
to obtain licenses and permits; and 8) fluctuations in foreign currency exchange rates.

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19 Dec 2023

Figure 7: Key operating assumptions for J&T Global

2020 2021 2022 2023E 2024E 2025E
Shipment volume (mn units of parcel)
Southeast Asia 1,154 2,161 2,513 3,267 4,247 5,394
China 2,084 8,334 12,026 14,912 18,192 21,831
New markets - - 49 246 466 863
Total 3,237 10,495 14,588 18,424 22,906 28,088

Change (YoY)
Southeast Asia - 87.3% 16.3% 30.0% 30.0% 27.0%
China - 300.0% 44.3% 24.0% 22.0% 20.0%
New mark ets - - - 400.0% 90.0% 85.0%
Average - 224.2% 39.0% 26.3% 24.3% 22.6%

ASP (US$)
Southeast Asia 0.91 1.10 0.95 0.83 0.78 0.78
China 0.23 0.26 0.34 0.31 0.31 0.31
New markets - - 1.67 1.47 1.47 1.45
Blended 0.47 0.43 0.45 0.42 0.42 0.43

Change (YoY)
Southeast Asia - 21.3% -13.9% -12.0% -6.0% -1.0%
China - 13.9% 30.1% -8.0% -1.5% -1.0%
New mark ets - - - -12.0% 0.0% -1.0%
Average - -7.8% 3.5% -6.4% -0.2% 2.6%

Unit cost of express delivery by region (US$)

Southeast Asia -0.64 -0.79 -0.76 -0.67 -0.63 -0.60
China -0.51 -0.41 -0.40 -0.34 -0.31 -0.30
New markets - - -2.06 -1.50 -1.29 -1.17
Average -0.55 -0.49 -0.46 -0.41 -0.39 -0.38

Change (YoY)
Southeast Asia - 24.7% -4.5% -11.4% -6.9% -3.4%
China - -19.5% -3.0% -14.4% -8.1% -4.2%
New mark ets - - - -27.1% -13.8% -9.4%
Average - -11.9% -4.8% -10.9% -5.7% -1.5%

Unit gross margin (US$)

Southeast Asia 0.27 0.31 0.19 0.16 0.16 0.17
China -0.28 -0.15 -0.06 -0.03 0.00 0.01
New markets - - -0.39 -0.03 0.17 0.28
Average -0.08 -0.05 -0.01 0.01 0.03 0.05

Change (YoY)
Southeast Asia - 13.3% -38.2% -14.3% -2.1% 8.5%
China - - - - - -338.5%
New mark ets - - - - - 62.0%
Average - - - - 306.3% 54.5%

(US$ mn) 2020 2021 2022 2023E 2024E 2025E

Revenue
Express delivery services 1,525 4,559 6,560 7,758 9,629 12,110
Southeast Asia 1,047 2,378 2,382 2,725 3,330 4,186
China 479 2,181 4,096 4,673 5,615 6,671
New markets - - 82 360 684 1,252
Cross-border services 10 292 708 722 433 468
Total 1,535 4,852 7,267 8,479 10,062 12,578

Revenue growth (by segment)

Express delivery services - 198.9% 43.9% 18.3% 24.1% 25.8%
Southeast Asia - 127.2% 0.2% 14.4% 22.2% 25.7%
China - 355.5% 87.8% 14.1% 20.2% 18.8%
New mark ets - - - 340.0% 90.0% 83.2%
Cross-border services - 2797.5% 142.5% 2.0% -40.0% 8.0%
Average - 216.0% 49.8% 16.7% 18.7% 25.0%

Gross margin (by region)

Southeast Asia 29.8% 27.8% 20.0% 19.5% 20.3% 22.2%
China -120.4% -55.9% -16.2% -8.2% -1.0% 2.3%
Others 32.5% 4.4% 2.4% 5.9% 11.1% 16.8%
Blended gross margin -17.0% -11.2% -3.7% 2.5% 7.4% 10.9%

(US$ mn) 2020 2021 2022 2023E 2024E 2025E

Adjusted EBITDA
SEA 267 427 332 421 549 736
China -616 -1,206 -723 -251 69 210
Others 2 -14 -169 -50 75 182
Unallocated 27 -2 -334 0 0 0
Total adjusted EBITDA -321 -794 -894 120 692 1,128
Share-based payments and expenses -188 -619 -281 -1,420 0 0
Listing expense 0 -12 -10 -6 0 0
Others 0 -1 302 0 0 0
Reported EBITDA -509 -1,427 -884 -1,305 692 1,128

Source: Company data, CMBIGM estimates

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19 Dec 2023

Valuation
Our target price of HK$14.2 is derived from the SOTP methodology. We apply different
EV/EBITDA multiples for SEA and New Markets to better reflect their respective growth
outlook. For China market, we apply Price/Sales multiple given the volatile earnings.

 We assign a target multiple of 16x for the SEA business, which is a 100%
premium over the global integrated logistics operators (~8.3x). Our premium is to
reflect J&T Global’s solid competitive edge and strong execution in market share
gains.

 We assign 20x for other regions (including New Markets and cross-border
logistics). Such premium multiple is to reflect the potential growth in the emerging
markets.

 We assign 0.95x target P/S ratio for the China market, a 20% discount to the
China express delivery peers. We expect J&T Global’s China business to achieve
positive EBIDTA in 2024E after years of market share gain strategy.

Figure 8: Target equity valuation

Breakdown Methodology 2024E Multiple Value % of total
(US$ mn) (x) (US$mn)
SEA EV/EBITDA EBITDA 549 16 8,777 56%
China P/S Revenue 5,615 0.95 5,335 34%
Others EV/EBITDA EBITDA 75 20 1,499 10%
Total EV 15,611 100%
Add: Net cash (2023E) 347
Minus: MI 0
Equity value 15,958
Target price
US$ 1.81
HK$ 14.2
Source: CMBIGM estimates
Note:Others include New Markets and cross-border business

Figure 9: Peers valuation table

Ticker Company Price Market cap PE (x) PB (x) EV/EBITDA (x) PS (x)
(local
(US$ m) FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E
currency)
China express delivery
ZTO US Equity ZTO EXPRESS -ADR 19.83 16,119 14.4 12.6 2.0 1.8 7.0 6.0 3.0 2.6
2057 HK Equity ZTO EXPRESS 153.50 16,119 14.4 12.6 2.0 1.8 7.0 6.0 3.0 2.6
002352 CH Equity S F HOLDING CO-A 40.27 26,960 22.9 18.5 2.1 1.9 8.2 7.1 0.7 0.6
600233 CH Equity YTO EXPRESS -A 11.98 5,640 10.7 9.3 1.4 1.2 5.1 4.5 0.7 0.6
002468 CH Equity STO EXPRESS CO-A 8.12 1,700 27.9 15.8 1.4 1.3 8.0 6.1 0.3 0.3
002120 CH Equity YUNDA HOLDING -A 7.90 3,132 12.7 9.7 1.2 1.1 5.3 5.0 0.5 0.4
Average 17.2 13.1 1.7 1.5 6.8 5.8 1.4 1.2
China logistics (others)
636 HK Equity KERRY LOGISTICS 8.28 1,915 15.5 10.4 0.8 0.7 6.0 5.1 0.3 0.3
2618 HK Equity JD LOGISTICS 9.18 7,762 42.4 22.3 1.3 1.2 6.7 5.0 0.3 0.3
9956 HK Equity ANE CAYMAN INC 5.38 800 12.3 10.7 2.8 2.4 3.0 2.7 0.6 0.5
603056 CH Equity DEPPON LOGISTIC-A 14.21 1,996 17.5 12.3 1.9 1.7 5.8 4.4 0.4 0.4
600787 CH Equity CMST DEVELOPM-A 5.27 1,572 n/a n/a n/a n/a n/a n/a n/a n/a
603128 CH Equity CTS INTERNATIO-A 7.70 1,389 12.9 10.7 1.6 1.5 8.2 6.9 0.7 0.6
603565 CH Equity SHANGHAI ZHONG-A 8.65 2,484 10.7 8.9 1.9 1.8 5.3 4.4 1.4 1.2
002930 CH Equity GUANGDONG GREAT RIVER-A 20.61 1,287 27.9 20.7 3.6 3.3 13.7 11.3 5.8 4.7
600057 CH Equity XIAMEN XIANGYU-A 6.73 2,088 7.6 5.6 0.8 0.7 10.8 7.2 0.0 0.0
Average 18.4 12.7 1.8 1.7 7.4 5.9 1.2 1.0
Overseas (Integrated logistics)
FDX US Equity FEDEX CORP 281.29 70,722 15.4 12.6 2.6 2.3 9.5 8.5 0.8 0.8
UPS US Equity UNITED PARCEL-B 162.94 138,813 18.5 17.1 6.9 6.3 11.9 11.0 1.5 1.4
DHL GR Equity DHL GROUP 45.93 60,484 14.6 13.7 2.3 2.2 7.0 6.7 0.7 0.7
9064 JP Equity YAMATO HOLDINGS 2,593.5 6,629 18.2 16.9 1.5 1.4 8.1 7.0 0.5 0.5
9143 JP Equity SG HOLDINGS 2,008.0 8,654 19.1 15.9 2.2 2.0 9.6 8.3 1.0 0.9
6178 JP Equity JAPAN POST 1,278.5 29,780 15.0 13.0 0.4 0.4 n/a n/a 0.4 0.4
KEX TB Equity KERRY EXPRESS TH 4.1 200 n/a n/a 1.8 2.7 n/a n/a 0.5 0.5
Average 16.8 14.9 2.5 2.5 9.2 8.3 0.8 0.7

Source: Bloomberg, company data, CMBIGM estimates

Note: As at 16 Dec 2023

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19 Dec 2023

Industry Overview
SEA Express delivery market

 SEA amongst the world’s fastest-growing economies

According to F&S, the nominal GDP of SEA reached US$3,526bn in 2022 (CAGR in 2018-
22: 4.5%), and is expected to grow to US$5,189bn in 2027E (CAGR in 2023E-27E: 7.9%),
while the nominal GDP per capita of SEA is expected to deliver a CAGR of 7% in 2023E-
27E. In terms of demographic structure, SEA has a relatively young population, 25% of
which aged 15-29, higher than that of developed countries such as the U.S. (20%),
suggesting vast future growth potential for the new technology and retail markets in SEA,
especially in the e-commerce retail market. Moreover, the urbanization rate of SEA is
expected to surge from 54.4% in 2022 (lower than that of China: 65.2%) to 68.1% in 2027E.

