J&T Global Express Ltd B

Good day and thank you for standing by. Welcome to the J&T Global Express first half 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To waste your question, press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Haibin Chen, Director of Strategic Investment and Capital Markets. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to GNT Express First Half 2025 Earnings Conference Call. I'm Haibin Chen, Director of Strategic Investment and Capital Markets. The company's results and investor relations presentation were released earlier today and are now available on the company's IR website at ir.jtexpress.com. Before we start the call, we would like to remind you that the call may include forward-looking statements which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of resources outside of J&T. This presentation also contains an audit on IFRS financial measures that should be considered in addition to, but not as a substitute for, the company's financials prepared in accordance with IFRS. I have with me J&T's Executive President Stephen Fan, Vice President Charles Ho, and CFO Dylan Tay. Our management will share strategies. Operating Highlights and Financial Performance for First Half 2025. This will be followed by Q&A session. With that, let me turn the call over to Steven. Steven will read through his prepared remarks in Chinese before I translate it for him in English.

Okay.

Hello, everyone. Welcome to the Mid-term Performance Announcement in 2025. Our company, Thank you very much for your long-term attention and support. I am very honored to report to you about the financial performance of this Group in the first half of this year. In the past six months, the global economic environment has been complicated and changing. The global economy has been in constant conflict, and the international trade policy has been uncertain. The changing government policy is also a challenge for the economic development of all countries. China China China China China China China China China China China China In the first half of 2025, our business volume in Southeast Asia reached 3.2 billion units, The growth is 58% and the market share is 32.8% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth is 5.4% and the market share is 5.4% The growth For example, the average investment time of the package has decreased further. Currently, our average investment time in Southeast Asia is less than two days. The loss and loss rate are also increasing. We share our results with our customers, maintain a reasonable level of profit, and further enhance our cooperation and trust between customers to increase the quantity. This strategy fully reflects the scale effect and the positive cycle of operation deepening. In the future, we will focus on two core strategies. First, we will continue to reduce capital. China's way of reducing capital will continue to be followed up. We will continue to learn about China's digitalization, digitalization management level and experience, and continue to promote the increase in the cost of Southeast Asia. Second, we will vigorously develop non-commercial platform business, including small and medium-sized sellers, brands, chain retailers, and individual customers. These customers' profits are relatively high, can further optimize our customer structure and increase our operating level. Next is the Chinese market. In the first half of 2025, our business volume in China reached 10.6 billion units, which increased by 20%. The market share increased by 0.1%, which is 11.1%. Since the second quarter of this year, the Chinese express market China China China China China Partly to compensate for the negative impact of price decline. From the business results, in the face of the severe external environment, the Chinese market continues to be profitable, showing a strong business tenacity. At the same time as stabilizing the basic market, we actively expand the high-value retail and retail businesses. Currently, the retail and retail businesses reach 4 million orders a day, with a total growth of 60% and an increase of 7% in total sales. We have implemented a series of measures in order to promote the development of retail and commercial business. For example, we have implemented a series of measures in order to promote the development of retail and commercial business. For example, we have implemented a series of measures in order to promote the development of retail and commercial business. For example, we have implemented a series of measures in order to promote the development of retail and commercial business. For example, we have implemented a series of measures in order to promote the development of retail and commercial business. For example, we have implemented a series of measures in order to promote the development of retail and commercial business. Our cloud-based reverse processing service can save 40% of the customer's work time, significantly increasing the customer experience and customer yearning. Finally, the new market. In the first half of 2025, our business in the new market will face important changes. The business volume reached 170 million pieces and increased by 22%. The market share increased to 6.2%. We not only achieved a steady growth in business volume, but also made a first turn at the EBITDA level. The major progress of this twist and turn is mainly due to our success in reproducing China's base experience to the new market, including the investment of automated division equipment, the optimization of road travel planning, and the improvement of the efficiency of modern Lampai. Since the second quarter, with new e-commerce customers entering the Lamei market and our cooperation with the largest e-commerce platform in the local area, the increase in business in the Lamei region will obviously rise. We believe B T We believe that only by adhering to long-term policy and doing the right thing as a man can we create value in the intense competition of the global express industry and repay every investor and partner who trusts and supports G2. In 2025, which is the 10th anniversary of G2's establishment, we will use this mid-term performance as a new starting point, never forget our original intention, move forward with confidence, continue to surpass ourselves, and welcome a broader future that belongs to G2. Hello everyone and welcome to G&T Express 2025 Interview Results presentation. On behalf of the company, I would like to extend our sincere gratitude for your long-standing attention and support.

