Investment Rating - The investment rating for ZTO Express (2057.HK) is "Buy" with a maintained rating [4][12]. Core Insights - The company reported an adjusted net profit of 0.30 CNY per ticket, indicating an improvement in profitability [7]. - ZTO Express achieved a revenue of 99.6 billion CNY in Q1 2024, representing a year-on-year growth of 10.9%, while the net profit was 14.5 billion CNY, a decrease of 13.0% year-on-year, primarily due to a one-time impact from the sale of Cainiao shares [7][8]. - The company’s package volume reached 7.17 billion pieces in Q1 2024, reflecting a year-on-year increase of 13.9% [7]. Financial Data and Valuation - Revenue projections for ZTO Express are as follows: - 2023A: 38,419 million CNY - 2024E: 44,526 million CNY - 2025E: 50,234 million CNY - 2026E: 56,105 million CNY - The net profit forecasts are: - 2023A: 8,749 million CNY - 2024E: 10,542 million CNY - 2025E: 12,109 million CNY - 2026E: 13,963 million CNY - The company’s earnings per share (EPS) are projected to grow from 10.76 CNY in 2024 to 17.18 CNY in 2026 [6][8]. Cost and Profitability Analysis - The average revenue per ticket for the express business in Q1 2024 was 1.29 CNY, down 3.3% year-on-year, while the adjusted net profit per ticket was 0.31 CNY, up 1.7% year-on-year [7]. - The company maintained a healthy profit growth despite a slight decline in market share, focusing on quality and effective competition [7]. - The operating cash flow for Q1 2024 was 20 billion CNY, with capital expenditures of 17 billion CNY [7].

Investment Rating - The investment rating for the company is "Buy" [5][2] Core Views - The company achieved a revenue of 9.96 billion yuan in Q1 2024, representing a year-on-year growth of 10.9%. However, net profit decreased by 14.6% to 1.43 billion yuan, while adjusted net profit increased by 15.8% to 2.22 billion yuan [1][7] - The company maintained a price strategy focused on profitability, leading to a business volume of 7.171 billion pieces, which grew by 13.9% year-on-year but lagged behind industry peers [1][7] - The average price per delivery decreased by 2.5% year-on-year, a significant improvement from a decline of 18.2% in the previous quarter [1][7] - The company optimized its operating costs, with transportation and transfer costs per piece decreasing by 7.0% and 5.4% respectively, contributing to a stable profit margin [1][9] Summary by Sections Financial Performance - Q1 2024 revenue was 9.96 billion yuan, up 10.9% year-on-year - Q1 2024 net profit was 1.43 billion yuan, down 14.6% year-on-year - Adjusted net profit for Q1 2024 was 2.22 billion yuan, up 15.8% year-on-year [1][7] Business Volume and Pricing - Business volume reached 7.171 billion pieces, growing 13.9% year-on-year but underperforming compared to industry growth rates - The company’s market share decreased compared to the previous year but remains higher than competitors [1][7] Cost Management - The average transportation cost per piece was 0.47 yuan, down 7.0% year-on-year, while transfer costs were 0.30 yuan, down 5.4% year-on-year - The gross profit per piece for core express services was 0.42 yuan, showing an increase from previous periods [1][9] Capital Expenditure - Capital expenditure for Q1 2024 was 1.69 billion yuan, significantly lower than 2.3 billion yuan in the same period last year, indicating a peak in capital spending has passed [1][9]

