Rising Protectionism And Escalating Costs Will Challenge Global Logistics

Key Takeaways

• Rising economic nationalism and trade barriers threaten J&T's cross-border growth, while intense competition and price wars continue to pressure revenue per parcel and margins.
  
• Ongoing regulatory, technological, and expansion demands are increasing operational costs and capital needs, risking earnings compression and potential inefficiencies as the company scales.
  
• Investments in automation, market expansion, and diversification are enhancing profitability, operational efficiency, and positioning J&T for sustained growth in high-potential regions.

Catalysts

An investment holding company, offers integrated express delivery services in the People’s Republic of China, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Saudi Arabia, the United Arab Emirates, Mexico, Brazil, and Egypt.

• Global parcel volumes may soon face headwinds as trade protectionism and economic nationalism continue rising, threatening to restrict cross-border flows in key markets where J&T has aggressively expanded; this severely jeopardizes revenue growth and could reverse recent top-line gains.
  
• Despite investments in automation, rapidly tightening environmental regulations and decarbonization targets across emerging economies are set to drive up compliance and operational costs, compressing net margins and putting long-term earnings at risk if logistics providers are forced to accelerate moves toward net zero supply chains.
  
• The company's persistent push into new and developing markets heightens the risk of operational inefficiencies and cost overruns, as ongoing expansion demands large capital outlays and raises SG&A, limiting any benefits from scale and likely resulting in margin stagnation or decline over time.
  
• Sustained price wars in China and potentially in international markets, driven by intense competition from entrenched and tech-driven rivals, continue to erode revenue per parcel; even recent policy attempts at price stability offer no guarantee of long-term margin improvement and leave J&T vulnerable to structural yield pressure.
  
• The required shift towards autonomous vehicles and drone-based delivery is expected to demand outsized capital expenditures relative to current cash flow generation, placing strain on capex budgets and risking dilution of shareholder value as the industry moves to a high-investment, lower-margin paradigm.

J&T Global Express Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on J&T Global Express compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming J&T Global Express's revenue will grow by 13.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 1.5% today to 4.3% in 3 years time.
• The bearish analysts expect earnings to reach $687.5 million (and earnings per share of $0.08) by about September 2028, up from $159.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 14.6x on those 2028 earnings, down from 70.5x today. This future PE is greater than the current PE for the HK Logistics industry at 14.3x.
• Analysts expect the number of shares outstanding to decline by 1.54% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.73%, as per the Simply Wall St company report.

J&T Global Express Future Earnings Per Share Growth

Risks

• The rapid and sustained growth of e-commerce in Southeast Asia and Latin America, coupled with J&T's expanding market share and leadership in these regions, suggests a strong secular tailwind for parcel volume and revenue growth in the long term.
  
• J&T's consistent and significant investments in automation, digital management, and network optimization have led to notable reductions in unit costs, with further room for improvement, which supports margin expansion and improved long-term profitability.
  
• Strategic diversification beyond core e-commerce platforms-such as targeted growth in higher-margin non-e-commerce parcels, social commerce sellers, and branded customers-has boosted profit contributions and is likely to enhance consolidated earnings over time.
  
• Successful expansion into New Markets, especially via partnerships with platforms like Mercado Libre and TikTok Shop in Latin America, has yielded positive EBITDA milestones, indicating that international growth and further market penetration can drive future revenue and earnings improvements.
  
• Ongoing adoption of AI, automation (including autonomous vehicles and automated sorting), and network partner/franchise models is creating structural operational efficiencies, which could enable J&T to offset future cost pressures and improve both net margins and free cash flow generation.

Valuation

• The assumed bearish price target for J&T Global Express is HK$7.38, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of J&T Global Express's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$14.2, and the most bearish reporting a price target of just HK$7.38.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $16.0 billion, earnings will come to $687.5 million, and it would be trading on a PE ratio of 14.6x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of HK$9.84, the bearish analyst price target of HK$7.38 is 33.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.