Market Research Report : Logistics Market in China 2012

Logistics Market – China
February 2012

Executive Summary
 Logistics market value in China is expected to reach USD x tr by 20‐‐, growing at a CAGR of z% from USD y bn in
Market 20‐‐
 Industrial products accounted for a major share of x% of the logistics market value in 20‐‐
Drivers: Challenges:
‐ Healthy Economy ‐ Rise in Logistics Costs with Low Efficiency

‐ Rising Income and Increasing Domestic Consumption ‐ Lack of Modern Logistics Facilities
Drivers &

LE
‐ Growing E‐commerce Business ‐ Inadequate Warehouse Space
Challenges ‐ Manufacturers’ Shift to the West ‐ Regional Protectionism

P
‐ Strong Retail Sales ‐ European Debt Crisis
‐ Opportunity from Cold Chain Logistics ‐ Constraints in Human Resources

M
‐ Opportunity from Pharmaceutical Logistics ‐ Preference towards Self Management

A
 Reorganization of Logistics‐Related Administrative Institutions in 20‐‐

S
 Fragmented Regulatory Framework
Government  Rejuvenating Program for Logistics Industry (20‐ ‐‐20‐ ‐)
Initiatives  Development Plan of Commercial Logistics (20‐ ‐)
 Logistics Key Focus Areas under the 12th Five Year Plan (20‐‐ ‐20‐ ‐)
 Medium‐and Long‐term Development Plan of Logistics Industry (20‐ ‐ ‐20‐ ‐)
 Development of National Transport Infrastructure
 Market Consolidation
Trends  Logistics Outsourcing
 Inland Expansion of Third Party Logistics
 Rising Investments

 Established foreign companies including Company 1,Company 2, Company 3, andCompany 4; and Hong Kong
Competition based Company 5 in China’s Logistics Market, indicates more fierce competition for the domestic players
 Key domestic players in the market include company 1, Company 2, Company 3, Company 4 and Company 5

LOGISTICS MARKET IN CHINA 2012.PPT 2

•Introduction
•Market Overview
•Drivers & Challenges
LE
MP
•Government Initiatives

S A
• Trends
•Mergers & Acquisitions
•Competition
•Key Takeaways


Logistics Industry Framework
d1

d2

LE
d6 c1 b1

MP
b5
a5

S
a1
A b2

X
d3
a2
a4

d5 c2
b4 b3
a3

A
d4
B c3
C
D
Source:


Integrated International Logistics Services

Type 7
Type 1

LE
P
Type 6

M
Type 2

Type 5
S A Xx
Xx

Type 3

Type 4
Source:


China was ranked X based on the Logistics Performance
Index
Logistics Performance Index Logistics Performance‐wise Rank (20‐‐)

Rank Economy Rank Economy
1 Country 1 16 Country 16

• Logistics performance of different economies has been
measured by the World Bank, by using the Logistics

LE
Performance Index

P
• Logistics Performance Index (LPI) is the a countries
score based on the weighted average of six chief 4 Country 4 19 Country 19

M
criteria: 5 Country 5 20 Country 20

A
 Efficiency of the clearance process

S
 Quality of infrastructure associated with trade and
transport 7 Country 7 22 Country 22
 Ease of arranging competitively priced shipments
 Capability and quality of logistics services
 Ability to track and trace consignments 9 Country 9 24 Country 24
 Efficiency in delivery time 10 Country 10 25 Country 25
• In 20‐‐, among the x evaluated economies, China
ranked y
• However, China topped amongst the lower‐middle 12 Country 12 27 Country 27
income countries 13 Country 13 28 Country 28
 Developed economies or high income countries, such 14 Country 14 29 Country 29
as X led the index, followed by Y and Z

Source:


Logistics market in China, exhibiting rapid development with
annual double digit growth through 20‐‐
Logistics Market – Overview Logistics Market Value and Growth
• Logistics industry acting as a bridge between the value USD tr
chain from production to sales, plays a key role in 40 35.6
31.2
China’s smooth economic development Z% 27.4