Investment Rating - The report maintains a "BUY" rating for ZTO Express with a target price of US$38.50, indicating an upside potential of 80% from the current price of US$21.39 [2][5]. Core Insights - ZTO Express has shifted its strategic focus to a profitable growth strategy in 1Q24, achieving a core net profit of RMB1.9 billion, which is a 23% year-over-year increase and represents 19% of the full-year forecast [2][3]. - The company aims for a parcel volume growth target of 15-18% for 2024, consistent with previous guidance, despite a higher industry growth forecast of 15-20% [2][3]. - ZTO's earnings growth is supported by a 10% year-over-year revenue increase, a 2.1 percentage point expansion in gross margin to 30.1%, and a significant increase in net finance income [3][5]. Financial Performance Summary - **1Q24 Results**: Core net profit increased by 23% YoY to RMB1.9 billion, while reported net income decreased by 15% YoY to RMB1.4 billion due to an impairment of RMB478 million [3][8]. - **Revenue Growth**: Total revenue for 1Q24 was RMB9.96 billion, reflecting a 10.9% increase YoY [8]. - **Parcel Volume**: Parcel volume grew by 14% YoY to 7.2 billion units, which is below the industry average growth of 25% [3][8]. - **Cost Management**: Unit cost decreased by 5% YoY to RMB0.94 per parcel, with transportation costs down by 7% YoY [3][8]. - **Earnings Forecast**: The earnings forecast remains unchanged, with adjusted net profit expected to reach RMB9.74 billion for FY24, reflecting an 11.4% growth YoY [5][17]. Key Financial Metrics - **Revenue Projections**: Revenue is projected to grow from RMB38.42 billion in FY23 to RMB43.87 billion in FY24, representing a 14.2% growth [5][17]. - **Earnings Per Share (EPS)**: Reported EPS is expected to be RMB11.67 for FY24, with a YoY growth of 11.4% [5][17]. - **Price-to-Earnings Ratio (P/E)**: The P/E ratio is projected to be 13.2x for FY24, which is in line with historical averages [5][17]. - **Dividend Yield**: The expected dividend yield for FY24 is 3.0% [5][17].

M N 16 May 2024 CMB International Global Markets | Equity Research | Company Update ZTO Express (2057 HK) 1Q24 core earnings beat estimates; Shifted to profitable growth strategy Target Price HK$303.00 ZTO Express (ZTO) shifted the strategic focus to profitable growth in 1Q24, Up/Downside 74.5% enabling it to deliver core net profit of RMB1.9bn (+23% YoY), representing 19% Current Price HK$173.60 of our full-year forecast (run rate in 1Q23: 17.6%), which is better than our expectation. Looking forward, ZTO ...

Investment Rating - The report assigns a "Buy" rating to ZTO Express [2] Core Views - ZTO Express is the leading player in China's e-commerce express delivery sector, achieving a revenue of HKD 38.419 billion in 2023, with express services accounting for HKD 35.488 billion (92.4% of total revenue) [5][11] - The company completed a total of 30.202 billion express deliveries in 2023, representing a year-on-year growth of 23.8% and a market share of 22.9% [5][11] - The report anticipates a compound annual growth rate (CAGR) of 17.1% for express delivery volumes from 2024 to 2026, driven by the continued optimization of online channel costs and the growth of e-commerce penetration [5][51] Company Overview - ZTO Express has maintained its position as the top express delivery service provider in China since 2016, with a consistent market share in delivery volumes [5][11] - The company's revenue has shown a compound annual growth rate (CAGR) of 18.5% from 2017 to 2023, with express delivery volumes growing at a CAGR of 30.1% during the same period [15] Industry Dynamics - The report highlights that the core driver of the industry is online consumption, which continues to grow as online channels optimize their costs [5][33] - The efficiency of online channels is expected to replace less efficient offline distribution channels, leading to an increase in e-commerce penetration [51] Financial Forecasts and Investment Recommendations - Revenue projections for ZTO Express from 2024 to 2026 are estimated at HKD 43.084 billion, HKD 47.989 billion, and HKD 53.065 billion, respectively [5][106] - The net profit attributable to shareholders is forecasted to be HKD 10.256 billion, HKD 11.481 billion, and HKD 12.866 billion for the same period, with corresponding earnings per share (EPS) of HKD 12.62, HKD 14.12, and HKD 15.83 [5][106] - The report emphasizes that ZTO Express is transitioning from operational leadership to shareholder return leadership, with significant cash dividends and stock buyback plans in place [19][100]

