We lifted no-moat Yunda Holding’s fair value estimate by 18% to CNY 11.20 per share after its first-half earnings exceeded our expectation. We think Yunda’s shares are undervalued, and we assume core operating profit will grow at a CAGR of 7% in the next five years.
Entry of Douyin as a strategic shareholder could lead to benefits for Yunda through higher volume and funding. This could allow Yunda to be more competitive.
Bears
Yunda loses volume share to competitor STO Express following support to STO from Alibaba Holdings that enables STO to be more aggressive in its price cuts.
Yunda is one of the “Tongdas,” which refers to the top four national express delivery companies that adopt the network partner model. In this model, Tongdas provide line-haul transportation, sorting, and waybill services to its network partners for fees, while its local network partners provide first-mile pickup and last-mile delivery services under the Tongdas’ brands and collect the customer payments. Unlike some other peers, Yunda controls 100% of its hub-level transit centers, ensuring higher quality assurance. The company was founded by couple Nie Tengyun and Chen Liying. Nie remains the Chairman and President, with a 54.8% stake as of Sept. 30, 2023. Yunda’s strategic shareholder is leading China e-commerce company, Alibaba Group, with around a 1.99% interest.