Institution: China Merchants Bank Co., Ltd. Researcher: China Merchants Bank Research Institute

Revenue in the transportation industry has grown steadily, while declining profitability has dragged down performance. Taking 55 A-share listed companies as a statistical sample, overall, benefiting from the optimization of supply and demand structure (supply-side reform, new project implementation and demand upgrade, etc.), industry revenue performance in 2018 remained stable, with a year-on-year growth of 15.9%; on the profit side As the profitability of many sub-sectors declined to varying degrees, the overall performance was poor, with a year-on-year decrease of 8.9%. The industry's gross profit margin was 24.2%, a year-on-year decrease of 0.95pct; the net profit margin was 7.5%, a year-on-year decrease of 2.03pct.

Aviation: Optimization of supply and demand drives revenue growth, and the impact of oil exchange is expected to be alleviated. Revenue was 496.3 billion yuan, a year-on-year increase of 13.2%; affected by sharp fluctuations in oil prices and exchange rates, net profit was 9.3 billion yuan, a year-on-year decrease of 58.26%. The shrinking performance of the aviation sector is the main factor behind the poor performance of the transportation industry. Operating cash performance is solid, investment expenditures are relatively conservative, and financing is in the stage of leverage contraction. In 2019, as tight transportation capacity drives up fares and the impact of oil exchange weakens, industry profitability is expected to recover significantly.

Express delivery: Continuing high growth, the improvement of the market structure is expected to alleviate the pressure of price cuts. Revenue was 149.3 billion yuan, a year-on-year increase of 31.3%; net profit was 9.2 billion yuan, a year-on-year increase of 14.7%; the main reason for the maintenance of revenue was the continuation of e-commerce dividends, and the decline in single-ticket revenue caused the net profit margin to fall by 0.9pct year-on-year. Rigid increases in rents and wages have squeezed operating cash, and industry expansion has driven rapid investment growth and amplified financial leverage. At present, leading companies have taken the initiative in the market (CR8's share exceeds 80%), and we expect that the pressure to reduce prices will be alleviated in the future.

Railways and highways: Freight transportation is improving, but passenger transportation is diverging. In 2018, the revenue of the railway sector was 114.6 billion yuan, a year-on-year increase of 37.2%, and the net profit was 16.2 billion yuan, a year-on-year increase of 7.9%; the highway revenue was 77 billion yuan, flat year-on-year, and the net profit was 19.7 billion yuan, a year-on-year decrease of 3.5%. In terms of freight transportation, benefiting from the rebound in demand for bulk commodities such as coal, metal ores, and steel, the freight turnover of railways and highways has recovered simultaneously since 2016; in terms of passenger transportation, railways have significantly diverted traffic from highways, showing a trend of rising and falling.

Ports: Throughput growth is slowing down, and profitability may continue to be under pressure. In 2018, revenue was 171.7 billion yuan, a year-on-year increase of 10.8%, and net profit was 21.2 billion yuan, a year-on-year increase of 14%. In 2018, the year-on-year growth rate of domestic port throughput slowed down, which had a significant impact on the revenue of listed companies. Affected by the tense global trade situation, intensified industry competition, and the expansion of low-gross profit margin businesses, port profitability has weakened in recent years; with the increase in tolls As model reform advances, profitability is expected to continue to be under pressure.

Key events in the transportation industry in April: 1) Civil aviation development fund collections are halved, airlines’ cost burdens are reduced, and profits are expected to be significantly increased; 2) YTO and HNA have reached a strategic cooperation, and both parties will to form complementary advantages and break the shackles of aviation logistics development; 3) The work of canceling provincial boundary toll stations on highways continues to advance, which is expected to significantly reduce logistics costs, improve logistics efficiency, and promote regional transportation integration.