Financial Data and Key Metrics Changes - In Q1 2024, ZTO Express reported a parcel volume of $7.17 billion, a year-over-year increase of 14% [6] - Adjusted net profit reached $2.22 billion, representing a 16% increase year-over-year [6][14] - Total revenue increased by 10.9% to $10.0 billion, while total cost of revenue rose by 7.7% to $7 billion [16] - Gross profit increased by 19% to $3 billion, with a gross profit margin of 30.1%, up 2 percentage points [16] Business Line Data and Key Metrics Changes - The core express delivery business saw an average selling price (ASP) decrease of 2.5% or $0.04, significantly lower than the industry average decrease of about $0.20 [15] - Retail parcel volume grew over 40% year-over-year, with a daily average of 5 million parcels [27] - The company limited incremental volume incentives, focusing on profitable growth rather than volume alone [15][21] Market Data and Key Metrics Changes - The overall express delivery industry volume increased by 25.2% year-over-year, driven by e-commerce growth [6] - ZTO's market share contracted by 1.9 percentage points to 19.3% [15] - The company noted a shift towards lower-priced e-commerce parcels due to competitive pricing strategies in the market [7][15] Company Strategy and Development Direction - ZTO's strategy emphasizes a balance between service quality, profitability, and scale, with a current focus on enhancing service quality [7][12] - The company aims to develop differentiated products and services to meet diverse customer needs and improve brand recognition [7][10] - ZTO is committed to improving transit efficiency and enhancing the product mix to increase market penetration [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged fierce price competition in major regions but remains focused on strategic execution to improve quality and efficiency [9][10] - The company anticipates overall industry growth of 15% to 20% for the year, with parcel volume expected to reach between $34.73 billion and $35.64 billion [17][18] - Management highlighted the importance of maintaining a focus on quality and profitability for sustainable growth in the long term [21][30] Other Important Information - Operating cash flow was reported at $2 billion, a decrease of 25.8% year-over-year due to longer receivable terms with new customers [17] - Capital expenditure for the quarter totaled $1.7 billion, with an annual forecast below $6 billion [17] Q&A Session Summary Question: Strategic focus shift on loss-making volumes and industry consolidation - Management explained the shift is aimed at focusing on long-term profitable growth amidst changing market dynamics, emphasizing the need to avoid unnecessary volume [20][21] Question: Expectations on unit profitability - Management indicated that unit profit expansion is expected to continue if competitive strategies remain unchanged, focusing on maintaining a balanced growth approach [20][23] Question: Individual parcel market prospects and measures to increase penetration - Management reported a 40% growth in retail volume and outlined initiatives to improve courier efficiency and service quality to increase market penetration [24][27] Question: Industry landscape and future strategy - Management discussed the potential for consolidation in the industry but emphasized their focus on quality and profitability over market share [29][30] Question: International expansion strategies - Management highlighted ongoing efforts to develop cross-border services in Southeast Asia and Africa, aiming for cost efficiency and growth in international markets [32][33] Question: Market share dynamics and consumer awareness - Management reiterated the importance of balancing volume, profit, and service quality for long-term growth, aiming to enhance brand recognition and consumer awareness [35][36]

