The YTO Express booth at the 9th China International Logistics Festival. [File photo]

The listed Chinese clothing company Dalian Dayang Trands Co Ltd has issued 2.267 billion non-public bonds evaluated at 17.5 billion yuan (US$2.63 billion) to acquire the entire stake of YTO Express, one of China's largest privately owned courier companies, after the recent conditional approval from relevant authorities.

Meanwhile, the clothing firm sold all its assets and debts to Shanghai YTO Jiaolong Investment and Development (Group) Ltd. and Yunfeng Capital, the two major shareholders of YTO Express, in a transaction worth 1.234 billion yuan.

The asset swap enables the courier company to be listed in the Shanghai bourse regardless of its profits, which have been dropping in the past few years.

Last year, YTO Express saw its net profit slide from 747 million yuan to 717 million yuan. Moreover, its gross profit slipped from 21.49 to 13.42 percent between 2013 and 2015.

The courier firm explained that the constant drop in gross profits can be seen as a result of the company's attempts to lower surface and transshipment charges to attract more franchisees. It also said that it will render to its parental companies 1.1 billion yuan, 1.33 billion yuan and 1.55 billion yuan in net profits from 2016 to 2018, in spite of nonrecurring gains or losses.

But industrial insiders disagree with the cutting-charges rhetoric, saying that the tug of war over prices caused by rising costs and escalating competition among domestic express companies was the real reason behind the diminishing growth rates.

"The listing in the stock market could be a double-bladed sword for courier companies which have been transformed from labor-intensive to capital-technology-and-facilities-intensive business models as companies in need of huge capital involvement plan to buy their own planes, build up aircraft teams and purchase property for logistic centers," said Shao Zhonglin, a think-tank expert at the State Post Bureau.

It is hard to predict how capital will work on the industry, which is now under pressure from both cut-throat competition and high expectations, Shao added.

According to LanjingTMT, an online economic and financial media outlet, the courier industry, which appears to be booming due to increasing cases of listing and fundraising, actually faces numerous challenges.

The annual growth of the industry has slowed down and their profits have plummeted. The business volume of the industry is expected to reach 27.5 billion parcels this year, registering a year-on-year growth of 34 percent, lower than 48 percent in 2015. However, the industry had annual growth rates above 50 percent from 2011 to 2014.

In 2015, profit for every parcel of courier business probably dropped below 0.5 yuan and the industrial profit rate has now declined to 3 to 5 percent, or even lower.

Moreover, the family-controlled business model in the courier sector can easily lead to nepotism and chaotic management, such as the murky regulations on duties and business divisions. And it may also have a loose control over franchises, which can affect the quality of delivery service and result in a rise in complaints, China Economic Net reported.

Go to Forum >>0 Comment(s)