It's my great honor to present to you the operational and financial performance of the group for the first half of the year. Looking back at the past six months, the global economic environment remains complex and volatile, persistent geopolitical conflict, uncertainties in international trade policies, and evolving tariff regimes continue to pose challenges to economic development across various countries. Despite these numerous external variables, with clear strategic positioning, efficient operational execution, and continuous network enhancement, we achieved significant growth in both scale and profitability in Southeast Asia and the new markets, while also demonstrating resilience in navigating the intense competition in the Chinese market. In the first half of 2025, the Group's password volume reached 13.99 billion parcels, representing a year-on-year increase of 27%. Revenue reached 5.5 billion USD, representing a year-on-year increase of 13%. And the Just Net Profit was 160 million USD, representing a year-on-year increase of 147%. Now, please allow me to provide an overview of the development of our operations in each region. Starting with the Southeast Asia market, in the first half of 2025, our parcel volume in Southeast Asia reached 3.23 billion parcels, representing a year-on-year increase of 58%. Our market share reached 32.8%, representing a year-on-year increase of 5.4 percentage points, securing our position as the industry leader for the sixth consecutive year and gradually widening the gap with competitors. Our robust growth was primarily driven by the continuous empowerment of Southeast Asia through cost reduction experience from China. Our cost per parcel in Southeast Asia decreased by 16.7% year-on-year, while service quality continued to improve. For instance, the average delivery time for parcels further decreased and is now under two days in Southeast Asia, with continued decline in lost parcel rates and damaged parcel rates. We share the benefits of our cost reduction with customers, maintaining a reasonable profit margin level. That strategy further deepens our cooperation and mutual trust with customers, driving passive volume growth and fully demonstrating the virtuous cycle brought by economics of scale and operational refinement. Looking ahead, we will focus on two core strategies. First, continuous cost reduction. As cost reduction methods in China continue to evolve, we will further them from China's automation and digital measurement experience to persistently drive down costs in Southeast Asia. Second, vigorous developing non-commerce platform customers, including small and medium-sized sellers on social media, branded customers, chain retailers, and individual customers. These customers offer higher profit margins and will further optimize our customer structure and enhance profitability. Next, the Chinese market. In the first half of 2025, our parcel volume in China reached 10.6 billion parcels, representing a year-on-year increase of 20%, with market share up by 0.1 percentage point year-on-year to 11.1%. Since the second half, Second quarter of the year, price competition in China Express delivery industry has been exceptionally intense. With industry price continue to decline, we dynamically adjust prices according to regional market competition to maintain relative stability in market share. In the first half of the year, our revenue per parcel decreased by approximately 0.3 RMB year-on-year, but our cost per parcel decreased by over 0.2 RMB year-on-year. Specifically, transportation and sorting costs for parcels decreased by approximately 0.13 RMB year-on-year, coupled with effective expense control, which reduced expense for parcels by 0.04 RMB year-on-year, partially offsetting the adverse impact of price decline. From an operational perspective, Despite the challenging external environment, the Chinese market remains profitable, demonstrating strong operational resilience. While stabilizing our core business, we actively expand high-value individual parcels and reverse logistic parcel business. Currently, individual parcels and reverse logistic parcels average 4 million parcels per day, representing a year-on-year increase of 60%, accounting for 7% of total parcel volume. promote the development of individual parcels and reverse logistic parcels business, we implement a series of measures, such as first, encouraging network partners to establish service stations to enhance control over last mile services and customer reach. Second, increasing the proportion of direct sorting and delivery by optimizing delivery routes, allowing carriers more time to develop individual customers. actively expanding cloud warehouse service capabilities to provide customers with one-stop solutions, including returns, quality inspection, and delivery. Our cloud warehouse reverse processing service can save customers over 40% of the work time, significantly enhancing customer experience and loyalty. Finally, the new markets. In the first half of 2025, our business in the new markets reached a significant turning point. Parcel volume reached 170 million parcels, representing a year-on-year increase of 22%. With an increase of market share of 6.2%, we not only reached steady growth in parcel volume, but also achieved positive EBITDA for the first time. Such a major turnaround was primarily attributable to our successful replication of China's cost reduction experience in the new market. including investments in automated sorting equipment, optimization of routing planning, and improvements in terminal pickup and delivery efficiency. Since the second quarter, with new e-commerce customers entering the Latin American market and our cooperation with the largest local e-commerce platform, business growth in Latin America has noticeably rebounded. We believe that with J&T's strong local network operation capabilities, deep cooperation, and trust with local e-commerce platforms, the Latin American market is expected to resume rapid growth in the coming quarters, becoming an engine for J&T's global growth. We are confident about the future growth potential of the new market. Looking ahead, we will continue to invest in our network. deepening the empowerment of overseas operations through China's experience and continuously optimize end-to-end operational efficiency and customer experience. We firmly believe that only by adhering to long-term reasons and doing the difficult yet right thing can we continue to create value in a fiercely competitive Global Express delivery industry and deliver returns to every investor and partner who trusts and supports J&T. The year 2025 marks the 10th anniversary of J&T's establishment, a significant milestone. Taking this entering performance as a new starting point and remaining true to our original aspiration, we will forge ahead and continue to support ourselves to embrace an event-bright future for J&T. Thank you again for the support. Next, I will hand over to our CFO, Dylan, to walk you through the financial details of this entering performance. Thank you all.

