E-commerce In Asia And Latin America Will Transform Last-Mile Delivery

Key Takeaways

• Aggressive automation, digital innovation, and AI-driven operations are driving cost reductions and margin improvements, outpacing industry efficiency gains.
  
• Expansion into new markets and partnerships with higher-margin customers position J&T for accelerated revenue growth and enhanced long-term earnings potential.
  
• Heavy reliance on Southeast Asia e-commerce, rising regulation, fierce competition, and capital risks from rapid expansion threaten growth, margins, and long-term profitability.

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.

• Analyst consensus expects strong parcel volume growth in Southeast Asia, but recent results show J&T's market share expanding by 5.4 percentage points and parcel volume surging 58 percent year-on-year, indicating the company is outpacing industry growth forecasts, with potential for even higher revenue and EBIT margin expansion as it separates further from competitors.
  
• While consensus calls for ongoing cost and efficiency gains, J&T's aggressive application of China-learned automation and digital management has already delivered a 16.7 percent year-on-year cost per parcel reduction in Southeast Asia and suggests further margin uplift is likely as these practices are rolled out more deeply and rapidly in both core and new markets.
  
• The company's early adoption and scaled deployment of AI-driven automation and 900 autonomous delivery vehicles in China, along with over 57 automated sorting systems in Southeast Asia, provide a technological edge that could drive structural reductions in operating costs and sustained net margin enhancement as last-mile efficiency improves faster than industry norms.
  
• J&T's partnership strategy with non-e-commerce and higher-margin customers-such as social sellers and branded retailers-remains nascent in key regions, but the company's leadership in network partner models and localized service stations could unlock significant ARPU and earnings gains as this customer segment grows well beyond current sub-10 percent contribution.
  
• J&T's rapid EBITDA breakeven in new markets like Latin America and demonstrated ability to enter, scale, and win contracts with major e-commerce platforms, including TikTok Shop and Mercado Libre, point to an underestimated long-run total addressable market and multi-year top-line acceleration, with potentially transformative impact on group-level free cash flow and earnings power.

J&T Global Express Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on J&T Global Express compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming J&T Global Express's revenue will grow by 21.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.5% today to 6.1% in 3 years time.
• The bullish analysts expect earnings to reach $1.2 billion (and earnings per share of $0.17) 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 bullish analyst cohort, the company would need to trade at a PE ratio of 16.5x on those 2028 earnings, down from 70.1x today. This future PE is greater than the current PE for the HK Logistics industry at 14.2x.
• 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 7.72%, as per the Simply Wall St company report.

J&T Global Express Future Earnings Per Share Growth

Risks

• The intense price competition in China has led to declining revenue per parcel, which even significant cost reductions have failed to fully offset, resulting in a 78 percent drop in adjusted EBIT for the China segment and putting sustained pressure on overall net margins and earnings if the trend continues.
  
• J&T's fast overseas expansion, particularly in new and unfamiliar markets such as Latin America, requires substantial capital investment and exposes the company to regulatory complexities and unpredictable competition, which could result in capital misallocation and depress returns on invested capital, ultimately impacting future earnings growth.
  
• The company remains heavily reliant on the Southeast Asian e-commerce sector for both volume and profit growth, and any slowdown or saturation in Southeast Asia e-commerce growth could lead to stagnation or decline in top-line revenue, especially as the non-e-commerce business remains a small portion of its volumes.
  
• Rising global protectionism, geopolitical uncertainties, and stricter customs regimes threaten to impede cross-border e-commerce flows and increase operational costs for J&T, potentially limiting international parcel growth and compressing future profit margins as compliance expenses rise faster than revenues.
  
• Advancements in digitalization and automation, while currently leveraged by J&T for efficiency, enable new, asset-light competitors to quickly disrupt markets with lower cost structures, which could further erode J&T's pricing power and compress its net margins over the long term as industry competition intensifies.

Valuation

• The assumed bullish price target for J&T Global Express is HK$14.2, which is the highest 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 bullish 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 bullish analysts, you'd need to believe that by 2028, revenues will be $19.4 billion, earnings will come to $1.2 billion, and it would be trading on a PE ratio of 16.5x, assuming you use a discount rate of 7.7%.
• Given the current share price of HK$9.77, the bullish analyst price target of HK$14.2 is 31.2% higher.
• 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.