Financial Performance - Adjusted net profit increased by 15.8% to RMB 2.224 billion in Q1 2024[3] - Revenue reached RMB 9.960 billion (USD 1.379 billion), a 10.9% increase from RMB 8.983 billion in Q1 2023[4] - Gross profit rose by 19.0% to RMB 3.002 billion (USD 415.8 million) from RMB 2.523 billion in the same period last year[4] - Adjusted EBITDA increased by 16.8% to RMB 3.660 billion (USD 507.0 million) compared to RMB 3.133 billion in Q1 2023[4] - Basic and diluted earnings per American Depositary Share (ADS) decreased by 14.5% to RMB 1.77 (USD 0.25) compared to RMB 2.07 in Q1 2023[4] - Net profit decreased by 13.0% to RMB 1,447.7 million (USD 200.5 million) compared to RMB 1,664.8 million in the same period last year[12] - Adjusted net profit was RMB 2,224.0 million (USD 308.0 million), up from RMB 1,919.8 million in the same period last year[12] - The company’s total comprehensive income for the three months ended March 31, 2024, was RMB 1,365,417, compared to RMB 1,689,607 for the same period in 2023, a decrease of about 19%[24] Operational Metrics - Package volume grew by 13.9% to 7.171 billion pieces compared to Q1 2023[5] - The core revenue from express delivery services grew by 11.0% year-on-year, attributed to a 13.9% increase in package volume, despite a 2.5% decline in unit price[7] - Operating cash flow was RMB 2.031 billion (USD 281.3 million), down from RMB 2.738 billion in Q1 2023[4] - Operating costs increased by 7.7% year-on-year to RMB 6.96 billion (USD 963.7 million)[8] - The unit transportation cost decreased by 7.0%, benefiting from improved economies of scale and optimized routing[9] - The company maintains a business volume guidance of 34.73 billion to 35.64 billion packages for the year, with a growth rate of 15%-18%[6] - The company expects package volume for 2024 to be between 34.73 billion and 35.64 billion, representing a year-over-year growth of 15% to 18%[13] Investments and Acquisitions - The company reported an investment impairment of RMB 478.4 million (USD 66.3 million) due to Alibaba's offer to acquire all outstanding shares of Cainiao Smart Logistics Network[11] - The company accepted Alibaba's offer to acquire its entire stake in Cainiao for approximately USD 94.3 million, with an investment cost of USD 54.0 million[14] Taxation and Expenses - Income tax expense was RMB 566.3 million (USD 78.4 million), an increase from RMB 455.0 million in the same period last year, with an overall tax rate increase of 6.8 percentage points[12] Leadership Changes - The company appointed Mr. Zhu Jingxi as the new CEO, previously serving as Vice President of Information Technology[15] Cash Flow and Assets - Cash flow from operating activities was RMB 2,031,020 thousand, compared to RMB 2,737,974 thousand for the same period in 2023, indicating a decrease of 25.8%[27] - The company's cash and cash equivalents amounted to RMB 12,583,834 thousand, a slight increase from RMB 12,333,884 thousand as of December 31, 2023, representing a growth of 2.02%[26] - The total assets as of March 31, 2024, were RMB 89,875,357 thousand, down from RMB 88,465,221 thousand as of December 31, 2023, reflecting a decline of 1.58%[26] - The total liabilities as of March 31, 2024, were RMB 31,485,000 thousand, a decrease from RMB 28,184,813 thousand as of December 31, 2023, reflecting a decline of 1.5%[26] - The company's total equity increased to RMB 58,390,357 thousand as of March 31, 2024, from RMB 60,280,408 thousand as of December 31, 2023, indicating a decrease of 3.1%[26] Currency and Exchange Rates - The exchange rate used for conversion is RMB 7.2203 to USD 1 as of March 29, 2024[16]

Emphasizing Profitable Growth amidst Consumption Mix-shiftAdjusted Net Income Grew 15.8% to RMB2.2 BillionParcel Volume Increased 13.9% to 7.2 BillionSHANGHAI, May 15, 2024 /PRNewswire/ -- ZTO Express (Cayman) Inc. (NYSE: ZTO and SEHK: 2057), a leading and fast-growing express delivery company in China ("ZTO" or the "Company"), today announced its unaudited financial results for the first quarter ended March 31, 2024[1]. The Company grew parcel volume by 13.9% year over year while maintaining high quality o ...

