Daily Brief China: JD Logistics , ZTO Express Cayman , Xiaomi Corp and more

In today’s briefing:

China Logistics (Part 2): All JD Logistic Roads Lead Back to S.F. Express

Despite being breakeven just quarters ago, JD Logistics (2618 HK) has achieved profitability on par with global peers nearly 3x its size. Margin still has upside with further subsidiary integration;
JDL is still positioned to accelerate revenue by taking share from S.F. Holding (6936 HK) in untapped opportunities, including domestic B2C (Taobao/Tmall), cross-border B2C (Kuayue acquisition), and B2B;
JDL’s stock price rose 60%+ while it was our top pick for 2024. We reiterate the company as our TOP buy idea in the China logistics space for 2025;

ZTO’s market share losses may accelerate as peers continue to cut prices. Worse yet, margins of its competitors are improving, which will sustain the war for a longer time;
ZTO has maintained profitability growth despite the price war, but we think this situation is unsustainable. Management will eventually need to sacrifice profitability or suffer accelerated share loss.
We now take a more bearish view on ZTO as we see no quick solution to the profit and market share balancing act.

Xiaomi’s Japan market share rose to ~7% in C2Q24 from the year prior, driven by carrier partnerships and brand recognition from SU7 media coverage and a product partnership with LEICA;
Upon examination, we found Xiaomi filled a product gap left by the smartphone exits of Kyocera and Fujitsu, for the carriers, which account for 90% of handset sales in Japan;
In our view, Xiaomi’s success in Japan marks a turning point in its global brand perception, signaling potential for further growth in other developed and high end developing markets.

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