Figure 10: Nominal GDP of SEA Figure 11: Nominal GDP per capita of SEA

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

 SEA e-commerce remains positive spurred by the rise of social e-commerce

On the back of strong economics and increasing internet penetration, SEA e-commerce
retail market delivered a CAGR of 41.8% during 2018-22 with the total transaction value
increasing to US$154.8bn in 2022, according to F&S. We see resilient growth in top e-
commerce platforms in SEA (e.g. Shopee, Lazada and Tokopedia) due to improving
internet infrastructure and smartphone penetration driving the shift to e-commerce in SEA.
Per F&S, with e-commerce penetration rate in SEA growing from 17.9% in 2023E to 29.8%
in 2027E, the e-commerce retail market in SEA is expected to reach US$373.6bn in 2027E
(CAGR in 2023E-27E: 18.6%).

More importantly, the emerging social e-commerce will serve as a new growth driver of e-
commerce market in SEA. The social e-commerce market in terms of transaction value in
SEA increased from US$9.2bn in 2018 to US$60.2bn in 2022 (CAGR: 59.9%), and is
expected to reach US$179.8bn in 2027E (CAGR: 22.2%), according to F&S. The
proportion of social e-commerce to the overall e-commerce retail market in SEA is expected
to increase from 38.9% in 2022 to 48.1% in 2027E, according to F&S.

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Figure 12: Market size of e-commerce retail market in SEA (by transaction value)

Source: Frost & Sullivan, CMBIGM

In terms of region, according to F&S, Indonesia has the largest e-commerce retail market
in SEA, accounting for 47.7% of the SEA market in terms of transaction value in 2022. The
market size of e-commerce retail market in Indonesia amounted to US$73.8bn in 2022
(CAGR in 2018-22: 44.1%), expecting to increase to US$175.2bn in 2027E (CAGR in
2023E-27E: 18%). The e-commerce penetration rate of Indonesia is expected to increase
from 23.6% in 2023E to 33.3% in 2027E, on the back of increased e-commerce users and
wider product offering.

Other SEA countries including Malaysia/ Vietnam/ the Philippines/ Thailand delivered a
CAGR of 44.1%/41.7%/37.1%/42.2% during 2018-2022, respectively. Malaysia, Vietnam,
Philippines and Cambodia markets are expected to grow ~20% YoY in 2027E.

Figure 13: Market size of e-commerce retail market in Figure 14: E-commerce penetration rate of SEA and
Indonesia Indonesia

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

Figure 15: Popularity of social e-commerce platforms in SEA countries

Source: Ninjavan, CMBIGM

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19 Dec 2023

 SEA express delivery industry to deliver CAGR of 15.5% during 2023-27E

SEA express delivery industry has seen strong growth over the past five years, yet
still in its early stages. With the rise of e-commerce retail market driving demand for fast,
high-quality express delivery services, the total parcel volume in SEA surged from 3.3bn in
2018 to 11.1bn in 2022 (CAGR in 2018-22: 36%), and is expected to increase to 23.5bn in
2027E (CAGR in 2023E-27E: 15.5%), according to F&S.

Figure 16: Market size of express delivery market in SEA (by parcel volume)

Source: Frost & Sullivan, CMBIGM

 Growth drivers of SEA express delivery market

1) Continuous growth in consumer purchasing power. According to F&S, the nominal
GDP per capita of SEA is expected to increase from US$6,217 in 2023E to US$8,143
in 2027E, representing a CAGR of 7% during the period, which indicates that increasing
consumer purchasing power in SEA will facilitate the e-commerce development.

2) Improvement in transportation infrastructure and payment system. Certain

locations in SEA, especially rural areas, are still underserved by express delivery
service providers due to a lack of network coverage and underdeveloped transport
infrastructure. On payment system, as consumers are more willing to transact via e-
commerce platform with timely settlement services provided by regional banks in SEA,
express delivery service providers in SEA have started to collaborate with local banks
to offer cash on delivery (COD) services to address the payment issues where online
payments are not available, such as the Philippines.

With a constantly improving transportation system and infrastructure in SEA, we expect

an improvement in service quality, coverage and timeliness of express delivery
services, driving the demand for express logistics from e-commerce.

3) Fast-growing e-commerce industry. Rapid development of e-commerce platforms

and the rise of social e-commerce in SEA have promoted a shift to e-commerce,
especially for young consumers with strong purchasing power, driving demand for fast,
high quality express delivery services for small value goods and community purchases.

4) Favourable policies. Regional governments in SEA have launched a series of policies

and guidelines to outline the scope of express delivery activities and standardize the
permitting processes, which facilitate the sustainable development of SEA express
delivery industry.

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China express delivery market

 China e-commerce’s momentum to continue with increasing penetration

China has the world’s largest e-commerce market, accounting for over 40% of global
transaction (US$3.9tn) in 2022. According to F&S, China e-commerce market, in terms of
transaction value, grew from US$1,059bn in 2018 to US$1,777bn in 2022 (CAGR in 2018-
22: 13.8%), with the e-commerce penetration rate increasing from 43.4% in 2018 to 66.2%
in 2022, attributable to the enhanced internet infrastructure with government support and
the continuous development of mobile internet technology, social network, online payment
and logistics in China.

Similar to SEA, we expect social e-commerce to serve as a growth driver of China’s e-

commerce industry, followed by the rise of multiple social media platforms, such as
Kuaishou, Wechat and Douyin, as well as the leading e-commerce platforms that built up
their live-streaming businesses, such as Taobao, JD and PDD.

 China’s express delivery market to deliver a CAGR of 10.7% in 2023E-27E

Rapid development of e-commerce in China has reshaped and promoted the development
of the logistics sector and the express delivery industry. China has the largest express
delivery market globally in terms of parcel volume in 2022, with parcel volume growing at
CAGR of 21.5% during 2018-22. Due to a strong demand from e-commerce, favorable
government policies, technology upgrade and rising demand for cross-border express
delivery, China’s express delivery market is expected to rise from 125bn parcels in 2023E
to 188bn parcels in 2027E (CAGR: 10.7%).

Figure 17: Market size of express delivery market in China (by parcel volume)

Source: Frost & Sullivan, CMBIGM

 Growth drivers of China’s express delivery market

1） Strong demand from e-commerce. Given that the majority of express delivery parcel
demand comes from e-commerce, we see that the rapid growth in e-commerce will
remain the key driver of China’s express delivery market.

2） Favourable government policies. Chinese government has issued a series of

policies to modernize the express delivery industry, enhance the service quality and
branding of express delivery companies, and stabilize express delivery pricing, which
helps promote the sustainable and orderly development of express delivery industry.

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19 Dec 2023

3） Technological upgrades. By promoting the applications of innovative technologies,

the express delivery operators can achieve the improvement of operational efficiency,
shortening of delivery times and the logistics supply chain optimization.

4） Enhancing infrastructure and facilities. The upcoming new infrastructure and new
energy vehicles will further solidify the foundation for the express deliver industry and
help the operators to achieve technological upgrades and service improvement.

5） Rising cross-border express delivery demand. The 14th Five Year Plan (“14th FYP”)
targets to promote the cross-border e-commerce development by expanding China’s
established e-commerce and logistics experiences to overseas markets and bringing
domestic producers and suppliers directly to overseas consumers. According to F&S,
revenue generated from cross-border small parcels is expected to reach US$92bn in
2027E (CAGR in 2023E-27E: 21.6%).

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19 Dec 2023

Express delivery industries in New Markets

 New Markets economies overview

According to F&S, the total nominal GDP of the New Markets, including Saudi Arabia, UAE,
Mexico, Brazil and Egypt, amounted to US$5,303bn in 2022, and is expected to reach
US$7,218bn in 2027E (CAGR in 2023E-27E: 6.3%). GDP per capita in the New Markets is
expected to grow at a CAGR of 5.1% to US$13,785 in 2027E, much higher than that
expected of SEA (US$8,143), according to F&S.

 E-commerce retail markets in New Markets are set for explosive growth
With the increasing e-commerce penetration, the market size of the e-commerce markets
in New Markets in terms of transaction value surged from US$32bn in 2018 to US$86bn in
2022 (CAGR: 27.5%). With the improving internet infrastructure and continuous economic
growth, the e-commerce markets in New Markets is expected to reach US$243.1bn in
2027E (CAGR in 2023E-27E: 22.6%), according to F&S. E-commerce penetration in the
New Markets is expected to increase from 14.6% in 2023E to 27.5% in 2027E.

Figure 18: Market size of e-commerce retail market in New Markets by transaction

Source: Frost & Sullivan, CMBIGM

 Express delivery markets in New Markets

Total parcel volume of express delivery markets in Saudi Arabia/ UAE/ Mexico/ Brazil/
Egypt delivered a CAGR of 20.2%/ 18.5%/ 22.3%/ 18.7%/ 12.7% during 2018-22,
respectively, and is expected to grow at a CAGR of 20.6%/ 21.0%/ 18.7%/ 16.1%/ 15.3%
during 2023E-27E, per F&S. Expected main drivers include the improved economies,
infrastructure enhancement, growing demand from e-commerce, and the rise of cross-
border logistics with supportive government policies in these regions. It is worth mentioning
that the express delivery service pricing in New Markets are relatively higher compared to
the majority of more-developed markets, as a result of the early stage of development.

Figure 19: Market size of express delivery market in New Markets by parcel volume

Source: Frost & Sullivan, CMBIGM

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19 Dec 2023

Cross-border logistics market

 Cross-border e-commerce retail market

China: growth momentum to sustain backed by favorable policies. Accounting for
over 10% of global trade, China plays a key role in global trade, with export/import goods
value growing at a CAGR of ~9.5%/6.5% during 2018-22, respectively, per F&S. This has
brought about a huge demand for cross-border logistics services in China. China’s cross-
border has competitive advantages in terms of policy environment, supply chain
infrastructure, sources of supply, etc.

On the back of (1) favorable policies, including promoting the international warehouses
construction and streamlining of the return and refund process for cross-border e-
commerce transactions, (2) partnership between e-commerce platforms and overseas
brands, and (3) expansion of international services, China’s cross-border e-commerce
retail market reached US$443bn in 2022 (CAGR in 2018-22: 21.8%), and is expected to
increase to US$1,102bn in 2027E (CAGR in 2023E-27E: 19.5%), according to F&S.