Thank you, Steven. Thank you, Hai Bing. Hi, everyone. Thank you all of you for joining the call again today. I will take you through our financial highlights. Before I start, please note that unless specifically mentioned, all the figures are in US dollars and percentage changes are on a year-on-year basis. Detailed financials, including our financial performance metrics, unit economics, cash flow and capital expenditures are available on our IR website. Here, I will only focus on the key highlights. For J&T Global Express Group overall, we are pleased to report that our total revenue increased by 13.1% year-on-year from $4.9 billion in the first half of 2024 to $5.5 billion in the first half of 2025. Core Express delivery revenue grew by 12.7% over the same period, from $4.7 billion to $5.3 billion. This performance was primarily driven by the parcel volume growth across the 13 countries in which we operate. We have captured the opportunities presented by the globalization of e-commerce, with revenue from Southeast Asia and new markets now accounting for 43% of our total revenue. Gross profit reached $539 million in the first half, remaining stable compared to the prior year period. However, the gross profit margin declined from 11% to 9.8% due to the intensive competitive pressures in the China market. Our total adjusted EBIT for the group, increased by 65.4% year-on-year from $118 million in the first half of 2024 to $196 million in the first half of 2025, largely attributable to the strong profit contribution in Southeast Asia and our first break-even in new markets, which in combined more than offset the China market segment decline. Adjusted Net Profit also showed a significant improvement, reaching $156 million in the first half of 2025, which is a 147% increase from $63 million last year's first half.

Next, I will present our segment results.

In Southeast Asia, supported by the strong volume growth highlighted by Stephen, our revenue increased by 29.6% year-on-year, from $1.5 billion in the first half of 2024 to $2 billion in the first half of 2025. Gross profit reached $351 million in the first half compared to $287 million in the same period last year. Adjusted EBIT amounted to $235 million which is a year-on-year increase of 74% in the first half. As you can see, we have achieved a healthy and sustainable level of profitability in the region with the adjusted EBIT margin improving from 8.9% in the first half of 2024 to 11.9% in the first half of 2025, thanks in part to the growing contribution of the non-e-commerce platform parcels. As an independent e-commerce enabler with flexible pricing, we continue to benefit from growth across the e-commerce platforms. Or at the same time, we are actively expanding our customer base to include the non-e-commerce customers by leveraging our established network and quality services. Furthermore, we are continuously reducing costs by capitalizing on economy of scale and applying operational expertise from China to Southeast Asia. So this approach enhances our unit of economics and allows us to pass on the cost savings to our customers, thereby strengthening our market position. Next, let's move to China. In China, the express delivery market experienced intense price competition during that period. Amidst this pressure, we continue to optimize our customer mix and implement more refined operational management. This initiative helps partially to offset the top-line pressure and sustain our profit resilience. In the first half of 2025, Revenue grew by 4.6% year-on-year to $3.1 billion compared to the first half of 2014. Revenue per parcel in China was $0.30, down from $0.34 in the same period last year, which is in line with the persistent industry-wide pricing pressures. In response to competition, We dynamically adjusted pricing across different regions to maintain our competitiveness while also focus on attracting higher quality customers. At the same time, we continue to work on our cost per parcel which decreased from $0.32 in the first half of 2024 to $0.28 in the first half of 2025. This is driven by the improved operational efficiency enhanced network stability and ongoing capacity investments, as highlighted earlier by Stephen. Key initiatives included expanding our self-owned line haul fleet and increased automation in our sorting centres and our networks. Nevertheless, the extent of the cost reduction was insufficient to offset the price decline, resulting in the year-on-year decrease in our EB per parcel. As a result, the adjusted EBIT was $13 million in the first half of 2025, a decrease of 78% from $60 million in the first half of 2024. Next, let's move to our new segments. For our new segments, our revenue increased by 24.3% year-on-year from $292 million in the first half of 2024 to $362 million in the first half of 2025. mainly driven by the growth in the parcel volume. We are happy to report that our first new markets achieved adjusted EBITDA break-even for the first time, indicating that the economy of scales are beginning to materialize. We expect further improvement in the unit of economics going forward. Adjusted EBITDA reached $1.6 million in the first half of 2025, compared to a loss of $7.8 million in the first half of 2024. with margin improvement from minus 2.7% to 0.4% positive. To support this growth, we expanded our network capacity during the period by investing in automated sorting equipment, we added new outlets, and we also continue to increase our line haul fleet.

