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Core Insights - ZTO Express is experiencing robust growth in parcel volume, which is positively impacting its revenue, but elevated operating expenses are significantly affecting its profitability [1][2] Factors Favoring ZTO - In Q1 2024, parcel volume increased by 13.9% year over year, while the parcel unit price decreased by 2.5%, leading to an 11% revenue increase from core express delivery services [2] - The company anticipates a parcel volume growth of 15%-18% year over year for 2024 [2] - Overall unit costs for the core express delivery business decreased by 5.3% year over year, driven by a 7% reduction in line-haul transportation costs and a 5.4% decrease in unit sorting costs [2] Shareholder Commitment - ZTO Express has repurchased 42,501,325 ADS for $1.06 billion by the end of Q4 2023, with $437 million remaining in its share repurchase program [3] - The company has increased its repurchase value from $1.5 billion to $2 billion and extended the program to June 30, 2025 [3] Key Risks - Total operating expenses rose by 28.3% year over year in Q1 2024, adversely impacting ZTO's bottom line [4] - Selling, general, and administrative expenses increased by 14% year over year, amounting to RMB896.6 million (US$124.2 million), primarily due to rising labor costs and a provisional loss related to a supplier [4] - ZTO's shares have declined by 16.9% over the past year, compared to a 9.4% decline in the industry [4]

Core Insights - ZTO Express (Cayman) Inc. is a leading express delivery company in China, founded in 2009 and publicly traded since 2016 [7] - The company currently holds a Zacks Rank of 3 (Hold) and has a VGM Score of B, indicating a solid position in the market [7] - ZTO's Value Style Score is also B, supported by a forward P/E ratio of 12.56, making it attractive for value investors [7] - Recent analyst activity shows two analysts have revised their earnings estimates higher for fiscal 2024, with the Zacks Consensus Estimate increasing by $0.01 to $1.75 per share [7] - ZTO has an average earnings surprise of 8.2%, suggesting a positive trend in earnings performance [7]

Core Viewpoint - ZTO Express (Cayman) Inc. held its annual general meeting in Hong Kong, where several resolutions were approved by shareholders, including financial statements for 2023 and the re-election of directors [1]. Group 1: Shareholder Resolutions - The audited consolidated financial statements for the year ended December 31, 2023, were received and considered [1]. - Mr. Xudong CHEN was re-elected as a non-executive Director [1]. - Mr. Qin Charles HUANG, Mr. Herman YU, and Mr. Tsun-Ming (Daniel) KAO were re-elected as independent non-executive Directors [1]. - The Board was authorized to fix the remuneration of the Directors [1]. - Deloitte Touche Tohmatsu was re-appointed as the auditor of the Company until the next annual general meeting [1]. - A general mandate was granted to the directors to issue and allot additional Class A Ordinary Shares not exceeding 20% of the total issued shares [1]. - A general mandate was granted to repurchase Class A Ordinary Shares not exceeding 10% of the total issued shares [1]. - The general mandate to issue additional Class A Ordinary Shares was extended by the number of shares repurchased [1]. Group 2: Company Overview - ZTO Express is a leading and fast-growing express delivery company in China, providing express delivery and value-added logistics services [2]. - The company operates a scalable network partner model to support the growth of e-commerce in China, leveraging partners for pickup and last-mile delivery while controlling the line-haul transportation and sorting network [2].