Investment Rating - The report assigns a "Buy" rating to ZTO Express, with a target market value of 173.8 billion HKD based on a 15x P/E ratio for the projected net profit of 10.526 billion CNY in 2024 [8][17]. Core Insights - ZTO Express has emerged as a leading player in the e-commerce express delivery sector, achieving significant market share and profitability through strategic innovations and operational efficiencies [3][18]. - The express delivery industry continues to exhibit growth potential, driven by increasing online shopping penetration and evolving consumer behaviors, despite a downward trend in the average value of packages [4][33]. - ZTO's operational transformation focuses on direct management, large-scale operations, and automation, which have significantly reduced costs and improved efficiency [5][24]. Summary by Sections Company Overview - ZTO Express was established in 2002 and has rapidly ascended to become a market leader in the e-commerce express delivery sector through various strategic initiatives [3][18]. - The company went public in the US in 2016 and in Hong Kong in 2020, enhancing its capital base and operational capabilities [19][20]. Industry Growth Potential - The e-commerce express delivery market is expected to grow, with the online retail sales of physical goods reaching 13.02 trillion CNY in 2023, a year-on-year increase of 8.4% [33]. - The penetration of online shopping is increasing, with the proportion of online retail sales in total social retail sales rising to 27.6% in 2023 [33]. Operational Efficiency - ZTO has achieved a 100% direct management rate for its trunk line vehicles since 2021, leading to a significant reduction in transportation costs from 0.83 CNY per item in 2016 to 0.45 CNY in 2023 [5][24]. - The company has also automated its sorting centers, increasing the number of automated sorting devices from 58 in 2017 to 464 in 2023, which has further reduced sorting costs [5][24]. Financial Performance - ZTO's net profit for 2024 is projected to be 10.526 billion CNY, with a compound annual growth rate of 16.0% from 2023 to 2026 [8][11]. - The company maintains a strong cash position, with a cash dividend of 0.62 USD per share in 2023 and a commitment to a dividend payout ratio of no less than 40% in 2024 [26][27].

Investment Rating - The investment rating for ZTO Express is "Buy" [4] Core Views - ZTO Express has emerged as a leader in the e-commerce express delivery sector, achieving significant market share and profitability through strategic innovations and operational efficiencies [7][16] - The express delivery industry still has growth potential, driven by increasing online shopping penetration and the rise of live e-commerce, which is expected to enhance overall business volume [8][35] - ZTO Express's asset transformation initiatives, including direct operation, large-scale vehicles, and automation, have significantly reduced operational costs and improved efficiency [9][25] Summary by Sections Company Overview - ZTO Express was established in 2002 and has rapidly ascended to become a leading player in the e-commerce express delivery market through various strategic initiatives [7][17] - The company focuses primarily on domestic e-commerce express services while gradually expanding its logistics ecosystem [22] Industry Growth Potential - The express delivery sector continues to grow, with e-commerce package volume expected to increase due to higher online shopping penetration and the fragmentation of consumer purchasing behavior [8][35] - The competitive landscape is anticipated to stabilize, reducing price competition among major players [8] Asset Transformation - ZTO Express has fully integrated its transportation operations, achieving 100% direct operation of its trunk vehicles since 2021, which has led to a significant reduction in transportation costs from 0.83 yuan per ticket in 2016 to 0.45 yuan in 2023 [9][25] - The company has also automated its sorting centers, increasing the number of automated sorting devices from 58 in 2017 to 464 in 2023, resulting in lower sorting costs [9][25] Management Strategy - ZTO Express has implemented a shared governance model that aligns the interests of headquarters, franchisees, and couriers through equity swaps and incentive programs [10][11] - The company has established an employee stock ownership plan to incentivize staff and enhance long-term commitment [11] Profit Forecast and Valuation - The projected net profit for ZTO Express for 2024 is 10.526 billion yuan, with a compound annual growth rate of 16% from 2023 to 2026 [12][16] - The target market capitalization is set at 173.8 billion HKD, based on a 15x price-to-earnings ratio for the expected net profit in 2024 [12][16]