Figure 20: Market size of cross-border e-commerce retail market in China by

transaction value

Source: Frost & Sullivan, CMBIGM

SEA: future key driver of e-commerce retail market in SEA. According to F&S, SEA
cross-border e-commerce retail market grew from US$12.8bn in 2018 to US$49.7bn in
2022 (CAGR: 40.4%), driven by the fast-growing e-commerce retail market, development
of international delivery service and Free Trade Area between SEA and China. With the
constant investment into the cross-border market from global cross-border e-commerce
retailers, such as Amazon, eBay, Alibaba and JD, SEA cross-border e-commerce retail
market will reach US$155.1bn in 2027E (CAGR in 2023E-27E: 24.3%), according to F&S.

Figure 21: Market size of cross-border e-commerce retail market in SEA (by
transaction value)

Source: Frost & Sullivan, CMBIGM

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19 Dec 2023

 Cross-border logistics market

There consists of four major types of business models in the cross-border logistics market:
1) cross-border freight forwarding service, 2) cross-border standard express, 3) cross-
border small parcels, and 4) international warehousing solutions.

Involving multiple parties, including local express delivery service providers, customs
declaration and clearance service providers, freight forwarder and warehousing service
providers, the cross-border logistics market is experiencing the trend of supply chain
integration. Companies with the capability to integrate are expected to outperform by
streamlining services and enhancing operational efficiency and service quality.

Figure 22: Four major business models in the cross-border logistics market

Source: Frost & Sullivan, CMBIGM

Figure 23: Comparison of different business models in cross-border logistics

market

Source: Frost & Sullivan, CMBIGM

China’s cross-border logistics market grew from US$128bn in 2018 to US$538bn in 2022.
However, we consider that the freight rates have continued to fall back to normal levels
from the historical high freight rates due to COVID disruption in 2022, driving the cross-
border logistics market to return to normal. China’s cross-border logistics market is
expected to increase from US$261bn in 2023E to US$411bn in 2027E, representing a
CAGR of 12.1%, according to F&S.

Powered by the rise of cross-border e-commerce, global cross-border logistics market is

expected to increase from US$456bn in 2023E to US$681bn in 2027E (CAGR in 2023E-
27E: 10.5%), according to F&S.

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19 Dec 2023

Figure 24: Market size of global cross-border Figure 25: Market size of China cross-border logistics
logistics market by transaction value market by transaction value

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

 Growth drivers of cross-border logistics market

1) Strong demand from cross-border e-commerce. Benefited from growing consumer

purchasing power, improving internet infrastructure and mobile penetration and the rise
of e-commerce platform, cross-border e-commerce business, the major source of
demand, is expected to continue to serve as the key driver of cross-border logistics.

2) Favourable government policies. A number of countries, including SEA countries,

China and the New Markets, have issued a wave of favourable policies and reforms to
promote the development of the cross-border logistics industry, such as the
establishment of Free Trade Area between SEA and China.

3) Improvement of cross-border logistics infrastructure. To facilitate the development

of cross-border logistics business, local governments of SEA countries, China and New
Markets have sped up the construction of related infrastructure. For instance, Chinese
government is resolved to reinforce overseas warehouses and logistics hubs to
enhance the worldwide supply chain.

4) Technological upgrades to enhance supply chain efficiency. The application of

advanced technologies, including AI, IoT, big data, and cloud computing, can
significantly smoothen the operation of logistics systems, streamlining and enhancing
the efficiency and timeliness of the complex cross-border logistics.

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19 Dec 2023

Competitive Landscape

SEA express delivery market

The express delivery industry in SEA is relatively fragmented, with a CR5 of 47.9% in 2022,
much lower than that of China (76.6%), indicating a huge potential for consolidation. J&T
Global was the largest express delivery operator in SEA express delivery market in
terms of parcel volume in 2022, accounting for 22.5% of the total market share (parcel
volume: 2,513.2mn units), followed by Thailand Post (Thailand’s state post), JNE (private
company) (with a main focus on Indonesia market) and Kerry Express (KEX TB) (with a
main focus on Thailand market).

According to a customer survey conducted by F&S, J&T Global scored the highest (8.4 out
of 10) among the peers with respect to speed, timeliness and service quality satisfaction,
and ~93.4% of J&T Global user respondents indicated that they would continue to use the
express delivery services provided by J&T Global.

Figure 26: Market share of major players in SEA Figure 27: Parcel volume of top 5 express delivery
express delivery market by parcel volume in 2022 operators in SEA express delivery market in 2022

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

Figure 28: Percentage of willingness to continue to use the services

Source: Frost & Sullivan, CMBIGM

Note: The consolidated results for total five countries including Indonesia, Thailand, the Philippines, Vietnam and
Malaysia, according to a customer survey conducted by Frost & Sullivan.

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19 Dec 2023

Multiple market challenges in SEA, including the lack of network coverage, underdeveloped
transportation infrastructure, difficulties in accessing remote areas and unavailability of
settlement options, have led to the situation that relatively few players have the ability to
provide delivery services across multiple countries. Therefore, although the competition in
SEA express delivery market is expected to escalate with new entrants and e-commerce
platforms building their own delivery team, we still expect the existing top players with
coverage and standardized service across multiple countries to maintain their leading roles.

Figure 29: Key challenges for the development of the express delivery sector in
SEA

Source: Frost & Sullivan, CMBIGM

Figure 30: Logistics Performance Index of SEA countries

Customs Customs Infrastructure Int'l shipment Competence Tracking & Timeliness
Country Year LPI Rank LPI Score Rank Score Score Score Score tracing Score Score
Singapore 2023 1 4.3 1 4.2 4.6 4 4.4 4.4 4.3
2018 7 4 6 3.89 4.06 3.58 4.1 4.08 4.32
Thailand 2023 34 3.5 31 3.3 3.7 3.5 3.5 3.6 3.5
2018 32 3.41 36 3.14 3.14 3.46 3.41 3.47 3.81
Vietnam 2023 43 3.3 43 3.1 3.2 3.3 3.2 3.4 3.3
2018 39 3.27 41 2.95 3.01 3.16 3.4 3.45 3.67
Malaysia 2023 26 3.6 31 3.3 3.6 3.7 3.7 3.7 3.7
2018 41 3.22 43 2.9 3.15 3.35 3.3 3.15 3.46
Indonesia 2023 61 3 59 2.8 2.9 3 2.9 3 3.3
2018 46 3.15 62 2.67 2.89 3.23 3.1 3.3 3.67
Philippines 2023 43 3.3 59 2.8 3.2 3.1 3.3 3.3 3.9
2018 60 2.9 85 2.53 2.73 3.29 2.78 3.06 2.98

Source: World Bank, CMBIGM

Note: LPI is an interactive benchmarking tool that based on two components: 1) a worldwide survey of
international logistics operators on the ground (global freight forwarders and express carriers), providing feedback
on the logistics “friendliness” of the countries with which they trade; 2) granular high frequency information on
maritime shipping and container tracking, postal and air freight activities that was collected and made available
to LPI by several data partners.

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19 Dec 2023

China’s express delivery competition

China’s express delivery industry is relatively concentrated, with a CR5 of 76.6% in 2022.
The top 5 companies include ZTO (ZTO US/2057 HK, BUY), Yunda (002120 CH, NR),
YTO (600233 CH, NR), STO (002468 CH) and EMS (a subsidiary of China Post, China’s
state post).

J&T Express ranked 6th in China’s express delivery market in terms of parcel volume in
2022, accounting for 10.9% of the total market share (parcel volume: 12bn units). In 1H23,
the market share of J&T Global in China’s express delivery market was 11.5% by parcel
volume.

Figure 31: Market share of major players in China Figure 32: Parcel volume of top 7 express delivery
express delivery market by parcel volume in 2022 operators in China express delivery market in 2022

Source: Frost & Sullivan, CMBIGM Source: Frost & Sullivan, CMBIGM

Figure 33: Parcel volume growth of major Chinese Figure 34: ASP growth trend of major Chinese express
express delivery operators and industry average delivery operators and industry average

Source: State Post Bureau of the PRC, CMBIGM Source: State Post Bureau of the PRC, CMBIGM

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19 Dec 2023

Figure 35: Negative correlation (-54% in last 10 years) between CR8 and
parcel shipment growth in China

95 140%

120%
90
100%

80%
85

60%

80
40%

20%
75
0%

70 -20%
May-13 Jun-14 Jul-15 Aug-16 Sep-17 Oct-18 Nov-19 Dec-20 Jan-22 Feb-23

Monthly CR8 Shipment volume growth (YoY) - RHS

Source: State Post Bureau of the PRC, Wind, CMBIGM

Figure 36: Profitability comparison of major players in China express delivery market

Source: State Post Bureau of the PRC, Frost & Sullivan, company data, CMBIGM
Note: 1) Revenue of J&T is converted into RMB based on the average exchange rate of 1USD = 6.453CNY for
2021, 1USD = 6.763CNY for 2022, 1USD=6.52CNY for 1H22 and 1USD=7.1CNY for 1H23. 2) J&T’s data refers
to China’s regional data. 3) SF's express delivery revenue includes the revenue generated from intra-city instant
express, express delivery, freight service, cold chain and pharmaceutical service.

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19 Dec 2023

Figure 37: Unit cost breakdown of Chinese express delivery operators

Source: State Post Bureau of the PRC, Frost & Sullivan, company data, CMBIGM
Note: 1) Revenue of J&T is converted into RMB based on the average exchange rate of 1USD = 6.453CNY for
2021, 1USD = 6.763CNY for 2022, 1USD=6.52CNY for 1H22 and 1USD=7.1CNY for 1H23. 2) J&T's data refer
to the regional data of China. 3) STO's sorting hub cost only includes part of the costs, while other related costs
such as staff and depreciation are included in the "Others" part.