30
24.0
 Logistics market value is expected to reach USD x tr in 20‐‐, 21.1

LE
20 18.5
growing at a CAGR of y% during 20‐‐‐ ‐‐ 13.3 14.3
11.1
8.8

P
• Higher logistics demand coefficient indicates bigger 10 7.1

logistics market

M
0
 In 20‐‐, logistics market growth slowed down with y‐o‐y 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e 20‐‐e 20‐‐e

global financial crisis

S A
growth rate reduced to x% from y% achieved in 20‐‐, due to

 However, logistics demand coefficient was x in 2010, up
from y in 2009 and logistics market value reached a record
high of USD z tr in 20‐‐, up by y % y‐o‐y, exhibiting a
Logistics Market Value Category‐wise(20‐‐)

B1%
phenomenal recovery from the global financial crisis A D C1%
B E D1%
 Industrial products accounted for a massive share of z% E1%
of the total logistics value in 20‐‐, followed by the C

imported and agricultural products with x% and y%
respectively A1%

Source:


Growth in logistics value‐added along with its consistent
share in GDP and …
Logistics Value‐Added (1/2)

• Steadily increasing logistics value‐added, denotes a growing logistics market over the time period

20‐‐‐‐‐

LE
• Higher logistics value added signifies bigger logistics market

P
 Logistics value added is expected to grow at a CAGR of x% during the five year period 20‐‐‐‐‐ amounting to
USD ybn by 20‐‐

S AM
Growth of Logistics Value‐Added
USD bn
1,000 Y%
x11
x10
x9
X% x8
x6 x7
500 x4 x5
x2 x3
x1

0
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e 20‐‐e 20‐‐e

Source: China Federation of Logistics and Purchasing; Li Fung Group Note: 2010 Exchange Rate has been used for all conversions


…tertiary industry indicates the expansion of logistics
market in China
Logistics Value‐Added (1/2)

• Total logistics value‐added reached USDx bn, representing y% of the GDP in 20‐‐, growing at a
CAGR of z%, from USD y bn, representing x% share of the GDP in 20‐‐
• Logistics sector has managed to grow as fast as the tertiary market and the national economy as
there has been a stable growth in the share of the total value‐added of the logistics industry in
both China’s tertiary industry and GDP, during 20‐‐‐‐‐

LE
Year
MP
Total Value‐Added Y‐O‐Y Growth Share in the Tertiary Share in GDP

A
(USD bn) (%) Industry (%) (%)
20‐‐

20‐‐

20‐‐
x1

x2

x3
S y1

y2

y3
z1

z2

z3
a1

a2

a3

20‐‐ x4 y4 z4 a4

20‐‐ x5 y5 z5 a5
Source:


Drivers & Challenges – Summary

Challenges
Rise in Logistics Costs with Low
Efficiency
Drivers

LE
Lack of Modern Logistics Facilities

P
Healthy Economy
Inadequate Warehouse Space

M
Rising Income and Increasing
Regional Protectionism

A
Domestic Consumption
Growing E‐commerce Business

Manufacturers Shift to the West S European Debt Crisis

Constraints in Human Resources

Self Management Mentality
Strong Retail Sales

Opportunity from Cold Chain Logistics

Opportunity from Pharmaceutical
Logistics


Powerful Chinese economy serves to build a strong
foundation for the logistics sector
Healthy Economy Impact
• Finding 1
• Finding 2

• Finding 3

P LE
Growth of GDP

S AM Growth of Foreign‐exchange Reserves

USD bn USD bn
x4
10,000 X% 4,000
Y% y4
8,000 y3
x3 3,000
x1 x2
6,000
2,000
4,000
1,000 y2
2,000 y1
0 0
20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐ 20‐‐ 20‐‐ 20‐‐

Source:


Rising income coupled with increasing consumption will
aggravate the country’s logistics requirement
Rising Income and Increasing Domestic Consumption Impact
• Finding 1
• Finding 2

• Finding 3

LE
• Finding 4

M
Urban Disposable Income (per household)P Urban Consumer Spending

USD bn
20,000
15,000
X% S
x3 A USD bn
5,000
4,000 Y%
y3

x2 3,000
10,000 y2
2,000
5,000 x1
1,000 y1
0 0
20‐‐ 20‐‐e 20‐‐e 20‐‐ 20‐‐e 20‐‐‐e

