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YTO Express, founded by Qin Xinghua, has entered its harvest season.

On August 15, Aneng announced that from January to June, it had revenue of 5.289 billion yuan, and was expected to reach 10 billion yuan for the whole year; its net profit was 430 million yuan, a year-on-year increase of 80%.

Since the reform was launched in September 2022, Aneng has turned to pursuing profits and its market value has rebounded to around HK$8.5 billion.

This change also reshaped the power structure.

Of the former entrepreneurial "iron triangle", only Qin Xinghua remains at the power center, and shareholder Hillhouse Capital has entered the market and become the dominant force.

For Qin, the challenge is not over yet.

Last year, YTO Express was surpassed by SF Express in terms of freight volume, and it is still challenging to regain the title of "King of Express".

Intensive cultivation

Qin Xinghua and Aneng are focusing on the small-ticket and less-than-truckload sector.

This is a logistics service between express delivery and full truckload. Generally, for goods weighing 10 kg to 3 tons, multiple shipments are required to fill one truckload for delivery.

With cargo volume as the guide, Qin Xinghua and his partners adopted the franchise system and in just 10 years, they created the largest LTL express enterprise in China.

After the epidemic, the express delivery industry entered the stock market and "traded price for volume" for a long time. From 2021 to 2022, YTO Express lost 2.4 billion yuan.

Qin Xinghua mentioned that investors are beginning to return to rationality, requiring companies to reduce fixed expenditures and additional investments and save variable costs; customers are more focused on cost-effectiveness, and franchise outlets are more volatile.

"The era of planting extensively and yielding little is over. Now we need to transform ourselves to intensive farming." Qin led Aneng's business towards profit.

The traditional way of playing in road freight is that the heavier the weight of the goods, the greater the discount and the lower the profit. In the past, in pursuit of scale, freight companies preferred packages with heavy cargo.

Now Qin Xinghua is focusing on optimizing the cargo weight structure.

In May this year, he implemented the "3300 Product Policy", exempting special area surcharges for goods weighing 3kg-300kg to absorb low-weight business.

From January to June, the cargo volume of mini-ticket (less than 70kg) and small-ticket LTL (70 to 300kg) increased by 25.6% and 19.6% respectively, which was higher than the 18.6% increase in the cargo volume of large-ticket LTL (over 300kg).

"The unit price and profit margin of small-ticket LTL are higher... and there is more demand for value-added services," said Aneng.

Qin Xinghua also adjusted the pricing, changing the past one-size-fits-all approach to precise pricing policies for professional markets and high-potential areas.

Since 2022, the average weight of YTO Express's single shipment has dropped from 106 kg to 89 kg, and the total unit price of service per ton has increased from RMB 750 to RMB 824.

Qin Xinghua reduced costs and increased efficiency, and proposed the "five best" goals, the first of which was optimal cost.

He started by optimizing the distribution structure, focusing on building a thousand-ton main hub, increasing the core hubs from 12 to 36, and decisively cutting redundant distribution centers, personnel, and vehicles.

From 2023 to the end of June this year, 54 directly-operated distribution centers were cut, 600 transport vehicles were cut, and 700 contract drivers were reduced.

It should be noted that distribution centers and trunk line transportation account for more than 65% of Aneng’s operating costs.

Qin took many measures. From January to June, Aneng's unit gross profit increased from 106 yuan in the previous year to 137 yuan, a 30% increase.

Aneng estimates that its full-year net profit will be around 800 million yuan.

Express logistics expert Zhao Xiaomin told the 21CBR reporter that YTO Express's performance and stock price have exceeded market expectations. If it wants to maintain this momentum in the future, it must return to the stage of scale competition at the business level.

Digging Deeper

"There are currently 7-8 leading companies in the express delivery industry. In the next 3-5 years, there will only be 2-3 companies left. The winner will be king."

Qin Xinghua said that the change is to "transform green trains into high-speed trains."

The cost is a temporary decline in cargo volume.

In 2023, YTO Express's total freight volume dropped to 12.03 million tons, declining for two consecutive years, and about 570,000 tons less than the peak in 2021.

This gave SF Express Freight an opportunity to overtake.