Core Insights - ZTO Express (Cayman) Inc. has experienced a 4.7% decline in share price over the past month, underperforming the S&P 500 index [1] - The company reported a year-over-year increase in Q1 2024 earnings, with earnings per share at 37 cents and total revenues reaching $1.37 billion [2] Operational Performance - Revenue from the core express delivery business increased by 11% year over year, driven by a 13.9% rise in parcel volume, despite a 2.5% decrease in parcel unit price [3] - KA revenue, which includes delivery fees from direct sales organizations, decreased by 7.1% due to a shift towards higher-value customers [3] - Freight forwarding services revenue grew by 5.2% year over year [3] - Sales of accessories, primarily thermal paper for digital waybills, surged by 31.5% [3] - The gross profit improved by 19% year over year, with gross margin increasing to 30.1% from 28.1% [4] Financial Position - Total operating expenses for the first quarter were RMB735.4 million ($101.8 million), up from RMB573.0 million in the previous year [4] - ZTO Express ended Q1 2024 with cash and cash equivalents of RMB12.58 billion, slightly up from RMB12.33 billion at the end of December 2023 [4] Future Outlook - The company anticipates parcel volumes for 2024 to be between 34.73 billion and 35.64 billion, representing a year-over-year increase of 15-18% [5] - Analysts have not made any earnings estimate revisions in the past two months [5]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with ZTO Express (Cayman) Inc. identified as a strong candidate due to its favorable growth metrics and Zacks Rank [1][6]. Group 1: Earnings Growth - ZTO Express has a historical EPS growth rate of 13.5%, with projected EPS growth of 13.4% for the current year, significantly outperforming the industry average of -3.7% [3]. Group 2: Cash Flow Growth - The company exhibits a year-over-year cash flow growth of 17.3%, which is substantially higher than the industry average of -12.5%. Over the past 3-5 years, ZTO's annualized cash flow growth rate has been 18.6%, compared to the industry average of 14.6% [4]. Group 3: Earnings Estimate Revisions - The current-year earnings estimates for ZTO Express have been revised upward, with the Zacks Consensus Estimate increasing by 0.6% over the past month, indicating a positive trend in earnings estimate revisions [5]. Group 4: Overall Assessment - ZTO Express has achieved a Growth Score of B and a Zacks Rank of 2, suggesting it is a solid choice for growth investors and a potential outperformer in the market [6].

Core Viewpoint - ZTO Express (Cayman) Inc. is currently positioned as a more attractive investment option compared to Grupo Aeroportuario del Sureste based on Zacks Rank and valuation metrics [1][3]. Valuation Metrics - ZTO has a forward P/E ratio of 14.06, while ASR has a forward P/E of 14.75 [2]. - ZTO's PEG ratio is 1.46, significantly lower than ASR's PEG ratio of 3.35, indicating better expected earnings growth relative to its valuation [2]. - ZTO's P/B ratio stands at 1.84, compared to ASR's P/B ratio of 3.65, suggesting ZTO is undervalued relative to its book value [2]. Investment Grades - ZTO holds a Value grade of B, while ASR has a Value grade of D, indicating ZTO is favored by value investors [3]. - ZTO has experienced stronger estimate revision activity, contributing to its more favorable valuation metrics compared to ASR [3].

Investment Rating - The report maintains a "Buy" rating for ZTO Express [2][4] Core Views - ZTO Express reported Q1 2024 earnings with revenue of 9.96 billion RMB, a year-on-year increase of 10.9%, and an adjusted net profit of 2.22 billion RMB, up 15.8% year-on-year, meeting expectations [2] - The company is optimizing its parcel volume structure, achieving steady growth with a business volume of 7.17 billion parcels, a year-on-year increase of 13.9%. The market share reached 19.3%, a decrease of 4.1 percentage points, primarily due to changes in industry volume calculations and a focus on high-quality development [2] - ZTO Express is shifting its strategic focus towards enhancing service quality and operational efficiency, with a positive outlook on the growth of its parcel business driven by competitive advantages in service timeliness and cost-effectiveness [2] - The report highlights ZTO Express's role as a leading company in expanding industry value, with expectations for both short-term growth and long-term development [2] Financial Data and Profit Forecast - Revenue projections for ZTO Express are as follows: 2024E at 44.41 billion RMB, 2025E at 50.05 billion RMB, and 2026E at 56.52 billion RMB, with year-on-year growth rates of 16%, 13%, and 13% respectively [3] - Adjusted net profit forecasts are 10.87 billion RMB for 2024E, 13.09 billion RMB for 2025E, and 15.67 billion RMB for 2026E, with year-on-year growth rates of 21%, 20%, and 20% respectively [3] - The report indicates a projected PE ratio of 13x for 2024E, 11x for 2025E, and 9x for 2026E, reflecting the company's strong competitive position and earnings certainty [2][3]