Last but not least, let's talk about our cross-border business.

We are now exclusively focused on just the B2B sector, primarily in the international freight forwarding. Although this is a modest and stable segment, we maintain this presence to stay engaged in the cross-border landscape. Consequently, revenue in the first half of 2025 was $29 million, down 43% year-on-year from $52 million in the first half of 2024. We delivered a positive adjusted EBIT of $2.5 million despite this decrease, which is a significant improvement compared to the loss of $13 million last year as we refine our business.

Finally, let me return to our consolidated numbers.

As a result of the factors outlined above and the combination of what I said, Our adjusted net profit reached $156 million in the first half of 2025 representing a 147.1% increase from $63 million in the first half of last year Total net profit for the period was $89 million which is up 186% from $31 million last year Moving into the cash flow So I think we, as a group, we have maintained strong cash flow numbers. We maintain a strong cash flow. The net in cash flow from our operating activities amounted to $421 million in the first half of 2025, which is an increase of 21.8%.

Please stand by, your conference will resume shortly.

After deducting capital expenditure, our free cash flow reached $192 million, which underscored our ability to maintain healthy cash generation amidst our rapid business expansion. As of 30 June 2025, we maintained strong cash balance with our total cash, cash equivalents and restricted cash and investments amounting to $1.7 billion. This concludes our prepared remarks.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, Please press star one and one again. We will now take the first question. From the line of Brian Gong from Citi, please go ahead. Your line is open.

Thank you, Manager, for accepting my question. First of all, congratulations on a very good year. There are two problems. The first one is that the domestic anti-fraud policy has also started to rise in some places. I would like to ask the management team if they can share how this wave of anti-fraud will be of great help to our domestic profits and subsequent improvements. The other one is that we are moving very fast overseas, especially in Southeast Asia. I would also like to ask the new market and Latin America. I will translate myself. Thanks management for taking my question and congratulations on solid earnings. I have two questions. First one is, after domestic policy, there has been price hike in few regions. Can management show yourselves how the policy can help? How does the policy help our sequential improvement our earnings ahead? And our overseas parcel volume has performed quite decently, especially for Southeast Asia. For Latin America, Tiktok shop has been there for a while and T-Museums have performed quite well. So how does management think about parcel volume and financial performance ahead?

Thank you.

Thank you for Brian's two questions. I'm Charles. Brian's first question is China China China We are also in the process of active consultation. From a long-term perspective, it will make the competition of the express industry more rational, and it will be good for the future high-quality development of the industry. But because of this, I don't think the landing of this policy is a gradual and continuous process. We have not yet is one of the basic conditions for stable and sustainable development of the network. Okay, this is Dylan. Thanks, Brian. I will translate for Charles. Thank you for your question. I think your first question is about the anti-involution and the pricing.

So Charles was saying that since July, I think the State Post Bureau has been actively promoting anti-involution policy. So currently, we have observed varying degrees of price recovery in provinces such as Guangdong, Zhejiang and Fujian. And we're also seeing other provinces actively engaged in the price negotiations. So the industry competition has become more rational in this view. which is also conducive in high-quality developments in the long run. However, I think he mentioned that this is likely going to be implemented in phases and the exact impact of these changes on our results still need to be observed. As a company, we will continue to continuously upgrade our network structure and also improve our service quality. Brian, this is Charles. Answer to our first question.