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 J&T ZTO YTO STO Yunda SF
Ticker Private ZTO US / 2057 HK 600233 CH 002468 CH 002120 CH 002352 CH
Business model Regional Sponsor Network Partner Network Partner Network Partner Network Partner Direct Operation

market
Market share in 1H23 (in terms of parcel) 11.5% 23.5% 16.4% 13.0% 14.1% 9.8%
19 Dec 2023

Alibaba's stakeholding n/a 8.7% 22.5% 25.0% 2.0% n/a

Value proposition Mid/Low-end market Mid/Low-end market Mid/Low-end market Mid/Low-end market Mid/Low-end market High/Mid-end market
Target market Ecommerce Ecommerce Ecommerce Ecommerce Ecommerce Enterprises/Ecommerce
Revenue recognition Line-haul transportation Line-haul transportation Line-haul transportation Line-haul transportation Line-haul transportation Entire process
Parcel sorting Parcel sorting Parcel sorting Parcel sorting Parcel sorting
Parcel delivery Parcel delivery Parcel delivery Parcel delivery

Key financials (1H23)

Total revenue (RMB mn) 15,642 18,724 27,000 19,086 21,574 124,366
Growth (YoY) 54.7% 13.1% 7.7% 27.6% -5.6% -4.4%
Express delivery revenue (RMB mn) 15,642 17,387 24,386 18,174 20,609 91,998
Growth (YoY) 54.7% 14.8% 12.4% 24.9% -4.7% 13.4%
Gross margin -0.80% 31.1% 11.0% 5.3% 9.9% 13.5%
Net profit (RMB mn) - 4,212 1,896 215 874 3,894
Growth (YoY) n/a 55.3% 4.6% 18.8% 60.5% 18.1%
Key operational data (as at Jun 30, 2023)
Fixed assets (RMB mn) 7,826 30,871 14,750 7,977 13,779 49,780
District & county coverage in China 99.0% 99.0% 99.7% 99.5% 98.6% 99.7%
Number of outlets 7,820 31,000 93,000 51,600 33,301* 35,000

chain and pharmaceutical service. 4) Data with * refers to data of 2022.

Direct network partners 5,900 6,000 5,128 4,950 4,224* n/a
Couriers ('000) n/a n/a n/a 124.53* 169.3* 350.0
Sorting

Source: State Post Bureau of the PRC, Frost & Sullivan, company data, CMBIGM
No. of sorting hubs 83 96 70 70 75 270
No. of self-owned sorting hubs n/a 87 70 70 75 270

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% of self-owned hub s n/a 91% 100% 100% 100% 100%
No. of automated equipment n/a 460 200 199 110 131
Transportation
No. of vehicles 5,000+ 10,000 6,400 n/a n/a 82,000
Self-owned vehicle 3,100 10,000 5,301 4,898 n/a n/a
% of self-owned vehicles ~60% 100.0% 82.8% n/a n/a n/a
No. of routes 2,600 3,800 8,279 n/a n/a 150,000

J&T's operating data refers to the regional data of China. 2) Revenue of J&T is converted into RMB based on the
Note: 1) J&T's financial data includes all regions and its gross margin refers to the blended gross margin while
Figure 38: Overview of major market players in China express delivery

revenue includes the revenue generated from intra-city instant express, express delivery, freight service, cold
average exchange rate of 1USD=6.52CNY for 1H22 and 1USD=7.1CNY for 1H23. 3) SF's express delivery
No. of aircrafts 0 0 12 0 0 99

21
19 Dec 2023

In China, there are three metrics that can evaluate the service quality of the express
delivery operators, namely complaint rate, complaint handling composite index and 72
hours on-time rate, released by the State Post Bureau of the PRC.
1) Average complaint rate: J&T Express ranked 1st among major players in China in 1Q23,
considerably better than the industry average level (J&T Express: 0.8 vs. industry
average: 10.3).

2) Complaint handling composite index: J&T Express also ranked 1st among major
players in China in 1Q23 (J&T Express: 99.95 vs. industry average: 96.45).

3) 72 hours on-time rate: J&T Express ranked 3rd among major players (1st: SF, 2nd: ZTO)
in 1Q23, while the industry average level is 75.39%.

Figure 39: Average complaint rate of top express delivery operators in China (1Q23)

Source: State Post Bureau of the PRC, Frost & Sullivan, CMBIGM
Note: Complaint rate refers to the units of parcels for which the State Post Bureau of the PRC receives complaints
from customers related to specific express delivery operators per million units of parcels that they have delivered.

Figure 40: Complaint handling composite index of top express delivery operators in
China (1Q23)

Source: State Post Bureau of the PRC, Frost & Sullivan, CMBIGM
Note: The parameters of the index include one-time settlement rate, overdue rate, non-standard response rate of
enterprise, false response rate of enterprise and job satisfaction rate.

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19 Dec 2023

Express delivery industries in New Markets

The express delivery industry in New Markets is relatively fragmented. The market
competition remains separated among local players and cross-regional players, such as
FedEx (FDX US, NR), UPS (UPS US, NR), DHL (DHL GR, NR) and Aramex Express
(ARMX UH, NR). Leading local players include 1) Braspress, TNT Express and RTE
Rodonaves in Brazil, 2) Estafeta Express in Mexico, 3) Egypt Express in Egypt, 4) Emirates
post in UAE and 5) Saudi Post in Saudi Arabia.

As the market competition in New Markets is relatively less intensive, the revenue per
parcel (US$1.6) is relatively high as compared to the ones of SEA (US$0.87) and China
(US$0.34), as of 1H23.

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19 Dec 2023

Key Entry Barriers

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19 Dec 2023

Business Overview
Established in 2015 in Indonesia, J&T Global is a global logistics services provider, with a
solid, leading position in SEA, and a competitive role in China. Leveraging its highly
scalable regional partner model, J&T Global’s express delivery business spans over 13
countries and regions, with the full network coverage of seven SEA countries (Indonesia,
Vietnam, Malaysia, the Philippines, Thailand, Cambodia and Singapore) and a geographic
coverage of over 99% in China. The Company has also tapped globally into Saudi Arabia,
UAE, Mexico, Brazil and Egypt (“New Markets”) in 2022. The Company achieved a
geographic coverage of over 90% in the New Markets, as of 30 Jun 2023.

As of 30 Jun 2023, J&T Global’s network consisted of 104 regional sponsors and ~8,700
network partners, coupled with 265 sorting centers and over 8,400 line-haul vehicles (self-
owned/line-haul routes: 4,400/3,900), as well as over 18.6k pickup and delivery outlets.

J&T Global provides a suite of express delivery services to leading e-commerce platforms,
including merchants and consumers on the platforms, such as Shopee, Lazada, Tokopedia,
Pinduoduo, Taobao, Tmall, Shein and Noon, as well as short video and live streaming
platforms, such as TikTok, Douyin and Kuaishou, enabling them to tap into New Markets.
Moreover, to capture the rapid growth in cross-border logistics industry, J&T Global has
also expanded its business to cross-border logistics services, covering small parcels,
freight forwarding and warehousing solutions services across Asia, North America, South
America, Europe, Africa and Oceania.

Figure 41: Global footprint and business milestones of J&T Global

Source: Company data, CMBIGM

Note: Labelled according to year of entry into each market.

Figure 42: Business partners of J&T Global

Source: Company data, CMBIGM

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19 Dec 2023

J&T Global’s regional sponsor model

Express delivery operator can be primarily categorized into three major business models,
including (1) direct operation model, (2) network partner model, and (3) regional sponsor
model.
Figure 43: Three major business models of express delivery operator

Source: Frost & Sullivan, CMBIGM

J&T Global adopts the regional sponsor model in each of its countries of operations,
except for Cambodia and Singapore (under direct operation without regional sponsors
due to their relatively small geographical coverage). According to F&S, the Company is the
only player in SEA and China that has successfully operated such model at scale.

Under the regional sponsor model, J&T Global’s country headquarters, as well as the
regional sponsors through its regional operating entities, operates the critical facilities,
which include sorting centers and line-haul. Local pickup and delivery outlets are primarily
managed either by network partners or regional sponsors via regional operating entities.
Service stations, e.g., small retail stores, are operated by third-party small enterprises or
individuals.

Figure 44: J&T Global’s regional sponsor model and its strengths

Source: Company data, CMBIGM

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19 Dec 2023

Figure 45: Roles of different parties under the regional partner model

Source: Company data, CMBIGM

Figure 46: J&T adopts different models of operations among countries

Source: Company data, CMBIGM

Note: 1) During the ramp-up period when entering into New Markets, the regional operating entities are generally
the unconsolidated regional operating entities, operating exclusively under “J&T” brand. 2) J&T Global seeks to
acquire from regional sponsors’ interests in these regional operating entities in exchange for interest in the
Company, once they think such entities have achieved certain level of business stability. 3) As Singapore and
Cambodia are relatively small in terms of geography, J&T Global operates in these regions without involving any
regional sponsors.

Figure 47: Equity ownership structure of regional sponsor model across regions

Source: Company data, CMBIGM

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19 Dec 2023

Figure 48: Key terms of J&T Global’s cooperation agreement with network partners

Source: Company data, CMBIGM

Figure 49: J&T Global’s delivery process and fund flow through network partners

Source: Company data, CMBIGM

Figure 50: J&T Global’s delivery process and funds flow through direct operation

Source: Company data, CMBIGM

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19 Dec 2023

Figure 51: J&T Global’s delivery process and funds flow through unconsolidated
regional operating entities

a)

b)
Source: Company data, CMBIGM

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19 Dec 2023

 Partnership with regional sponsors

Playing key roles in the business model, regional sponsors, authorized by J&T Global, are
responsible for assisting the operation of local delivery networks in their designated regions.
Regional sponsors continuously invest resources into local operations, including injecting
capital into regional operating entities, navigating local markets and engaging network
partners that are responsible for operating their own pickup and delivery outlets and service
stations. Commercial arrangements and operational structure vary across regions, based
on the maturity of local markets, operational challenge, local laws and regulations.

Regional sponsors are subject to a regular-basis performance review by J&T Global with
KPIs set by country headquarters. Indicators include on-time delivery rate, on-time transit
rate, on-time package signoff rate, lost parcel rate, damaged parcel rate and complaint rate,
based on the local market conditions and historical performance, etc. Moreover, to further
incentivize and enhance their performance, regional sponsors are also subject to the
discretionary rewards or bonus mechanism, which depends on the (1) maturity of the local
network, (2) overall regional KPIs, (3) parcel volume and profitability of network partners,
(4) contribution to the overall cost-effectiveness of the network and cooperation with other
regional sponsors in terms of cost structure optimization.

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19 Dec 2023

 Advantages of J&T Global’s regional sponsor model

1) Operational efficiency. With J&T Global’s leadership and systematic support, the
regional sponsors are authorized to assist in the daily operation and supervision of
local delivery networks, as well as the network expansion and development of new
network partners. To further achieve operational optimization, J&T Global has a review
system to consistently evaluate the performance of regional sponsors and optimize the
portfolio of regional sponsors, while balancing the dynamic process of the expansion.

2) High flexibility and extensiveness. Compared to the network partner model (may
face difficulties in locating qualified network partners) and the direct model (relatively
capital-intensive), the combined regional sponsor model enables J&T Global to
embrace the regional differences as the regional sponsors can execute local
operations. Regional sponsors may also establish unconsolidated regional operating
entities, enabling adaption to the changing market demands during the expansion.