Investment Rating - The report maintains a "Recommend" rating for ZTO Express (02057 HK) with a target price of HKD 218, representing a 17% upside from the current price [1] Core Views - ZTO Express achieved revenue of RMB 9 96 billion in Q1 2024, up 10 9% YoY, with adjusted net profit increasing 15 8% YoY to RMB 2 22 billion [1] - The company handled 7 17 billion parcels in Q1 2024, a 13 9% YoY increase, maintaining a 19 3% market share [1] - ZTO is focusing on service quality improvement while pursuing profitable growth, with a strategic shift towards quality over quantity [1] Financial Performance - Q1 2024 gross profit was RMB 3 billion, up 19% YoY, while net profit declined 13% YoY to RMB 1 45 billion [1] - Single ticket revenue decreased 2 5% YoY to RMB 1 36, while single ticket cost dropped 5 3% to RMB 0 94 [1] - Adjusted single ticket net profit increased to RMB 0 31, up RMB 0 01 YoY [1] Operational Metrics - ZTO operates 31,000 pickup/delivery outlets and 10,000 self-owned line-haul vehicles, including 9,100 high-capacity vehicles [1] - The company has 3,800 transportation routes and 96 sorting centers [1] - ZTO's market share in Q1 2024 was 19 3%, leading competitors like YTO (15%), Yunda (13 32%), and STO (12 36%) [1] Future Outlook - ZTO expects full-year 2024 parcel volume between 34 73-35 64 billion, representing 15-18% YoY growth [1] - The company forecasts industry growth of 15-20% for 2024 [1] - ZTO plans to maintain a dividend payout ratio of at least 40% starting from 2024, with semi-annual dividend payments [1] Valuation - The report values ZTO at 15x 2024E PE, implying a market cap of RMB 163 9 billion (approximately HKD 180 5 billion) [1] - 2024-2026E net profit is projected at RMB 10 9 billion, RMB 12 8 billion, and RMB 14 1 billion respectively [1] - Corresponding PE ratios are estimated at 13x, 11x, and 10x for 2024-2026 [1]

Investment Rating - The report maintains a "Buy" rating for the company, with a target market price of 188.7 HKD [2][3]. Core Views - In Q1, the company adjusted its strategy, focusing on improving profitability and service quality, resulting in a decline in market share but an increase in profits that exceeded expectations [3][5]. - The company reported a business volume of 7.27 billion parcels in Q1, a year-on-year increase of 13.9%, with a market share of 19.3%, down 1.9 percentage points year-on-year [5][6]. - The report highlights that despite a decrease in market share, the company's net profit for 2024 is projected to be 9.664 billion RMB, with a net profit growth rate of 10.5% [3][5]. Financial Performance Summary - Revenue projections for the company are as follows: - 2022: 35,377 million RMB - 2023: 38,419 million RMB - 2024E: 42,787 million RMB - 2025E: 49,252 million RMB - 2026E: 53,942 million RMB - Net profit projections are: - 2022: 6,809 million RMB - 2023: 8,749 million RMB - 2024E: 9,664 million RMB - 2025E: 12,228 million RMB - 2026E: 13,384 million RMB - The diluted earnings per share (EPS) are projected to be: - 2022: 8.23 RMB - 2023: 10.58 RMB - 2024E: 11.69 RMB - 2025E: 14.79 RMB - 2026E: 16.18 RMB [3][4][5]. Strategic Focus - The company is shifting its focus towards enhancing service quality and profitability, which is expected to lead to stable profit growth in the long term [6][5]. - The report notes that the company is increasing its dividend payout ratio and share buyback amounts, which is anticipated to enhance shareholder returns [6][5].