Brian, the second question is about the increase in business volume in Lamin. We can see that in the first half of this year, our package volume in the new market has increased by 22%. This is based on our original customer and everyone's cooperation, and and other e-commerce platforms, such as TikTok and Microsoft's new cooperation. With the growth of the business, we have also achieved the transformation of the new market by adjusting EBITDA. This also provides a very solid foundation for our future business development. We see that the Latin American market is still in the rapid development stage of e-commerce and express delivery. All major e-commerce platforms continue to expand their investment in the Latin American market. For our company, we will continue to insist on our strategic positioning as an independent third-party logistics and express delivery service provider. We hope to provide a better service to customers and consumers through high-cost express services. Since the second quarter of this year, we have seen a significant improvement in the number of businesses in the Latin American market. So Brian, I think the second question is

is about our growth, our growth perspective of our Latin American market. So Charles is saying that in the first half of 2025, we have achieved the passive volume increase of 22% year on year in our new markets. This is based out of the deepening collaboration with some of our existing customers, but also as well as establishing new partnership with new key players such as TikTok and MercadoLibre And I think we, as you heard, we have successfully achieved adjusted EBITDA break-even, which is going to lay a strong foundation for our future business development in the Latin American market. So he further commented that the Latin American market is developing and growing very quickly with major platforms continue to increase their investments in the region. and J&T we will maintain our strategic position as a third-party logistics provider providing high-value express services to help all our clients to better serve merchants, consumers and others. Since the second quarter, we have also observed a noticeable increase in our fossil volume growth in Latin America. We are very optimistic and confident that the region is able to grow further in the coming quarters, and it will serve as another key growth engine for J&T's global expansion. Brian, so I hope we answered your questions.

Thank you. We will now take the next question. From the line of Phan from Bank of America, please go ahead.

Thank you, Manager Chen. Congratulations. It's been a great past year. I'm a fan of Meiyin Zengquan. I'd like to ask two small questions about Southeast Asia. The first is the current development of our non-commercial platform. The second is the production capacity in Southeast Asia. Is it able to keep up with our high-speed supply growth? Do we need to add more investment? Let me translate myself. I have two questions. First one, could you provide a latest update and outlook for the non-e-commerce platform businesses in the Southeast Asia? And second, I just wanted to check whether the operational capacity in Southeast Asia, whether it is sufficient to cope with the strong volume growth here today and whether we need to accelerate CapEx investment. Thank you.

Thank you, Fan, for asking. I think Dylan can take the question.

Okay. um hey fan hi um yeah so thanks for the two questions first the first question is about i think you asked about the non-platform or non-e-commerce parcel volume in south asia uh short answer is we continue to actively develop continue to develop this customers group including social e-commerce and also key accounts um well the absolute contribution from this These customers have increased. Their growth rate lags behind those of the e-commerce parcel because the e-commerce parcels are growing a lot faster. So as a result, I think our non-e-commerce business accounts for less than 10% right now in our Southeast Asia total parcel. However, from a profit contribution perspective, the non-e-commerce parcels have higher margins and their contribution to the overall margins is steadily increasing. In fact, the profit contribution for this segment significantly exceeds the volume share. So I think building on, I think we talk about this a lot of times, I think building on the strong non-e-commerce customers require sustained effort over time. At J&T, we will continue to expand our non-e-commerce segment as a long-term and strategic focus for our business in Southeast Asia. Thanks. And then I think your second question is about, let me see, okay, the capacity in Southeast Asia, right? So, yeah, I think we have maintained very frequent, as you know, we plan our capacity by talking frequently with our, especially our e-commerce customers, because they make up a big chunk of our capacity. So we talk to them very frequently and about their needs and their product, their needs in the coming peak or the next, the next certain timeframe. So based on those communications, we will update our volume forecast and proactively carry out capacity upgrades in advance of time. During the peak of Ramadan in the first quarter this year, our daily volume exceeded 27 million parcels. And we didn't have any capacity related issue. So as you can see from our disclosed quarterly operational data, I think we added one extra sorting center in Southeast Asia precisely to expand our capacity expansion effort. I would say at this moment our daily capacity in the region, we now comfortably can handle more than 30 million parcels a day, which fully positions us to handle the upcoming peak during the fourth quarter shopping season, especially in the second half. Just as a side note, I think our capacity in Southeast Asia is spread across multiple countries, and we don't evaluate the overall utilization based on a single aggregation matrix. But overall, I would say our capacity is at a very healthy level. And also given the rapid expansion of our parcel volume, we will expect the demand of the companies continue to build on our capacity gradually. So, we continue to upgrade and continue to expand our capacity to make sure that we can meet our customers' needs. Last but not least, I think I will just add Capacity, one of the things that we have done, I think we talk about this a lot, is we continue to invest significantly in the automation equipment and our fleet to make sure that while we increase the capacity, another very important factor is the cost, the unit cost. So are we driving down our unit cost? So we are very active on that and so we continue to do this.

Got it. Thank you very much.

Thank you. We will now take the next question from the line of Hu Junwen from Changjiang Securities. Please go ahead.

I have two main questions. The first one on the domestic front, what is potential for cost reduction and efficiency improvement in the company? How to build a sustainable Thank you for asking. I think Charles can take two questions. Hello, I'm Charles.

