20151125-高盛-Logistics_in_China_When_old_meets_new_96页_5mb

Summary of "Logistics in China: When old meets new"

Core Content

This report from Goldman Sachs explores the dynamics of China's logistics industry, highlighting its rapid growth, structural challenges, and future opportunities. It emphasizes the role of logistics in supporting China's e-commerce boom, the competitive landscape of express delivery firms, and the potential for consolidation and technological advancement.

Main Points

• China's Logistics Market:

  • China's logistics costs reached US$1.7 trillion in 2014, making it the largest logistics market globally, accounting for 17% of GDP, compared to 8% in the US.
  • The report forecasts China's logistics costs to reach US$2 trillion by 2020.

• Express Delivery Market:

  • China's express delivery market is already the world's largest, handling 38 million parcels daily in 2014, with a CAGR of 35% expected for domestic express volumes from 2014 to 2017.
  • E-commerce accounts for 70% of express parcels, and this is expected to rise to 80% by 2020.
  • Singles' Day in 2015 saw over 700 million packages ordered, showcasing the massive scale of the industry.

• Market Structure:

  • The market is fragmented, with over 10,000 third-party logistics providers.
  • Third-party logistics penetration is 8% in China, compared to 11% in the US.
  • Private firms dominate, with SF Express and YTO Express leading in growth and market share.

• Comparison with Global Giants:

  • China's top two logistics companies, SF Express and China Post EMS, are significantly smaller than UPS, FedEx, and DHL.
  • China's domestic logistics sector is still underdeveloped and lacks a global player like UPS or FedEx.

• Key Challenges:

  • Regulatory issues: Private express delivery was illegal until 2009, and electric tricycles are banned in 1/3 of Chinese cities, affecting last-mile delivery.
  • Infrastructure and productivity: China's logistics infrastructure is underdeveloped, with low labor productivity and high spoilage rates in cold chain logistics.
  • Traffic congestion: 16 of the world's 50 most congested cities are in China, which could hinder further growth.

• Emerging Trends:

  • Shift towards third-party logistics: Companies are increasingly moving towards outsourcing logistics.
  • Cold chain logistics is a key growth area, with high demand for temperature-controlled transport.
  • IT platforms are transforming logistics, with Cainiao Network playing a major role.
  • Cross-border e-commerce is gaining traction, with Alibaba aiming to expand next-day delivery to 50 cities by end-2015.
  • In-house logistics is still a major strategy for e-commerce players like JD.com and Suning to enhance customer experience.

• Opportunities:

  • Consolidation and M&A: The report suggests that M&A activity is likely to increase as companies seek to improve service and expand their reach.
  • Growth in cold chain and contract logistics: These segments are expected to grow at 28% and 15% CAGR respectively.
  • Investment in logistics infrastructure: Modern warehousing, air freight, and light trucks are in high demand.
  • Potential for new players: Sinotrans and Kerry Logistics are highlighted as major players with growth potential.

Key Players and Market Cap (as of Nov 20, 2015)

Logistics

• Sinotrans Ltd. (598.HK): US$2.8 billion
• Sinoair (600270.SS): US$3.9 billion
• Kerry Logistics (636.HK): US$2.7 billion
• Jiangsu Xinning (300013.SZ): US$1.0 billion
• CMST Development (600787.SS): US$3.3 billion
• Shenzhen Huapengfei (300350.SZ): US$1.8 billion
• Eternal Asia (002183.SZ): US$8.3 billion

E-Commerce / Retail

• Alibaba (BABA): US$197.9 billion
• JD.com (JD): US$41.5 billion
• VIPSHOP (VIPS): US$9.5 billion
• Jumei (JMEI): US$1.3 billion
• DangDang (DANG): US$0.6 billion
• Suning Commerce (002024.SZ): US$17.5 billion
• Yonghui Supermarket (601933.SS): US$6.7 billion
• GOME Electrical (493.HK): US$3.0 billion
• Intime Retail Group (1833.HK): US$2.3 billion

Pharmaceuticals

• Jointown (600998.SS): US$5.3 billion
• Sinopharm (1099.HK): US$11.1 billion
• Shanghai Pharma (601607.SS/2607.HK): US$7.9 billion

Airlines & Airports

• Air China (601111.SS/753.HK): US$16.4 billion
• China Eastern Airlines (600115.SS/670.HK): US$13.6 billion
• Beijing Capital International Airport (694.HK): US$5.0 billion
• Shanghai International Airport (600009.SS): US$9.1 billion
• Shenzhen Airport (000089.SZ): US$2.8 billion
• Guangzhou Baiyun International Airport (600004.SS): US$2.5 billion

Conglomerates

• Fosun International (656.HK): US$15.7 billion
• Santai Holding (002312.SZ): US$4.7 billion
• Shenzhen International (152.HK): US$3.2 billion
• China Merchants Holdings (144.HK): US$8.9 billion
• NWS Holdings (659.HK): US$5.5 billion

Real Estate

• GLP (GLP): US$7.1 billion
• Mapletree Logistics Trust (MLT): US$1.8 billion
• Vanke (000002.SZ/2202.HK): US$25.4 billion

Conclusion

The logistics sector in China is poised for significant growth, driven by the expansion of e-commerce and the need for more efficient and cost-effective supply chains. While the industry is fragmented and faces several challenges, including regulatory issues, low productivity, and underdeveloped cold chain logistics, there are clear opportunities for consolidation, technological integration, and expansion into new markets. The report highlights the potential for logistics firms to become more integrated and competitive, similar to global giants like UPS and FedEx, and notes that the industry's evolution will have wide-reaching implications across multiple sectors.