ZTO Express' (ZTO) ) shares gained 6.1% since its second-quarter 2024 earnings release on Aug 20. Quarterly earnings of 47 cents per share improved year over year. Total revenues of $1.47 billion improved year over year. Detailed Operational Statistics Revenues from the core express delivery business improved 10.4% year over year, owing to 10.1% growth of parcel volume and stable parcel unit price. KA revenues, including delivery fees from direct sales organizations established to serve core express KA cust ...

Investment Rating - The report maintains a "Buy" rating for ZTO Express (2057.HK) [4] Core Insights - The company focuses on balanced growth, enhancing single-piece collection. In Q2 2024, ZTO Express achieved a total parcel volume of 8.45 billion pieces, a year-on-year increase of 10.1%, with a market share of 19.6%, down by 2.0 percentage points. The revenue per single piece for express delivery was CNY 1.17, a decrease of 0.3% year-on-year, while the core revenue per piece was CNY 1.24. The sorting cost per piece was CNY 0.26, up by CNY 0.01 year-on-year, and the transportation cost per piece was CNY 0.39, down by CNY 0.03 year-on-year. The gross profit per piece was CNY 0.52, an increase of 2.6% year-on-year [3][9] - Operational efficiency continues to improve, with profitability optimizing. In Q2 2024, the gross profit reached CNY 3.62 billion, a year-on-year increase of 9.6%, and net profit was CNY 2.61 billion, up by 3.3%. The adjusted net profit was CNY 2.81 billion, a growth of 10.9% year-on-year. For the first half of 2024, the gross profit was CNY 6.62 billion, a year-on-year increase of 13.6%, and adjusted net profit was CNY 5.03 billion, up by 13%. The adjusted net profit per piece in Q2 2024 was CNY 0.33, an increase of 0.7% year-on-year. The company expects parcel volume in 2024 to be between 34.73 billion and 35.64 billion pieces, representing a year-on-year growth of 15% to 18% [3][9] - Profitability forecast and investment advice indicate that the company has the strongest scale effect and a robust, balanced franchise network. With industry demand continuing to exceed expectations, the company adheres to a quality operation strategy, achieving high-quality profitability. The net profit forecasts for 2024, 2025, and 2026 remain unchanged at CNY 10.5 billion, CNY 12.1 billion, and CNY 14 billion, respectively, maintaining a "Buy" rating [3][9] Financial Data and Valuation - For 2022A, 2023A, and projections for 2024E, 2025E, and 2026E, the revenue is projected to be CNY 35.377 billion, CNY 38.419 billion, CNY 44.526 billion, CNY 50.234 billion, and CNY 56.105 billion, respectively, with growth rates of 16%, 9%, 16%, 13%, and 12% [3][9] - The net profit for the same periods is projected to be CNY 6.809 billion, CNY 8.749 billion, CNY 10.542 billion, CNY 12.109 billion, and CNY 13.963 billion, with growth rates of 43%, 28%, 20%, 15%, and 15% [3][9] - The earnings per share (EPS) are projected to be CNY 8.38, CNY 10.76, CNY 12.97, CNY 14.90, and CNY 17.18, with price-to-earnings ratios (P/E) of 17.6, 13.7, 13.2, 11.5, and 10.0 [3][9]

Investment Rating - The investment rating for the company is "Buy" for both Hong Kong and US stocks [2]. Core Views - The company reported a slight profit exceeding expectations, with a continuous optimization of its customer structure [2]. - For the first half of 2024, the company achieved revenue of 20.69 billion RMB, a year-on-year increase of 10.5%, and a net profit attributable to shareholders of 4.04 billion RMB, a year-on-year decrease of 4.1% [3][4]. - The adjusted net profit for the same period was 5.03 billion RMB, reflecting a year-on-year increase of 13.0% [3]. - The company completed a business volume of 15.623 billion pieces in the first half of 2024, representing a year-on-year growth of 11.8% [3]. Financial Performance - In Q2 2024, the company achieved revenue of 10.73 billion RMB, a year-on-year increase of 10.1%, and a net profit of 2.61 billion RMB, a year-on-year increase of 2.8% [3][4]. - The adjusted net profit for Q2 was 2.81 billion RMB, a year-on-year increase of 10.9% [3]. - The adjusted profit per ticket increased slightly by 0.7% to 0.33 RMB, while the core revenue per ticket remained stable at 1.24 RMB, despite a 12% decline in the industry average [4]. Strategic Insights - The company is actively exploring a new balance between market share and profit margin amidst ongoing price competition in the industry [4]. - The revenue from direct customer business grew by 26.2% year-on-year, indicating a focus on high-quality development strategies [4]. - The company announced a dividend of 0.35 USD per share, highlighting its commitment to synchronizing dividends with growth [4]. Earnings Forecast and Valuation - The earnings per share (EPS) forecasts for 2024, 2025, and 2026 are 12.73 RMB, 14.89 RMB, and 17.42 RMB, respectively [5]. - The company is assigned a 15x price-to-earnings (PE) valuation for 2024, leading to a target price of 208.57 HKD per share and 26.73 USD per share for Hong Kong and US stocks, respectively [4].