3) Solid local operations with profound market insights. The profound knowledge of
local markets and market observations of the regional sponsors have enabled them to
react promptly to the needs of network partners and end customers, in terms of
complaints handling, pricing adjustments and reward mechanism for network partners,
etc. In addition, J&T Global can frame strategies, scale network and design service
offerings, based on first-hand feedback from the regional sponsors.

4) Highly-aligned interests with regional sponsors. With the highly-aligned interests

with J&T Global, such as holdings of equity interests in operating entities and/or country
headquarters, the regional partners have huge incentives to take ownership in local
operations, execute the Company’s strategies and enhance profitability.

Leveraging such model, J&T Global has successfully established itself as the major player
in the highly competitive markets, where other leading players have been building network
and amassing resources in the past decade. According to F&S, J&T Global is the youngest
among all leading players in China, as well as one of the few newcomers that successfully
gained a substantial share from the major players. In 2022, the Company tapped into Saudi
Arabia, UAE, Mexico, Brazil and Egypt. According to the Company, J&T Global can
generally launch its JMS system within 3 months to undergo localized operations in new
regions, which has enabled the Company to scale efficiently and attain a geographic
coverage of over 90% in the New Markets within a year, as of 30 Jun 2023.

As of 30 Jun 2023, J&T Global had 104 regional sponsors and 8,700 network partners
(SEA/China: 2,800/5,900).

Figure 52: Breakdown of J&T Global’s network partners by region

Source: Company data, CMBIGM

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19 Dec 2023

Key Services

J&T Global primarily provides (1) express delivery services, and (2) cross-border services.

 Express delivery services

J&T Global primarily offers express deliveries of parcels weighing under 20kg, with
expected delivery time of 24-72 hrs. Moreover, the express delivery services are typically
customized based on the local needs of each geographic region. For instance, J&T Global
offers J&T Super in Indonesia, a priority service that emphasizes on time-sensitive parcels
delivery to even the most remote islands within the country.

Figure 53: J&T Global’s process of domestic express delivery service

Source: Company data, CMBIGM

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19 Dec 2023

 Cross-border services
J&T Global primarily offers cross-border services to e-commerce platforms, merchants and
consumers, based on its own cross-border network, coupled with its own domestic express
delivery capabilities and partnerships with commercial partners. The Company provides
three types of cross-border services:

1) Cross-border small parcels: include (i) door-to-door express service, typically for e-
commerce platforms and merchants, covering pickup and sorting, custom clearance,
shipment to sorting and delivery; (ii) transhipment service for individual customer,
covering consolidation of e-commerce parcels in warehouse, transhipment and
delivery in the country of destination.

2) Cross-border freight forwarding: covering cargo space booking and coordination,

custom clearance, and shipment via air or sea carriers.

3) International warehousing solutions: an integrated warehousing services typically

for e-commerce platforms and merchants with self-operated warehouses.

Figure 54: J&T Global’s process of cross-border service

Source: Company data, CMBIGM

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19 Dec 2023

 Service Pricing
Figure 55: J&T Global’s pricing for service offerings

Source: Company data, CMBIGM

Note: 1) J&T Global provides e-commerce platform partners and corporate customers with certain volume
discounts. 2) The regional operating entity collects fees from the network partner for the use of the Company’s
delivery network, which is based on local market conditions and standards.

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19 Dec 2023

Infrastructure

 Sorting centres and warehouses

Connected by line-haul transportation network, J&T Global’s sorting centres collect parcels
from outlets and service stations, sort and dispatch to the destination sorting centres. As
of 30 Jun 2023, J&T Global’s express delivery network operated 265 sorting centres.

Figure 56: Geographic map of J&T Global’s network of sorting centres and
warehouses in operation

Source: Company data, CMBIGM

The automated machines, which enhance the scanning-up peak volume to ~88k parcels/hr,
as well as an intelligent scanning system, are employed at certain key sorting centres. J&T
Global was awarded the Indonesia Innovation award for its sorting centres in Jakarta, which
helped increase the sorting capacity from ~180k parcels/day to ~460k parcels/day.

J&T Global is upgrading its existing sorting centres and constructing customized integrated
logistics centres, with the combined functions of warehouses (storage) and sorting centres
(parcel sorting & transportation) alongside additional functions such as include after-sales
services.

Figure 57: J&T Global’s sorting centres

Source: Company data, CMBIGM

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19 Dec 2023

Figure 58: J&T Global’s warehouse in Bangkok Figure 59: Inside the warehouse

Source: CMBIGM Source: CMBIGM

 Transportation network
J&T Global has established a localized transportation network in multiple countries. As of
30 Jun 2023, the Company’s sorting centres were connected by over 1,100 and over 2,600
well-organized line-haul routes in SEA and China, respectively, with both self-owned fleet
and third-party transportation service providers. J&T’s self-owned fleet contained over
1,270 and 3,100 self-owned line-haul vehicles in SEA and China, as of 30 Jun 2023,
respectively. J&T Global manages the line-haul route planning and vehicle dispatch of the
entire line-haul transportation system.

For the cross-border services and shipping services across Indonesia and the Philippines,
J&T Global contracts for air and sea shipping while maintaining access to third-party
operators.

 Pickup and delivery outlets and service stations

For pickup and delivery outlets, as of 30 Jun 2023, J&T Global had over 18,600 pickup and
delivery outlets, of which over 12,900 were run by its network partners (SEA / China: 5,100
/ 7,800) and over 5,600 were run by its regional operating entities (SEA / China: 4,900 /
20). Given its limited operating history in the New Markets, J&T Global had ~800 outlets
and did not have any network partners in these countries. J&T Global is exploring a “hybrid”
model to expand in the New Markets.

For service stations, J&T Global has multiple service stations in SEA, which are usually
collection points in convenience stores or local shops that are only entitled to designated
geographical scope of operation. J&T Global oversees the performance of outlets and
provides incentives to the regional sponsors and network partners to optimize performance.

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19 Dec 2023

Figure 60: Breakdown of J&T Global’s outlets by primary operator

Source: Company data, CMBIGM

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19 Dec 2023

Customers

J&T Global’s primary customers include e-commerce platforms, enterprises and individual
customers, as well as its network partners and unconsolidated regional operating entities.
For cross-border services, J&T Global’s customers also include freight forwarders.
In SEA, J&T Global has generated a considerable portion of revenue from the e-commerce
platforms, i.e., its direct customers. The e-commerce platforms in SEA generally have great
influence over the shipping method, and are therefore inclined to make agreements directly
with the express delivery service providers to secure express delivery services in bulk. In
2020/ 21/ 22/ 1H23, over 80%/ 85%/ 89%/ 91% of the parcels were from e-commerce
platforms in SEA, respectively.

In China, J&T Global’s direct customers are its network partners, who pick up parcels from
merchants would pay J&T Global fees for transportation, sorting, delivery of the parcel and
use of J&T Global’s brand and platform, given that express delivery service providers in
China are typically required to establish partnership with e-commerce platforms as their
permitted service providers to gain access to merchants and orders from end-users. In
2020/ 21/ 22/ 1H23, over 50%/ 80%/ 80%/ 99% of the parcels were from network partners
platforms in China, respectively.

In 2020/ 21/ 22/ 1H23, revenues from the top five largest customers accounted for 44.6%/
39.4%/ 25.7%/ 29.9% of the Company’s total revenue, respectively. Revenue from the
largest customer, an e-commerce platform, accounted for 35.4%/ 35.4%/ 16.9%/ 11.1% of
the total revenue, respectively.

Figure 61: J&T Global’s revenue from top 5 customers as % of total purchases

.
Source: Company data, CMBIGM

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19 Dec 2023

Suppliers

J&T Global’s principal suppliers are service providers of third-party transportation, human
resources services and express delivery services, which include network partners and
unconsolidated regional operating entities.

In 2020/ 21/ 22/ 1H23, purchases from the five largest suppliers accounted for
15.6%/12.3%/10%/10.3% of the total purchases, respectively, whilst purchases from the
largest supplier amounted to 6.2%/ 3.6%/ 2.5%/ 3% of the total purchases, respectively.

Figure 62: J&T Global’s procurement from top 5 suppliers

Source: Company data, CMBIGM

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19 Dec 2023

Competitive Edge
Global express delivery operator with leading position in SEA

J&T Global is a global logistics service provider with a leading market position in SEA, a
competitive role in China and an expanding footprint in Latin America and the Middle East.
Per F&S, J&T Global is the No.1 express delivery operator in SEA in terms of parcel volume
in 2022 (market share: 22.5%), attaining cost efficiency and economies of scale.

Since its entry in Mar 2020, J&T has experienced rapid growth in China. According to F&S,
J&T Global is the fastest-growing express delivery operator in China among the major
players from 4Q20 to 4Q22. The full integration of BEST Express China (subsidiary of
BEST US), which was acquired in Dec 2021, has enabled J&T Global to improve network
capacity and infrastructure, expand customer base and establish partnerships with major
e-commerce platforms in China. The Company’s parcel volume has witnessed a CAGR of
140.2% from 2020 to 2022, achieving market share of 10.9% in China in 2022 and 11.5%
in 1H23, according to F&S. The Company has also strategically expanded into New
Markets, including Saudi Arabia, UAE, Mexico, Brazil and Egypt since 2022.

Regional sponsor model to promote fast penetration in New Markets

Regional sponsor model has enabled J&T Global to extensively expand in Asia in recent
years. J&T Global serves numerous merchants and end-customers on the leading e-
commerce platforms in SEA and China, such as Shopee, Lazada, Taobao, etc., as well as
the live streaming platforms, e.g. TikTok. J&T Global assists its e-commerce partners with
the critical logistics and parcel delivery infrastructure. For instance, the Company has
successfully helped Shopee expand into emerging markets including Indonesia, Malaysia,
Vietnam, the Philippines, Thailand and Brazil, especially the underdeveloped remote areas
that still have limited express delivery services.

Bolstered by regional sponsors' resources and experience, the Company is well-positioned

to connect the marketplaces and merchants to New Markets, while achieving the reduction
of capital expenditure. Leveraging the solid collaboration with regional sponsors under the
model, the Company has continuously expanded its express delivery network and
customer base in new countries in 2022. For example, the Company achieved a daily peak
volume of over 1.1mn parcels in Brazil in Jul 2023. According to F&S, J&T Global is the
fastest to achieve such level of parcel volume among the major local peers in Brazil.