Increasing Domestic Higher logistics
Rising Income
Consumption requirements

Source: i‐Newswire; PWC


Rise in e‐commerce has augmented the domestic demand
for improved logistics
Growing E‐commerce Business Impact
• Finding 1
• Finding 2

LE
MP
Rise in E‐commerce S A Cost Structure Per Parcel

USD bn A B C D
3,000 x7
2,500 X% x6 2011 A1 B1 C1 D1
2,000 x5
1,500 x4
x3
1,000 x1 x2
500
0
20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e 20‐‐e 20‐‐e
Source:


Movement of manufacturing hubs to the West, provides
significant growth opportunity for logistics market
Manufacturers Shift to the West
LE Impact
• Finding 1
• Finding 2

MP
S A
Major
manufacturing,
Shenyang consumption and
Beijing distribution hubs
Tianjin Dalian
Taiyuan Qingdao
Jinan
Xian
Lianyungang A
Nanjing
Chengdu Shanghai B
Chongqing Ningbo
Wuhan Hangzhou C

Xiamen D
Kunming Guangzhou
Foshan Shenzhen
E

F


Growing retail sales add to the rising demand for logistics in
the country
Strong Retail Sales Impact
• Finding 1

Annual Retail Sales of Consumer Goods

LE
A B

17.1%
Y

MP • Point 1
• Point 2

A
3,000 X
y2

S
2,000 x2
1,000 x1 y1
0
20‐‐ 20‐‐

Methodology adopted by the retailers to tackle the logistics issue can be a key differentiator among competitors
Methodology adopted by the retailers to tackle the logistics issue can be a key differentiator among competitors
• Type 1
• Type 2
• Type 3
• Type 4
• Type 5
Source:


Underdeveloped cold chain logistics provides significant
opportunity for further growth
Opportunity for Cold Chain Logistics Impact
• Finding 1
• Finding 2
• Finding 3

LE
MP
Cold Chain Service Demand & Supply Gap

USA China
S A Point 1

X% Y%

Foreign Investors are Attracted by The Enormous Growth Potential of Domestic Cold Chain Logistics Market
Date Description
•Point 1
Jan 20‐‐
•Point 2
Apr 20‐‐ •Point 3

Source:


Pharmaceutical logistics is expected to grow with the
growth of Chinese pharmaceutical market
Opportunity for Pharmaceutical Logistics Impact
• Finding 1 Growth of Pharmaceutical Market
• Finding 2

USD bn
x3

LE
200
X%
150

MP 100

50 x1
x2

S A
China is being considered as an emerging market, driving
0
Mar20‐‐ 20‐‐ 20‐‐

Government’s support for the development of modern
up demand for Western drugs pharmaceutical logistics
• Point 1
• Point 1
• Point 2
• Point 2
• Point 3

Source:


Rise in transportation fees, fuel costs and labor costs
coupled with…
Rise in Logistics Costs with Low Efficiency (1/2) Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4

LE
MP
USD bn
Rise in Logistics Cost

X%
S A Ratio of Total Logistics Cost to GDP (20‐‐)

%
1,200 x2
x3 20 x1
1,000 x1
800 15
600 10 x2
400
5
200
0 0
20‐‐ 20‐‐ Jan‐Oct 20‐‐ Country 1 Country 2

Source:


…low efficiency is a major challenge to the logistics market

Rise in Logistics Costs with Low Efficiency (2/2)
• Finding 1

Share in Total Logistics Cost

LE Increase in Transportation Fees

%
A B C

MP USD bn
15.6%

A
100 a113 a2 a3 a4 a5 600 x2
x1

S
80
b1 b2 b3 b4 b5 400
60
40
c1 c2 c3 c4 c5 200
20
0 0
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐

Y‐O‐Y Growth
Point 1 Category Sub‐Category
(Jan‐Oct 20‐‐)
A1 x1
A
A2 x2
B1 x3
B
B2 x4
Source:


Lack of modern logistics facilities is a huge set back for the
logistics sector
Lack of Modern Logistics Facilities Impact
• Finding 1
• Finding 2
• Finding 3

LE
MP •Effect 1

A
Cause
•Effect 2

S
Limited Supply of Modern Logistics Space (20‐‐)

