Delivery giant says growth slowdown due to increased focus on high-quality services

Chinese delivery giant SF Holding announced on Tuesday evening that its net profit in 2017 rose 14.12 percent, representing a slowdown in growth as the nation's overall delivery industry is going through a transition period.

In its latest annual report, the company said its net profit reached 4.77 billion ($755 million) yuan last year, while it was 4.18 billion yuan in 2016, an increase of 112.5 percent compared with 2015.

Its total number of packages delivered last year increased 18.29 percent year-on-year to more than 3 billion, but in 2016 it jumped 31 percent.

However, SF Holding raked in 71 billion yuan of revenue in 2017, still the highest among China's top courier services, including STO Express, YTO Express, ZTO Express and Shanghai Yunda Express.

"China's express delivery industry is transforming to develop service quality, so slowdown of business growth rate is inevitable," said Yang Daqing, contributing researcher at the China Society of Logistics.

He expects the trend will continue this year.

In 2016, total industry revenue hit nearly 400 billion yuan, marking year-on-year growth of 43.5 percent, but last year, it climbed only 24.7 percent, according to the State Post Bureau of China.

Shenzhen-based SF Express adopts a differentiation strategy, competing by focusing on highquality service, especially business express, which is "a drive to its high profit to surpass its competitors," Yang said.

SF Holding states its average income of each delivery is 23.14 yuan, higher than the industry average of 12 to 14 yuan in 2017.

But he pointed out that other major delivery companies now are also striving to develop high-quality service market, making use of additional capital after they went public, one after another.

The other four top couriers, who all partnered with Alibaba Group Holding Ltd's logistics service offshoot Cainiao, saw higher revenue growth rates than SF Holding's in 2017.

Meanwhile, China's second-biggest e-commerce firm JD is also expanding its delivery business, which is also well-received for its high-quality service, with a new round of fundraising in January targeting at least $2 billion.

Though its traditional business is developing at a slower speed, SF Holding's new services are accelerating rapidly and it has efficiently controlled operating costs by utilizing technology, said Su Baoliang, an analyst at Sinolink Securities Co.

These new services, including heavy freight, cold chain transportation and international deliveries, account for 13.5 percent of the company's total revenue in 2017, while the proportion is 9.9 percent in the previous year, and that growth rate was about 68 percent last year.

The company also announced on Tuesday a deal to establish a cold-chain firm in China with Havi Logistics Services, a world-leading supply chain management and logistics company.

Shares in SF Holding, which went public last year on the Shenzhen Stock Exchange, closed 1.19 percent higher on Wednesday at 52 yuan.