You have two questions. The first question is about China's business space. I believe everyone knows that since March 2020, we have been in business in China for more than five years. Our entire team continues to target our excellent colleagues in the industry. We hope that on the basis of China's 30-year rapid industry development, The gap between the excellent peers and the excellent peers is decreasing further. If we divide it up, the cost of single ticket transportation in China is now $0.04. Compared to our excellent colleagues, there may be a gap of about $0.03. The cost of single ticket transportation is now about $0.03. Compared to the excellent colleagues, there is also a gap of about $0.03. So we can see that we still have room and need for improvement. Of course, as time goes by, we also hope to become the best partner. The main reasons for the results of the cost reduction effect are probably very well known to everyone. Through the optimization of transport units, the optimization of rail and metal resources, the improvement of loading rate, the improvement of the ratio of high-pressure vehicles, and so on. At the time of the division, we have the investment of the entire system division equipment, the improvement of the professional ability of the personnel to achieve the reduction of the division cost. But in addition to these two, our traditional improvement in operation and operation, in fact, in the past time, we have the attention of two other aspects. The first one is We have a very high requirement for the size of all the partners and the network points and the investment of equipment tools. Our partner's current operating capabilities and quality have made a lot of progress compared to before. Another one is that in the past period of time, our attention to information, data, and intelligentization, investment, and application have played a big role. Of course, I won't go into details here, in which areas there has been progress. This is a continuous... Citi Brand The question is the same, because it is still in the process of happening. We have seen some areas with price recovery, but we still have to observe the flexibility and continuity of its profits for us, whether it is the company itself or the sponsor.

Okay, let me try and see whether I capture everything. So I think Charles was saying that, as everybody knows, we entered the Chinese market in March 2020. Over the last five years, we have tried to benchmark ourselves against the industry leaders here, our peers who have been operating in this 30-year industry in China. I think we try to actively learn the best practices we can so that we can really drive down our costs. But I think as our team continues to execute with strength, we have optimized our network and as a result, in the first half of 2025, our transport and sorting cost per parcel has decreased to RM0.70, down by RM0.13 year-on-year. narrowing the gap with the leading peers. Also, he mentioned that our transportation cost per parcel reached a drive down to around $0.40 per parcel renminbi, but still behind our top players by around $0.03 renminbi. Sorting cost on the other hand per parcel, now we are around $0.30 renminbi. We are also behind our Our peers by about three to four cents, right? So that's that's the the cost side and I think as and he also mentioned that we have a very clear goals and we have a We obviously want to reduce this cost gap further. We continue to do benchmarking and we continue to benchmark how we do our business and against our to try to learn from the industry leaders here and There are about four fronts that I think we will continue to drive the four directions. One is on the transport front. So the transportation front, we continue to expand our fleet size. We will better coordinate how to balance our own fleet as well as the third-party resources and also increase the loading rates. and also try to use the higher proportion of high-capacity vehicles to improve our logistic efficiencies. So that's the first one. Secondly, I think you talked about the sorting. I think the sorting, so we continue to deploy more automated equipment. We will continue to train our operators better through trainings and other measures. And so that's the second one. And the third one is the network. So the network is also very important. So as we continue to optimize the scale and density of our network, we will continue to drive up the investment in the automated equipment at our network. Because at this scale, we need to continue to improve on that. With that, he commented that the network partners operating service qualities as well as the consistency has improved significantly over time. Last but not least, you mentioned that we will continue to invest in digitalization and the smart automations, particularly in our industry. We continue to adopt these new technologies to continue to drive down the cost. So we will continue to do all these things across the different parts of our value chain to make sure that we can drive down the cost. So I think his final remark, I don't know how he finished, but he's talking about anti-involution. So I think, yeah, we did observe some of the price recovery in some regions, but he thinks that more time is needed before we can really see how sustainable and how big the margin recovery can be. Yeah. Because it also depends on how this policy will be implemented across the geographies. Yeah. So that's the, hopefully, hopefully I covered the first question. Yes.