Continuous technology innovation and automated operation

J&T Global’s self-developed JMS system enables the Company to build and constantly
upgrade various systems and technologies to enhance its operational efficiency, including
address digitalization, allocation of transportation and network resources, parcel tracking
and customer service quality management, etc. The high adaptability of JMS system allows
the Company to establish localized business operations and quickly launch in New Markets.
For example, according to J&T Global, it generally only requires less than three months to
complete the setup of a JMS system and related IT infrastructure in the New Markets.

Moreover, the Company has pioneered address digitalization in SEA with its self-developed
and self-maintained proprietary address database and nine-digit code system. According
to F&S, J&T Global was the only major express delivery service provider in SEA to apply
its nine-digit code technology with a proprietary address database, and its four-segment
code system is among the few advanced systems that integrate the mainstream address
digitalization algorithms in China.

The Company is equipped with a strong team of research and development talents. As of
30 Jun 2023, J&T Global had a global R&D team of 1,658 personnel. Its global R&D
expenses have delivered a CAGR of 77% from 2020-2022.

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19 Dec 2023

Quality customer service catering market needs

J&T Global focuses on the improvement of customer service quality to meet thriving market
needs. According to F&S, J&T Global was the first operator that provided express delivery
services with exclusive features such as 365-day operations and 24-hour customer service,
which subsequently raised the industry standards in Indonesia and Malaysia. Moreover,
the Company offers auxiliary services based on local market demands, including the
broadest coverage of cash-on-delivery services in SEA.

According to F&S, J&T Global obtained a tremendous Net Promoter Score of 8.4 out of 10,
surpassing its competitors in terms of speed, timeliness, and service quality. In China,
according to the State Post Bureau, J&T Global achieved a low lost parcel rate/ complaint
rate/ effective complaint rate of 0.23/ 0.58 / 0.015 per million parcels, compared to industry
averages of 1.90/ 6.68/ 1.83 per million parcels, respectively, as of 1H23.

Experienced management team and regional sponsors

J&T Global’s founder, Mr. Jet Jie Li, has over 20 years of sales and entrepreneurial
experience. Together with the capable management team and regional sponsors, J&T
Global is able to execute its regional strategies and quickly tap into New Markets. The
regional sponsors, which possess extensive industry knowledge and entrepreneurial
expertise, bring valuable insights and local expertise to the Company’s business, ensuring
the smooth implementation of regional business operations.

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19 Dec 2023

Growth Strategies

Solidfy leading position while strategically expanding into New

Markets

J&T Global aims to solidify the existing market leadership in SEA and China, by deepening
relationships with local and global e-commerce partners, as well as diversifying its service
offerings and improving its service quality to enhance its customer stickiness.

The Company also seeks to expand into emerging markets, including Saudi Arabia, UAE,
Mexico, Brazil, and Egypt. Recognizing opportunities in the emerging economies with
relatively low e-commerce penetration, the Company will collaborate with e-commerce
partners that also seek business opportunities in such markets.

The Company plans to diversify its logistics service offerings, ranging from storage to
inventory management, and from delivery to warehousing. Moreover, J&T Global plans to
develop its cross-border services by connecting with more logistics centers, domestic
warehouses and last-mile capacity.

Expand capacity and enhance network efficiency

With a view to broadening geographical coverage based on end-customers’ demands, J&T

Global intends to selectively build new sorting centers and optimize the density of the
pickup and delivery outlets. The Company will also invest in advanced/automated sorting
machinery and related technology in order to enhance the accuracy and efficiency of the
sorting process.

Furthermore, J&T Global plans to upgrade its transportation facilities, through expanding
its line-haul network, upgrading its vehicle fleets, and diversifying its transportation
methods to meet local demands in different markets.

Improve technology and innovation capabilities

J&T Global strives to implement its self-developed JMS system across all markets and
upgrade key functions within the system to improve operational efficiency. For instance,
the Company will optimize its address digitalization algorithms to further enhance the
delivery accuracy and efficiency. In addition, the Company will continuously develop its
global data management platform to effectively manage data from various aspects of
operations and across different markets.

The Company will continue to invest in automation technologies and upgrading software of
sorting equipment to streamline operations, increase the overall efficiency and achieve the
reduction in unit costs. Moreover, the Company will increase the utilization of digitalized
packaging identification (e.g. RFID) to be compatible with the increasingly automated
operations.

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19 Dec 2023

Financial Analysis and Earnings Forecast

Revenue
The Company’s total revenue surged by 216%/ 49.8%/ 18.5% YoY to US$4,852mn/
US$7,267mn/ US$4,030mn in 2021/ 22/ 1H23 respectively, driven by both the revenue
growth of express delivery services and cross-border delivery services.

Express delivery services (88% of revenue in 1H23)

Revenue generated from express delivery services grew 208%/ 42% YoY to US$4,571mn/
US$6,480mn in 2021/ 22, respectively. The increase in revenue in 2021 was driven by (i)
increase in parcel volume (+224% YoY to 10.5bn units), (ii) increase in average selling
price (ASP) in both SEA and China. The growth in 2022 was attributable to the increase in
parcel volume (+39% YoY to 14.5bn units in 2022), driven by the market share gain in
China (2022: 10.9% vs. 2021: 7.7%). In 1H23, revenue from express delivery services
increased 14.1% YoY to US$3,546mn, driven by parcel volume growth (+16.9% YoY to
8bn units).

 SEA: Revenue generated from SEA increased by 127%/ 0.2%/ 6% YoY to

US$2,378mn/ US$2,382mn/ US$1,246mn in 2021/22/1H23, respectively.

 Parcel volume grew 87% YoY to 2,161mn units in 2021, due to the growth in
e-commerce and express delivery markets and its market share gain. The parcel
volume in 2022/ 1H23 increased by 16%/ 18.4% YoY to 2,513mn/ 1,438mn units,
due to the diversified customer base and the increase in e-commerce and social
e-commerce platform partners.

 ASP increased 21% YoY to US$1.1 in 2021, due to the change of service (J&T
Global became responsible for the entire express delivery service) and the
revenue recognition of the charged fee after the SEA entities were acquired and
consolidated. However, the ASP decreased 14% YoY to US$0.95 in 2022, due
to (i) the strategic adjustment to pricing policies arising from market competition,
and (ii) currency fluctuations. In 1H23, the ASP further decreased 10.3% YoY
to US$0.87, due to the fierce market competition in SEA.

 China: Revenue generated from China grew by 356%/ 88%/ 12% YoY to
US$2,181mn/ US$4,096mn/ US$2,203mn in 2021/ 22/ 1H23, respectively.

 Parcel volume grew 300%/ 44% YoY to 8,334mn/ 12,026mn units in 2021/22,
respectively. The growth was mainly attributable to (i) continued expansion of
partnership with more e-commerce platforms (especially upon the acquisition of
BEST Express China), (ii) expanded network of network partners, and (iii)
enhanced service quality and client sourcing abilities. In 1H23, the parcel
volume grew 15% YoY to 6,446mn units, driven by the deepening cooperation
with major e-commerce platforms.

 ASP increased 14%/ 30% YoY to US$0.26/ US$0.34 in 2021/22. The increase
in parcel volume and ASP in 2021 was primarily due to network expansion and
adjustment of pricing terms based on market conditions, whilst the increase in
2022 was due to expanded partnerships with e-commerce platforms and
enhanced bargaining power. In 1H23, ASP remained relative stable at US$0.34
(1H22: US$0.35) in China.

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19 Dec 2023

 New Markets: Revenue generated from the New Markets was US$81.8mn/
US$132.8mn in 2022/ 1H23, accounting for 1.1%/ 3.3% of total revenue respectively.

 Parcel volume in the New Markets was 49.1mn units in 2022 and 83.2mn units
in 1H23 (1H22: 7.7mn units).

 ASP in the New Markets was US$1.7/ US$1.6 in 2022/ 1H23.

 Forecast:

 We forecast the parcel volume in China market to increase by 24%/22% YoY in

2023E/24E, higher than the industry growth as we expect the Company to put
more focus on market share. We forecast the ASP to see a high single-digit
decrease in 2023E, followed by a stabilisation in 2024E-25E (driven by lower
unit cost).

 In SEA, we forecast parcel volume to grow 30% YoY in 2023E, followed by

30%/27% in 2045E/25E, driven by continuous market share gains in regions
such as Thailand.

 We forecast New Markets to contribute parcel volume of 246mn units, in 2023E,

up 4x YoY due to a low base. We forecast 90%/85% parcel volume growth in
2024E/25E, driven by strong growth in regions such as Brazil and the Middle
East.

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19 Dec 2023

Cross-border services (11% of revenue in 1H23)

 In 2021, the segment revenue soared by 28x YoY to US$292mn in 2021, driven by
the ramp-up of cross-border services business. Contributed by the increased market
demand and business expansion, the segment revenue increased 1.4x YoY to
US$708mn in 2022. In 1H23, revenue from cross-border services increased by 78%
to US$449mn, due to the business expansion and expanding relationship with e-
commerce platforms. The proportion of cross-border services to total revenue
increased from 6% in 2021 to 9.8% in 2022, and further to 11.1% in 1H23.

 We forecast the segment revenue to be largely stable YoY in 2023E. We expect the
revenue to drop ~40% in 2024E as we expect JT Global to put the focus on express
delivery business.