According to data from the Transport Association Think Tank, in 2022, it surpassed YTO Express in freight volume for the first time, and by 2023 the gap had widened to 920,000 tons.

By 2023, the freight volume of ZTO Express and Deppon Express will narrow the gap with YTO Express to within 800,000 tons.

Qin Xinghua is not anxious. From January to June this year, cargo volume increased by 20.5% year-on-year to 6.42 million tons.

Management expects full-year freight volume to grow by around 15% to approximately 13.83 million tons, exceeding its peak period.

Qin said the core driving force came from the increase in the number of outlets. As of the end of June, Aneng's number of outlets exceeded 31,000, a net increase of 3,000 year-on-year.

At the business level, the strategy formulated by Qin Xinghua and the management team is to "focus on express delivery and dig ten thousand meters deep" to find two growth paths.

First, e-commerce market business.

YTO revealed to the 21CBR reporter that in terms of the total signed volume of goods, the year-on-year increase in the first half of 2024 was about 1.09 million tons, with the e-commerce platform accounting for about 200,000 tons.

The “0 plus service” launched by the “3300” product is mainly aimed at e-commerce and other customers.

"In the future, the business volume of e-commerce platforms may become a new growth point for the company's cargo volume," Aneng said.

Second, the regional and dedicated line markets.

Qin Xinghua mentioned that about 60% of the existing highway express market is provincial logistics products controlled by "regional tyrants" who have good business flows.

Qin estimates that if the region is cut into, the daily volume of cargo will increase by 20,000 to 40,000 tons.

It is said that YTO will adjust its distribution center into a thousand-ton hub based on provinces, and also prepare to compete for the existing market within the province.

“As long as I make the structure of the thousand-ton hub in each province the most efficient and standardized, I can launch a new product for intra-provincial logistics.”

Qin Xinghua said that he was prepared to compete with the "regional bully" in this way.

High-level change

It is a bit regrettable that during the drastic reform, the "iron triangle" of Aneng Entrepreneurship disintegrated.

YTO was first founded by Qin Xinghua. In 2010, Qin Xinghua, a former pilot, left the Guangxi Airport Group and established a regional logistics company.

Two years later, he invited Wang Yongjun to join and gave up the position of chairman.

Wang previously served as vice president of operations for LTL express giant Tiandi Huayu. After joining, he was responsible for overall strategic planning and corporate management.

In the same year, Qin invited Zhu Jianhui, who was working at Best, to join as Chief Operating Officer, in charge of the overall management and execution of business operations.

The three of them worked together to transform YTO Express from a regional company into the "King of LTL Express" and rang the bell for its listing on the Hong Kong Stock Exchange.

In the autumn of 2022, at the beginning of the reform, Zhu Jianhui resigned.

In January last year, Wang Yongjun also resigned as chairman of the board and executive director, and the two of them only retained the honorary position of consultant in Aneng.

Immediately afterwards, Hillhouse Capital became Aneng’s largest shareholder, holding 24.6% of the shares.

Zhao Xiaomin believes that Centurium Capital plays a key role in Aneng's reform. "It is equivalent to re-examining Aneng and formulating its strategic direction, including organizational restructuring and personnel deployment in key positions."

After Wang Yongjun resigned, Chen Weihao, a partner of Hillhouse Capital, and Qin Xinghua served as co-chairmen of the board of directors; when Zhu left office, YTO Express also established a strategic committee, with Chen serving as chairman of the strategic committee.

Afterwards, Aneng started adjusting its operating areas across the country, abolished all provinces and regions, re-divided the areas to establish operating areas, and launched a competition for the regional general "Wolf Warrior".

Aneng’s new team has recruited a large number of professional talents.

Senior executives in key positions, such as Chief Operating Officer, Chief Growth Officer, Chief Financial Officer, etc., are selected from provincial regional general managers.

Shen Meng, executive director of Xiangsong Capital, believes that having more newcomers in charge of front-line business will be conducive to the implementation of the new strategy.

At the beginning of the year, Qin Xinghua mentioned that the company has passed the critical period of transformation and its organizational structure can cope with the competition in the next 3-5 years.

After the adjustments were made, profits increased, but what awaited him and Aneng was even more intense competition from the oligopoly.