A B
sq m
X
600 b1
400 Point 1
a1
200
0
20‐‐
Source:


European debt crisis hinders China’s overall growth,
hampering logistics escalation
Debt Crisis in Europe Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4

LE
MP
S
Decline in New Export Order Sub‐Index

X%
A
60 x1 x2 • Point 1
40 • Point 2

20
0
Jan 20‐‐ Feb 20‐‐

Point 3
Point 3

Source:


Government has implemented certain measures to
reorganize the regulatory structure of the logistics industry

LE
P
Reorganization of Logistics‐Related Administrative Institutions in 20‐‐

SA M
• Finding 1
LE
• Finding 2

M P
S A
x1
y1
x2
X Z Y

x3 y2

Source:


Government has issued new guidelines to solve the long‐
term problems in the logistics industry
Logistics Key Focus Areas under the 12th Five Year Plan (20‐‐‐20‐‐)

A1

B1

C1

D1

E1

F1

G1

H1

J1

P LE Category CAGR
Target set by NDRC and CFLP
by 20‐‐

SAM X1
X2
X3
X%
Y%
Z%

Source:


Government’s future plans for the development of logistics
industry
Medium‐and Long‐term Development Plan of Logistics Industry (20‐‐‐20‐‐)

• Finding 1
• Finding 2
• Finding 3

LE
MP A

SA B

C

D

Source: Li Fung Group


Trends – Summary

Development of National

LE
Transport Infrastructure

MP
Rising Investments
S A Market Consolidation
Key
Trends

Inland Expansion of 3PLs Logistics Outsourcing

BOTTLED WATER MARKET IN CHINA 2011.PPT

Major Domestic Public Companies – Summary (1/2)
Net Income
120 Size of the Bubble represents Market
110
Capitalization in USD mn
100
d1

90

LE
80

P
70

60

50

40

30

20
a1
S AM
10 b1 c1
0 Revenue
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000

Company 1 Company 2 Company 3 Company 4

Source:


Major Domestic Public Companies – Summary (2/2)

Total Income and Profit for Major Domestic Companies of 2010

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
USD mn

Company 1
y1

LE x1

MP x2

S A
Company 2
y2

x3
Company 3
y3

x4 X Y
Company 4
y4

Source:


Domestic Company – Company 1
Company Information Locations – China

Corporate Address City 1, Country 1

Tel No. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
Fax No.
Website
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

LE
P
Year of Incorporation 20‐‐
Ticker Symbol ‐‐‐‐
Stock Exchange

Products and Services
‐‐‐‐

S AM Headquarter
Other Offices
Category Products/Services
Category 1 Product
Key People
Category 2 Product
Category 3 Product Name Designation
Category 4 Product
Person 1 Designation 1
Category 5 Product
Person 4, Designation 4

Source:


Financial Snapshot Key Ratios
y‐o‐y
Revenue Revenue Profit Particulars change 2010 2009 2008 2007
USD mn USD mn (2010‐09)
Profit / Loss
600 x4 30
Profitability Ratios
Operating Margin ‐‐ ‐‐ ‐‐ ‐‐ ‐‐
x3
400 x2 20 Net Margin ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐‐

x1
Profit Before Tax Margin ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐

LE
200 10
Return on Equity ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐
0 0 Return on Capital Employed ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐

P
20‐‐ 20‐‐ 20‐‐ 20‐‐ Return on Working Capital ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐
Return on Assets ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐
Financial Summary Return on Fixed Assets ‐‐ ‐‐ ‐‐ ‐‐‐ ‐‐

• The company incurred a net profit of USD x1 mn in FY 20‐‐, as
compared to net profit of USD x2 mn in FY 20‐‐

S
• The company reported total Income of USD y1 mn in FY 20‐‐,
registering an increase of y% over FY 20‐‐
• The company earned an operating margin of x% in FY 20‐‐ an
AM Cost Ratios
Operating costs (% of Sales)
Administration costs (% of
Sales)
Interest costs (% of Sales)
Liquidity Ratios
‐‐