The second question is about the international part. There are two parts. One is the expected growth of the Southeast Asian market. The second is whether there is a plan to open a new country. The growth of our domestic volume in Southeast Asia, the increase in market share, and our profit and loss in the first half of the year, we can see this in the whole report. Based on some research on the third-party industry, it is predicted that the annual growth rate of e-commerce in Southeast Asia from 2025 to 2019 will still be 15% to 20%. This shows that the e-commerce and express industry in Southeast Asia is still looking for high-speed growth. For us, we must continue to apply some of the experiences and methodologies that China has acquired and accumulated in the Chinese market in Southeast Asia, and continue to increase service quality and reduce costs to expand the market share to consolidate our leading market position. For G2, our entire company, as Steven mentioned, in 2025, we will be celebrating our 10th anniversary. We have been asking ourselves that we are still a startup company. We still need to actively study and evaluate other markets. Through this study, we can see which new markets are suitable for entry. The second question is about the growth rates of Southeast Asia and also whether we have plans to open a new market. So Charles was commenting that I think the

According to the industry reports, I think we also published that the e-commerce market in Southeast Asia is expected to grow very quickly at maybe CAGR of 10-15% between 2025 to 2029. So it indicates that the e-commerce and delivery sectors in this region will continue to enjoy the high growth. So I think as we continue to Adopt or replicate our experience from China into the region. We hope that we can continue to increase further our market share. We can continue to increase our quality, reduce our cost, and continue to enhance our market leadership in the region. And also, secondly, he mentioned that Stephen said, he echoed what Stephen said earlier, that this is the 10th year, very significant year for J&T.

Please stand by. Please stand by. Your conference will resume shortly.

Hi.

Can you hear us?

Yes, we can hear you now. Thank you. Please continue.

Apologies, guys. So yeah, just final thing about, so as we cross the 10-year mark, so Charles was commenting that we continue to evaluate potential markets across the globe for feasibilities, for suitable timing, etc. So I think as soon as we have something concrete, we will announce it to all of you.

Hopefully that answers your question. The second question, Jingwen. Can you guys hear us?

Yes, we can hear you.

Okay, yeah, we'll answer the second question.

Can we go to the next question? Okay, thank you.

Yeah, we can take it.

We will now take the next question.

From the line of Gangshan Liu from CICC, please go ahead.

Okay, thank you for accepting my question. I'm Liu Gangqian, an analyst at Zhongjin. I have two questions. First, I would like to ask about the leadership of UE in Southeast Asia in terms of cost. This is the first question. The second question, I would like to ask So let me translate for myself. Thank you for taking my question. And congratulations on the strong growth. I have two questions. The first one is about Southeast Asia on the unit economics guidance about unit cost. and for the unit for the ASP is there any principle or baseline for us to balance our passive volume growth and the jobs in our ASP for example are we anchoring on any kind of metrics for example margins or unit profit and so this will help us on the modeling and the forecast and the second question is about the franchise model of adoption in Southeast Asia. Can you share with us the current status and if possible, any future expectations? Thank you.

Thank you, Ganjian, for asking. I think Dylan can take the two questions from you.

Okay. Hey, Ganjian. I'll answer these two questions. Okay, I think the first question is on The UE, right? Southeast Asia UE. I think, as you know, we continue to... For the last few years, our EBIT per parcel has been very stable. I think we try to balance our growth alongside our ASP strategy, along with our cost reduction strategy, right? So, as you know, we continue to be the leading E-Commerce Platform Customers We think there is still a big room that we can further reduce. For example, I think as you can see, our parcel volume has increased 58% year-on-year and we can greatly increase the utilization efficiencies of all our sorting centers, vehicles and outlets and drive down our costs. So as we continue to adopt Those various cost strategy, I think we talked about this many times. We have continued to expand our own fleet. We continue to put in automated sorting equipment. We continue to optimize our network. We can continue to drive down those costs. And we think that there's still a lot of room for cost reduction. And all these efforts will help us to maintain a relatively stable per parcel profit going forward. That's our thinking. And then your second question is about, you call it the franchise, right? Or we call it the network partner, but I think it's the same thing, right? So you're asking how the network partners are implementing across the non-China markets. So I think it's twofold, right? So the short answer to answer your question is that we are actually implementing this network partners model across Southeast Asia and even our new markets. But we will be very careful with that. We will adapt it very carefully depending on the local situation and also based on our local insights. So I think the most important thing that we think is selecting and developing the very high potential and good quality network partners to join our network. So maybe just give you a sense. I think currently I think our The network partners across Southeast Asia, we have about 30% of our network that is run by our network partners. 30%. And Mexico and Brazil, we are also steadily replicating this model into Latin America, Mexico and Brazil. So for us, from our perspective, it's very important that the network partners continue to demonstrate the ability to improve efficiencies and reduce costs alongside with us. Because once we adopt the network partners model, it's not just our cost at our centers, our line hall. We also need them to manage the cost at the delivery end as well, right? So there's one area we look at them. Second thing, we also look at whether they can do business development because the beauty of these network partners is they are able to bring in new business because they're highly incentivized to work like us, to think like us as entrepreneurial company. So we look at how they're bringing new customers, how they're bringing growth into our network, right? Overall, I think we believe that this is one of the network partner strategy. I think we're only 30% there in Southeast Asia. And I think we will continue to use this to adopt it across our network to continue to lower our cost for your first question earlier on.

