Deppon Dips Toe Outside China, but Stays Focused on Home

(Davos, Switzerland) – Package-delivery firm Deppon Logistics Co. Ltd. is taking baby steps to explore the global market, but is feeling no pressure as it feasts on booming domestic demand that should allow it to keep posting strong profit growth, its chairman told Caixin.

Deppon is one of China’s top 10 delivery companies, in a highly fragmented market that has exploded over the last decade on the back of a boom in e-commerce and concurrent demand for parcel-delivery services. While most companies have found profits in the space, many are plagued by high employee turnover and even occasional scandals involving misconduct by their huge squadrons of deliverymen.

Deppon has taken some small steps to explore global expansion beyond the mainland, including opening an office in nearby Hong Kong and forging partnership agreements with delivery firms in other markets like Taiwan, South Korea and the U.S., Chairman Wilson Cui told Caixin on the sidelines of the World Economic Forum taking place this week in Davos, Switzerland.

The company is aiming to learn the ropes of operating outside mainland China through its Hong Kong operation and perhaps a similar move into Taiwan, he said.

“It’s easier for U.S. companies to go global than Chinese ones,” he said. “We really have no foundation for such expansion. We want to cultivate the global market. But first we want to do well domestically.”

With some 130,000 employees, Deppon became one of the last of China’s top delivery firms to go public with its IPO in Shanghai earlier this month. Since then, its shares have traded up by their daily 10% limit each day, and the stock now trades at about double its debut levels. Peers like SF Express and ZTO Express have all made listings at home and abroad over the last two years, though, like Deppon, most still do the lion’s share of their business in China.

One of the most globally minded has been YTO Express, which last year paid about HK$1 billion ($129 million) for a controlling stake of a Hong Kong logistics company, and separately announced it would set up a 5 billion yuan logistics hub in coastal Zhejiang province and form an alliance with global peers. 

Cui said Deppon posted a profit in the 300 million yuan ($45 million) to 400 million yuan range last year, representing 20-30% growth. He added the company should be able to maintain similar growth this year due to continued strong demand from e-commerce. That means he is feeling no pressure to consider consolidation, though such pressure is likely to come eventually.

“There could be some consolidation among the major players in the next few years,” he said. “But we are not ready to consider M&A.”

Contact reporter Yang Ge (geyang@caixin.com)