‐‐

‐‐
‐‐

‐‐

‐‐
‐‐
‐‐

‐‐

‐‐
‐‐

‐‐

‐‐
‐‐

‐‐‐

‐‐‐

Current Ratio ‐‐ ‐‐ ‐‐ ‐‐ ‐‐
increase ofz percentage points over FY 20‐‐
Cash Ratio ‐‐ ‐‐ ‐‐ ‐‐ ‐‐‐
• The company reported debt to equity ratio of y1 in FY 20‐‐, a Leverage Ratios
decrease of x% over FY 20‐‐ Debt to Equity Ratio ‐‐ ‐‐ ‐‐ ‐‐ ‐‐
Debt to Capital Ratio ‐‐ ‐‐ ‐‐ ‐‐ ‐‐
Financial Summary Interest Coverage Ratio ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Indicators Value (dd/mm/yy) Efficiency Ratios
Market Capitalization (USD) Fixed Asset Turnover ‐‐ ‐‐ ‐‐‐ ‐‐‐ ‐‐
‐‐
Asset Turnover ‐‐ ‐‐ ‐‐‐ ‐‐‐ ‐‐
Total Enterprise Value (USD) ‐‐ Current Asset Turnover ‐‐ ‐‐ ‐‐‐ ‐‐‐ ‐‐
EPS (USD) ‐‐ Working Capital Turnover ‐‐ ‐‐ ‐‐‐ ‐‐ ‐‐
PE Ratio (Absolute) ‐ Capital Employed Turnover ‐‐ ‐‐ ‐‐‐ ‐‐ ‐‐

Source:


Key Business Segments Key Geographic Segments
A D B C
Country 1

100%
100% b2 b3 d3 b4 d4
80%

80%
60%

LE
60%
a1 c2 c3 c4
40% 40%
20% 20%
0%
20‐‐ 20‐‐ 20‐‐ 20‐‐

MP 0%
20‐‐

Key Recent Developments

Description
S A News
• Company 1 was formerly known as Company 2. and had changed its name in Jun 20‐‐
 Company provides integrated logistics services in the  Country 1
– Milk‐run service covers more than x suppliers in the areas of A, B, C, D, E and F, with annual  output of over y TEU
– International freight forwarding services has an annual output exceeding zTEU
Overview – Company owns x vessels to handle bulk cargo with capacity of more than y ton and annual transportation capacity by
railway exceeds z ton
– Company has x sophisticated distribution centers for supply parts, with a total warehousing space of more than y sq m
 Company delivers within  x to y days to over z large and medium sized cities and within z days to over x county‐level cities
all over Country 1

Source:


Logistics market is expected to grow at a CAGR of X% to
reach USD y tn by 20‐‐
Logistics industry has become a leading industry in China's national economy and is playing a guiding and supporting
role in the overall national economic situation

Opportunities in the Market Size Government
Market Initiatives

USD tn
Government has been

LE
Healthy economy coupled 40 x11
x10
with rising income and 30
X% x9 taking some major
x8

P
increasing domestic x7 initiatives for the
x6
20 x5 development of the
x4
consumption act as a driver x2 x3

M
10 x1 logistics sector
for the growing demand of

A
logistics in the country 0 However, presence of

S
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐e 20‐‐e 20‐‐e 20‐‐e 20‐‐e multiple government
Growing e‐commerce bodies associated with
business and relocation of the jurisdiction of the
manufacturers to the west logistics sector, creates
provides opportunity for high‐level coordination
growth in the logistics sector Challenges failure

• Rise in Logistics Costs with Low Efficiency Government has issued
Growing retail sales, • Lack of Modern Logistics Facilities new guidelines to solve
opportunity from cold chain • Inadequate Warehouse Space the long‐term problems
• Regional Protectionism in the logistics industry
and pharmaceutical logistics
• European Debt Crisis
tender prospects for future via its 12th Five Year Plan
• Constraints in Human Resources
growth and medium and long‐
• Inclination towards Self Management
term development plans


Thank you for the attention
Logistics Market ‐ China report is a part of Netscribes’ Logistics Series.
For more detailed information or customized research requirements please contact:

Jitendra Punjabi
Phone: +91 33 4064 6215
E‐Mail: jitendra.punjabi@netscribes.com

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Market Research Report : Logistics Market in China 2012

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Market Research Report : Logistics Market in China 2012