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19 Dec 2023

Figure 63: Operating assumptions

2020 2021 2022 2023E 2024E 2025E
Shipment volume (mn units of parcel)
Southeast Asia 1,154 2,161 2,513 3,267 4,247 5,394
China 2,084 8,334 12,026 14,912 18,192 21,831
New markets - - 49 246 466 863
Total 3,237 10,495 14,588 18,424 22,906 28,088

Change (YoY)
Southeast Asia - 87.3% 16.3% 30.0% 30.0% 27.0%
China - 300.0% 44.3% 24.0% 22.0% 20.0%
New mark ets - - - 400.0% 90.0% 85.0%
Average - 224.2% 39.0% 26.3% 24.3% 22.6%

ASP (US$)
Southeast Asia 0.91 1.10 0.95 0.83 0.78 0.78
China 0.23 0.26 0.34 0.31 0.31 0.31
New markets - - 1.67 1.47 1.47 1.45
Blended 0.47 0.43 0.45 0.42 0.42 0.43

Change (YoY)
Southeast Asia - 21.3% -13.9% -12.0% -6.0% -1.0%
China - 13.9% 30.1% -8.0% -1.5% -1.0%
New mark ets - - - -12.0% 0.0% -1.0%
Average - -7.8% 3.5% -6.4% -0.2% 2.6%

Unit cost of express delivery by region (US$)

Southeast Asia -0.64 -0.79 -0.76 -0.67 -0.63 -0.60
China -0.51 -0.41 -0.40 -0.34 -0.31 -0.30
New markets - - -2.06 -1.50 -1.29 -1.17
Average -0.55 -0.49 -0.46 -0.41 -0.39 -0.38

Change (YoY)
Southeast Asia - 24.7% -4.5% -11.4% -6.9% -3.4%
China - -19.5% -3.0% -14.4% -8.1% -4.2%
New mark ets - - - -27.1% -13.8% -9.4%
Average - -11.9% -4.8% -10.9% -5.7% -1.5%

Unit gross margin (US$)

Southeast Asia 0.27 0.31 0.19 0.16 0.16 0.17
China -0.28 -0.15 -0.06 -0.03 0.00 0.01
New markets - - -0.39 -0.03 0.17 0.28
Average -0.08 -0.05 -0.01 0.01 0.03 0.05

Change (YoY)
Southeast Asia - 13.3% -38.2% -14.3% -2.1% 8.5%
China - - - - - -338.5%
New mark ets - - - - - 62.0%
Average - - - - 306.3% 54.5%

(US$ mn) 2020 2021 2022 2023E 2024E 2025E

Revenue
Express delivery services 1,525 4,559 6,560 7,758 9,629 12,110
Southeast Asia 1,047 2,378 2,382 2,725 3,330 4,186
China 479 2,181 4,096 4,673 5,615 6,671
New markets - - 82 360 684 1,252
Cross-border services 10 292 708 722 433 468
Total 1,535 4,852 7,267 8,479 10,062 12,578

Revenue growth (by segment)

Express delivery services - 198.9% 43.9% 18.3% 24.1% 25.8%
Southeast Asia - 127.2% 0.2% 14.4% 22.2% 25.7%
China - 355.5% 87.8% 14.1% 20.2% 18.8%
New mark ets - - - 340.0% 90.0% 83.2%
Cross-border services - 2797.5% 142.5% 2.0% -40.0% 8.0%
Average - 216.0% 49.8% 16.7% 18.7% 25.0%

Gross margin (by region)

Southeast Asia 29.8% 27.8% 20.0% 19.5% 20.3% 22.2%
China -120.4% -55.9% -16.2% -8.2% -1.0% 2.3%
Others 32.5% 4.4% 2.4% 5.9% 11.1% 16.8%
Blended gross margin -17.0% -11.2% -3.7% 2.5% 7.4% 10.9%
Source: Company data, CMBIGM estimates

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19 Dec 2023

Gross Margin

J&T Global’s gross loss expanded by 108% YoY to US$545mn in 2021, due to the ramp-
up of service offerings in China. Thanks to the constantly improving margin in China, the
blended gross loss narrowed by 50% YoY to US$270mn in 2022. The blended negative
gross margin improved from 11.2% in 2021 to 3.7% in 2022. In 1H23, J&T Global realized
a gross profit of US$194mn (1H22: gross loss of US$66mn). The gross margin in 1H23
was 4.8%, compared to a negative gross margin of 1.9% in 1H22.
 SEA: Gross profit increased 1.12x YoY to US$662mn in 2021, contributed by the
express delivery market growth and market share gain in SEA countries. Meanwhile,
gross margin slightly decreased by 2ppts YoY to 27.8% in 2021, due to the volume
discount to the key e-commerce customers. In 2022, gross profit dropped 28% YoY
to US$476mn in 2022, with gross margin slipped 7.8ppts YoY to 20% due to the
increased operational cost including line-haul costs and fulfillment costs. Gross profit
slightly decreased 1% YoY to US$220mn in 1H23, with gross margin slipping from
18.9% to 17.7% in the corresponding periods.

 China: In 2021, gross loss expanded 1.1x YoY to US$1,219mn, primarily due to (i)
fierce market competition, (ii) increased expenditures in expansion, including costs of
equipment and facilities, leases and other operating costs. The negative gross margin
improved from 120.4% in 2020 to 55.9% in 2021, primarily attributable to the improved
operational efficiency driven by network effect, economies of scale and adjustments
to pricing terms. In 2022, the gross losses amounted to US$665mn, with negative
gross margin improving to 16.2%. Gross loss narrowed from US$268mn in 1H22 to
US$17mn in 1H23, with negative gross margin 13.7% to 0.8% in the corresponding
periods.

 Others (New Markets of express delivery and cross-border services): The

segment gross profit was ~US$12mn in 2021. In 2022, a gross loss of US$81mn was
reported. Gross loss in 1H23 narrowed to US$9.5mn (1H22: US$21mn)

Figure 64: Gross margin trend

60%

40%

20%

0%

-20%

-40%

-60%

-80%

-100%

-120%

-140%
Southeast Asia China Others Blended gross margin

Source: Company data, CMBIGM estimates

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19 Dec 2023

Selling, general & administrative expenses

Selling, general and administrative expenses rose by 2.09x YoY to US$366mn in 2021,
largely driven by (i) an increase in staff costs as a result of increased employee benefit
expenses in relation to share-based awards for employees and management, as well as
the shares to certain regional sponsors, and (ii) an increase in share-based payments in
relation to equity transactions.

In 2022, the SG&A expenses slightly dropped by 3% YoY to US$1,096mn in 2022, led by
(i) a decrease in share-based compensation as part of staff cost of US$123mn, and (ii) a
decrease in shared-based payments in relation to equity transaction of US$199mn, largely
offset by (i) increased depreciation and amortization costs in relation to right-of-use assets,
and (ii) increase in advertising and marketing activities.

In 1H23, the SG&A expenses increased by 236% to US$1,768mn, due to (i) a significant
increase in share-based payments related to the issuance of preferred shares to existing
shareholders, (ii) an increase in other share based compensation expenses related to
Class A shares issued to regional sponsors, partially offset by a decrease of US$234mn in
share-based compensation to staff. Excluding the share-based payments and expenses
and impairment of goodwill (US$1,427mn), the adjusted SG&A expenses increased by 28%
to US$341mn in 1H23, largely due to an increase in promotion and marketing expenses.

The expense ratio (as a percentage of revenue) was 23.8%/ 23.3%/ 15.1% in 2020/ 21/ 22.
Excluding share-based payments and expenses and impairment of goodwill, the adjusted
expense ratio was 11.6%/ 10.8%/ 9.6% in the corresponding periods. In 1H23, the expense
ratio was 43.9%, mainly due to a significant increase in share-based payments and
expenses. Excluding share-based payments and expenses and impairment of goodwill, the
adjusted expense ratio slightly increased 0.7ppts YoY to 8.5% in 1H23.

Fair value change

J&T Global completed several rounds of financing by issuing different classes of

convertible preferred shares which are typically recognized at fair value after initial
recognition. The Company recorded a fair value loss of US$4.38bn in 2021 and gains of
US$3bn/ US$1bn in 2022/ 1H23.

Finance costs

The Company’s finance costs were US$14mn/ US$99mn/ US$99.5mn/ US$56mn in 2020/
21/ 22/ 1H23. The significant increase in 2021 was due to (i) an increase in interest expense
of US$81.6mn on convertible preferred shares, due to a special dividend declared in 2021,
(ii) an increase in interest expense on lease liabilities from US$6mn in 2020 to US$14mn
in 2021, partially offset by a decrease in interest expense on borrowings.

The finance costs were largely stable in 2022, which was a mixed outcome of (i) an
increase in interest expense on borrowings from US$4mn in 2021 to US$62mn in 2022,
due to the interest expense related to the senior notes and certain credit facility used in
2022, (ii) an increase in interest expense on lease liabilities, however, largely offset by a
decrease in interest expense on convertible preferred shares from US$82mn to nil in 2022.

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19 Dec 2023

Net profit forecast

J&T Global recorded after-tax profit/loss (before MI) of -US$0.66bn/-6.2bn/+1.57bn/-

0.66mn in 2020/ 21/ 22/1H23.

Stripping out (1) the fair value change of convertible preferred shares, (2) listing expense
and (3) share-based payment, the adjusted net loss was US$0.47bn/ 1.18bn/ 1.49bn/
0.26bn in 2020/21/22/1H23.

We forecast the adjusted after-tax loss to be US$494mn in 2023E, and potentially turn to
profit of US$78mn/ 474mn in 2024E/25E.

Figure 65: Recurring net profit after tax Figure 66: Earnings sensitivity to China ASP and cost
US$ mn 2024E After-tax profit (US$ mn) ASP (US$/unit)
1,000 78 0.29 0.30 0.31 0.31 0.32
-0.067 -221 -74 25 123 270
500 -0.065 -189 -42 56 155 302
Unit line-haul -0.064 -168 -20 78 176 323
0 transportation cost (US$) -0.063 -147 1 99 197 345
-0.061 -115 33 131 229 376
-500

-1,000 2024E After-tax profit (US$ mn) ASP (US$/unit)

78 0.29 0.30 0.31 0.31 0.32
-1,500 -0.194 -322 -174 -76 22 169
-0.189 -229 -82 16 114 262
-2,000 Pick-up & delivery cost -0.185 -168 -20 78 176 323
Recurring net profit after tax (US$) -0.181 -106 41 139 237 385
-0.176 -14 133 232 330 477
Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates
Note: Based on recurring net profit after tax

Figure 67: Adjusted EBITDA projection by region

(US$ mn) 2020 2021 2022 2023E 2024E 2025E
Adjusted EBITDA
SEA 267 427 332 421 549 736
China -616 -1,206 -723 -251 69 210
Others 2 -14 -169 -50 75 182
Unallocated 27 -2 -334 0 0 0
Total adjusted EBITDA -321 -794 -894 120 692 1,128
Share-based payments and expenses -188 -619 -281 -1,420 0 0
Listing expense 0 -12 -10 -6 0 0
Others 0 -1 302 0 0 0
Reported EBITDA -509 -1,427 -884 -1,305 692 1,128
Source: Company data, CMBIGM estimates

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19 Dec 2023

Risk Factors

High dependence on the development of e-commerce industry

J&T Global's business relies heavily on the growth of the e-commerce industry as it
provides express delivery services to e-commerce platforms and merchants. The
development of the e-commerce industry is influenced by several factors, including: 1)
change in consuming power of e-commerce consumers and changes in demographics and
consumer preferences, 2) penetration of smart phone and Internet, as well as the cost of
Internet access and mobile data, particularly in developing countries, 3) development of
fulfilment, payment and other infrastructure in relation to the e-commerce, 4) changes in
laws, regulations and policies, and 5) changes in macro conditions.

