J&T reported strong operating data in 1Q25, with parcel volume growing at an average of 31%. During the analyst briefing, J&T was confident that it would achieve the volume and cost reduction target this year. That said, we reset our earnings forecast in 2025E/26E by -48%/-18%, as we are concerned that the fierce price cut launched by the leading player in China will more than offset the high volume growth. We are still positive on J&T, given its strong competitive edge in the SEA market. Our SOTP-based TP is revised down to HK$6.9 (from HK$10) due to more conservative target multiples. Maintain BUY.
　　Key highlights in 1Q25:
　　SEA volume +50% YoY driven by early Ramadan. Parcel shipment volume reached 1.5bn. The impressive growth was driven by an early Ramadan this year (Feb 28-Mar 29 in 2025, vs Mar 10- Apr 9 in 2024), as sales promotion normally takes place during Ramadan in Indonesia and Malaysia. In addition, J&T also benefited from the strong sales growth of both Tik Tok and Temu in the region.
　　China volume +27% YoY to 4.9bn units. J&T believes the sustainable growth in China was helped by the continuous improvement of brand equity. Besides, the daily reverse parcel and individual orders, which generally carry higher value compared with e-commerce parcel, grew 70% YoY to 3.5mn in 1Q25. On the cost side, J&T is confident of achieving RMB0.1/parcel cost reduction this year.
　　New markets volume +19% YoY to 77mn units. The growth was driven by Brazilian and Mexican markets. J&T maintains the full-year growth target of 20%. We expect J&T will be able to achieve breakeven at EBITDA level this year.
　　Risks: 1) ASP pressure; 2) fluctuations in foreign exchange rates.