Okay, Gang Jian.

That's very helpful. Thank you, Dylan. Again, congratulations.

Thank you.

Thank you. We will now take the last question from the line of Aaron Luo from UBS. Please go ahead.

Thank you for accepting my question. First of all, congratulations on the company's performance in the last half year. I have two questions. The first one is to see the report, including what you just mentioned, that we have started to provide delivery services to Microsoft in the new market. So I would like to ask you to introduce the background of your cooperation, including some of the current progress. Let me translate myself. First of all, congrats for the strong H1 result. And I have two questions. The first one is about the recent cooperation with MercadoLibra. Let me know from the recent news and you also just mentioned earlier. So just could you please share a bit more of the background and the current progress on this? This is the first question. The second one is about AI technologies. We know that the market has a lot of hope that development AI, including the unmanned aerial vehicles, could bring bigger improvement on logistic network efficiency. So just curious about what kind of initiatives you have taken and your future plans for for their embracing AI technologies and also the M&A vehicles. Thank you so much.

Thank you, Aaron, for your question. I think Steven's answer is better. Thank you, Aaron, for asking. I think Steven will take your question.

Okay, thank you, Aaron. The first question is about Microsoft. Right now, no matter if it's in Brazil or Mexico, we're starting to have is the largest e-commerce platform in Latin America. Its price is relatively high, but at the moment, it is mainly operated by the self-made logistics model. But in the past two years, many platforms have started to invest in the Latin American market. Microsoft has also lowered its tolerance threshold and cut into some low-price e-commerce markets. Ah, Thank you.

I'll translate for Steven. So he's saying that the Mercado Libre, as you know that Mercado is the largest e-commerce platform in Latin America. The average order value is higher and they also have relied historically on their own in-house logistics systems. But in recent years as the e-commerce competition intensified across the region, Mercado has lowered the free shipping cost to capture the lower tier market segments. This shift has increased the demand for the cost effective 3PL services like the one that we provide. So as you know, we continue to operate with Chinese excellence replicating also into this and we have good success in replicating to Southeast Asia. So we continue to take all these abilities that we have and continue to replicate that into Latin America by offering them high-value express delivery solutions. So as we continue to benefit from the economy of scale and also optimize our network, we will continue to further our costs. We have room to further reduce our costs as well while we continue to enhance quality and also our competitiveness. Right now, so Stephen commented that MercadoLibre's volume is still relatively very small, and it's also a very small share of their total business. But the collaboration has progressed so smoothly, and we see a significant potential, and we look forward to further expanding this relationship with them. Aaron, yeah.

The second question is about smart logistics and five-seater vehicles. Yes, our smart logistics is mainly invested in industry advanced equipment in China. In Southeast Asia and Xinjiang, we are investing in Chinese mature technology and equipment. In China, our company started in 2023 with a 4.5-person vehicle. Some of the network points already have successful experience and sales logic. It has a strong driving force on the whole network and other stores. uh uh Thank you.

Okay, so for the second question about smart logistics. So I think Steven mentioned that. So I think we continue to focus on deploying the adopt this advanced technologies that we can get from China into the different market, the Southeast Asia markets. and new markets but of course in varying degrees right so first but let's talk about China first so I think he first started off talking about China he said that we first pilot we started piloting the autonomous autonomous delivery vehicles I think back in 2023 and some of these out some of these network partners have have have received a very significant cost savings benefit from this and they can but The way we work is the network partners are responsible for procuring those vehicles independently and we will continue to provide encouraging support policies to help them to do so. So to date, I think we have deployed over 900 autonomous delivery vehicles and this has greatly enhanced the last mile delivery efficiency in our network. And going forward, we also further support our network partners to continue to adopt and promote more usage of this according to the operational needs. Then he commented about Southeast Asia and new markets. But that's probably not on the autonomous front. I think he mentioned about equipment. We will try to localize the proven auto solders and the equipment and operating system from China into Southeast Asia and new markets. At the end of June, we have deployed 57 automated sorting equipment in Southeast Asia. We've deployed 10 in the new markets and substantially improved their efficiencies in these places. We continue to see strong potential to use different technologies into different regions. We continue to stay Robust and also open in applying all these innovative application and technologies so that we can continue to maintain our technology leadership and our cost leadership and our market leadership.

Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.