Risks in managing global operations

As J&T Global strives to expand its global presence, it faces various risks, particularly in
unfamiliar countries, including: 1) operational challenges due to distance, language, and
cultural differences, 2) limited logistics infrastructure, delivery, and digital payment systems,
3) difficulties in finding capable regional sponsors and partners, 4) adapting to local
practices, laws, regulations, and making investments to localize the business, 5)
challenges in managing and staffing international operations, and 6) import/export
restrictions and changes in trade regulations.

Dependence on certain customers

Collaborating with major e-commerce platforms is a key strategy for J&T Global to expand
its customer base. Given that these platforms have a significant influence on shipping
methods, particularly in SEA, J&T Global may need to accommodate their demands and
provide customized value-added services, in order to maintain and foster these
partnerships, which could increase its operational costs. Additionally, there is no guarantee
that the Company will be able to sustain these relationships in the future.

Relationship with network partners

J&T Global heavily relies on its network partners to reach customers, and thus their
performance directly impacts the Company’s brand reputation. However, managing the
partners may be challenging compared to self-operation, despite providing them with
service standards and training. If the network partners fail to meet expectations, it can harm
the Company’s reputation. If network partners suspend or terminate services in a specific
area, it can disrupt regional services within the region. However, it is challenging to find
timely and reliable replacements or alternatives, which may negatively impact customer
satisfaction, reputation, operations, and financial performance.

Fierce industry competition

J&T Global faces fierce competition from national postal agencies and domestic express
delivery operators. If these competitors lower prices and control costs more effectively, it
could lead to a loss of market share, reduced revenue, and operating margins. Furthermore,
major e-commerce platforms may choose to develop their own delivery capabilities, posing
further competition and potentially impacting J&T Global's market share and parcel volume.

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19 Dec 2023

Seasonality

J&T Global’s operations are subject to seasonal patterns and other regional events. For
instance, parcel volume tends to decrease in the first quarter due to regional holidays like
the Lunar New Year in China and holidays in Southeast Asian countries such as Ramadan.
Additionally, promotional periods like the 9 September and 10 Oct sales promotions can
impact parcel volume. In China, the Company experiences higher parcel volume in the
fourth quarter due to holidays and e-commerce promotional events like the 11 Nov and 12
Dec sales promotions. These fluctuations can affect the Company's revenue and overall
performance.

Failure to obtain licenses and permits

J&T Global is required to hold various licenses and permits to conduct its operations. In
China, this includes obtaining a Courier Service Operation Permit and making the
necessary filings with postal authorities to expand operations under the permit. In Thailand,
where the company collaborates with network partners, they must comply with the transport
management license regime. Additionally, the Company's network partners also need to
acquire the relevant licenses and permits to operate express delivery and transportation
businesses in jurisdictions such as Thailand. Non-compliance with these requirements can
negatively impact the company's operations.

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19 Dec 2023

Appendix
Company background

Figure 68: J&T Global’s major business development milestones

Source: Company data, CMBIGM

Figure 69: J&T Global’s management profile

Source: Company data, CMBIGM

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19 Dec 2023

Employee

As of 30 Jun 2023, J&T Global had a total of 131,935 full-time employees, while 113,053/
8,683/ 10,199 employees were based in SEA/ China/ other markets, respectively.

Figure 70: J&T Global’s employee breakdown by Figure 71: J&T Global’s employee breakdown by
function (2022) function
Function No. of employees % of toal

Operations 111162 84.3%

Sales and Marketing 1709 1.3%

Research and Development 1658 1.3%

General Administration 14284 10.8%

Customer services 3122 2.4%

Total 131935 100%

Source: Company data, CMBIGM Source: Company data, CMBIGM

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19 Dec 2023

Financial Summary
INCOME STATEMENT 2020A 2021A 2022A 2023E 2024E 2025E
YE 31 Dec (US$ mn)
Revenue 1,535 4,852 7,267 8,479 10,062 12,578
Cost of goods sold (1,797) (5,397) (7,538) (8,268) (9,318) (11,203)
Gross profit (261) (545) (270) 211 744 1,375
Operating profit (606) (1,647) (1,390) (1,848) 164 611
Share of (losses)/profits of associates/JV (0) 1 (0) 0 0 0
Interest income 2 9 22 23 22 17
Interest expense (14) (99) (99) (81) (101) (70)
Net Interest income/(expense) (12) (90) (77) (58) (79) (53)
Others 0 (4,384) 3,051 1,000 0 0
Pre-tax profit (619) (6,119) 1,583 (906) 85 557
Income tax (46) (73) (11) (14) (8) (84)
After tax profit (664) (6,192) 1,573 (919) 78 474
Minority interest 99 145 84 46 4 9
Net profit (565) (6,047) 1,656 (873) 82 483
Adjusted net profit (476) (1,178) (1,488) (494) 78 474
Gross dividends 0 121 29 0 0 0

BALANCE SHEET 2020A 2021A 2022A 2023E 2024E 2025E

YE 31 Dec (US$ mn)
Current assets 1,615 3,516 2,846 3,395 3,123 2,736
Cash & equivalents 600 2,102 1,504 1,935 1,407 740
Restricted cash 1 126 80 80 80 80
Account receivables 181 335 514 415 687 691
Inventories 16 29 29 25 36 38
Prepayment 745 882 703 923 896 1,171
Financial assets at FVTPL 71 42 16 16 16 16
Other current assets 0 0 0 0 0 0
Non-current assets 628 3,028 3,089 3,257 3,336 3,475
PP&E 303 1,108 1,053 1,433 1,677 1,932
Right-of-use assets 187 604 481 281 131 31
Deferred income tax 5 10 43 43 43 43
Investment in JVs & assos 53 1 1 0 0 0
Intangibles 6 1,129 964 948 933 917
Financial assets at FVTPL 0 0 481 481 481 481
Other non-current assets 74 177 67 70 70 70
Total assets 2,243 6,545 5,936 6,652 6,459 6,212

Current liabilities 1,147 2,206 1,732 1,946 1,975 2,254

Short-term borrowings 407 60 77 127 177 177
Account payables 225 577 484 648 628 907
Tax payable 9 21 32 32 32 32
Other current liabilities 0 134 0 0 0 0
Lease liabilities 64 207 151 151 151 151
Contract liabilities 137 291 210 210 210 210
Accrued expenses 304 915 776 776 776 776
Non-current liabilities 1,967 10,975 9,188 2,393 2,093 1,093
Long-term borrowings 37 29 1,021 2,021 1,721 721
Obligations under finance leases 111 391 341 341 341 341
Other non-current liabilities 1,818 10,555 7,826 30 30 30
Total liabilities 3,114 13,181 10,920 4,338 4,068 3,347

Total shareholders equity (759) (6,591) (4,847) 2,497 2,578 3,062

Minority interest (111) (45) (137) (183) (187) (197)

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19 Dec 2023

CASH FLOW 2020A 2021A 2022A 2023E 2024E 2025E

YE 31 Dec (US$ mn)
Operating
Profit before taxation (619) (6,119) 1,583 (906) 85 557
Depreciation & amortization 41 107 299 342 378 418
Tax paid (40) (76) (74) (14) (8) (84)
Change in working capital 241 (283) (227) 47 (276) (2)
Others 223 5,404 (2,100) 258 229 153
Net cash from operations (155) (967) (520) (272) 408 1,043

Investing
Capital expenditure (256) (490) (541) (700) (600) (650)
Acquisition of subsidiaries/ investments (0) (612) 4 (3) 0 0
Others (379) 101 (322) 16 15 10
Net cash from investing (635) (1,001) (860) (687) (585) (640)

Financing
Dividend paid 0 0 (121) (29) 0 0
Net borrowings 444 (355) 1,009 1,050 (250) (1,000)
Proceeds from share issues 1,077 4,223 264 450 0 0
Others (236) (398) (271) (81) (101) (70)
Net cash from financing 1,285 3,470 881 1,390 (351) (1,070)

Net change in cash

Cash at the beginning of the year 0 600 2,102 1,504 1,935 1,407
Exchange difference 105 1 (100) 0 0 0
Cash at the end of the year 600 2,102 1,504 1,935 1,407 740
GROWTH 2020A 2021A 2022A 2023E 2024E 2025E
YE 31 Dec
Revenue na 216.0% 49.8% 16.7% 18.7% 25.0%
Gross profit na na na na 252.9% 84.7%
Operating profit na na na na na 272.2%
Net profit na na na na na 492.1%
Adj. net profit na na na na na 509.5%
PROFITABILITY 2020A 2021A 2022A 2023E 2024E 2025E
YE 31 Dec
Gross profit margin (17.0%) (11.2%) (3.7%) 2.5% 7.4% 10.9%
Operating margin (39.5%) (34.0%) (19.1%) (21.8%) 1.6% 4.9%
Adj. net profit margin (31.0%) (24.3%) (20.5%) (5.8%) 0.8% 3.8%
Return on equity (ROE) na na na na 3.2% 17.1%
GEARING/LIQUIDITY/ACTIVITIES 2020A 2021A 2022A 2023E 2024E 2025E
YE 31 Dec
Net debt to equity (x) na na na (0.1) (0.0) (0.1)
Current ratio (x) 1.4 1.6 1.6 1.7 1.6 1.2
Receivable turnover days 27.6 19.4 21.3 20.0 20.0 20.0
Inventory turnover days 2.2 1.5 1.4 1.2 1.2 1.2
Payable turnover days 25.5 27.1 25.7 25.0 25.0 25.0
VALUATION 2020A 2021A 2022A 2023E 2024E 2025E
YE 31 Dec
P/E na na na na 190.1 32.1
P/B na na na 6.2 6.0 5.1
Div yield (%) na na na 0.0 0.0 0.0
Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.

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19 Dec 2023

Disclosures & Disclaimers

Analyst Certification
The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities
or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities
or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific vi ews expressed by that analyst in
this report.
Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities
and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue
of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as
an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies
covered in this report.
CMBIGM Ratings
BUY : Stock with potential return of over 15% over next 12 months
HOLD : Stock with potential return of +15% to -10% over next 12 months
SELL : Stock with potential loss of over 10% over next 12 months
NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months
MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months
UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800
CMB International Global Markets Limited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned
subsidiary of China Merchants Bank)

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