Investment Rating - The report maintains a "Buy" rating for ZTO Express (02057.HK) [1] Core Views - ZTO Express reported a revenue of 10.73 billion yuan for Q2 2024, representing a year-on-year growth of 10.1%, while net profit reached 2.61 billion yuan, up 3.3% year-on-year [1] - The company’s business volume for Q3 2023 was 8.452 billion pieces, also reflecting a 10.1% year-on-year increase, although market share decreased by 2 percentage points to 19.6% [1] - The management maintains the annual package volume growth forecast for 2024 at 15% to 18%, corresponding to 34.73 billion to 35.64 billion pieces [1] Financial Performance Summary - Revenue (in million yuan): - 2022A: 35,377 - 2023A: 38,419 - 2024E: 44,178 - 2025E: 48,901 - 2026E: 53,193 [3] - Net Profit (in million yuan): - 2022A: 6,809 - 2023A: 8,749 - 2024E: 10,522 - 2025E: 12,125 - 2026E: 13,609 [3] - Gross Margin for Q2 2024 decreased by 0.1 percentage points to 33.8%, while net margin fell by 1.6 percentage points to 24.4% [1] Dividend Information - The board has approved a mid-term cash dividend of $0.35 per share for H1 2024, with a payout ratio of 40% [1]

Investment Rating - The investment rating for ZTO Express (02057.HK) is "Outperform" [3][15]. Core Views - The report highlights ZTO Express's focus on a balanced growth strategy, emphasizing service quality while achieving steady operational performance. In Q2 2024, the company reported a revenue of 20.69 billion yuan, a year-on-year increase of 10.5%, and an adjusted net profit of 5.03 billion yuan, a year-on-year increase of 13.0% [1][4]. - The company is transitioning from high volume to high quality, with a business volume of 8.45 billion parcels in Q2 2024, reflecting a 10.1% year-on-year growth despite a slight decline in market share due to intense price competition [1][4]. - ZTO Express's core express service price remained stable at 1.24 yuan per parcel, while the single parcel net profit (adjusted) was 0.33 yuan, showing resilience in profitability [10][12]. Financial Performance Summary - For the first half of 2024, ZTO Express achieved a revenue of 20.69 billion yuan, with a net profit of 4.04 billion yuan, down 4.1% year-on-year, and an adjusted net profit of 5.03 billion yuan, up 13.0% year-on-year [1][4]. - In Q2 2024, the company reported a revenue of 10.73 billion yuan, a 10.1% increase year-on-year, and a net profit of 2.61 billion yuan, a 3.3% increase year-on-year [1][4]. - The company’s capital expenditure in Q2 2024 was 1.28 billion yuan, significantly down from 2.20 billion yuan in the same period last year, indicating a peak in capital spending has passed [10][12]. Profitability and Cost Analysis - The report indicates that the single parcel transportation cost was 0.39 yuan, down 6.8% year-on-year, while the single parcel transfer cost was 0.26 yuan, up 4.6% year-on-year [10][12]. - The company’s EBIT margin is projected to improve, with estimates for 2024-2026 showing a gradual increase in profitability metrics [2][13]. - The adjusted net profit forecast for 2024-2026 is 9.90 billion, 11.71 billion, and 13.36 billion yuan, respectively, with year-on-year growth rates of 13.2%, 18.2%, and 14.1% [12][13].

[FINANCIAL HIGHLIGHTS](index=2&type=section&id=FINANCIAL%20HIGHLIGHTS) [Summary of Financial Highlights](index=2&type=section&id=1.1%20Summary%20of%20Financial%20Highlights) ZTO Express reported **10.5%** revenue growth and **13.6%** gross profit increase in H1 2024, alongside a **3.2%** net income decrease, but **13.0%** adjusted net income growth and higher adjusted EPS | Metric | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | Change (%) | | :--------------------------------------- | :------------------------- | :------------------------- | :--------- | | Revenues | 18,723,563 | 20,685,970 | 10.5% | | Cost of Revenues | (12,895,730) | (14,063,408) | 9.1% | | Gross Profit | 5,827,833 | 6,622,562 | 13.6% | | Net income | 4,195,034 | 4,061,744 | (3.2)% | | Net income attributable to ordinary shareholders | 4,211,540 | 4,037,848 | (4.1)% | | **Non-GAAP Financial Measures:** | | | | | EBITDA | 6,761,106 | 7,034,205 | 4.0% | | Adjusted EBITDA | 7,016,846 | 8,000,042 | 14.0% | | Adjusted net income | 4,450,774 | 5,029,768 | 13.0% | | Adjusted net income attributable to ordinary shareholders | 4,467,280 | 5,005,872 | 12.1% | | Adjusted basic and diluted earnings per ADS attributable to ordinary shareholders (Basic) | 5.52 | 6.21 | 12.5% | | Adjusted basic and diluted earnings per ADS attributable to ordinary shareholders (Diluted) | 5.40 | 6.06 | 12.2% | [Non-GAAP Financial Measures](index=2&type=section&id=1.2%20Non-GAAP%20Financial%20Measures) The company uses non-GAAP metrics like EBITDA and adjusted net income to evaluate performance and identify business trends, acknowledging their limitations and the necessity of considering them alongside GAAP results - Non-GAAP metrics (EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS for ADS) are used to assess operating performance and for financial/operational decision-making[10](index=10&type=chunk) - These metrics help identify underlying business trends by excluding certain expenses and non-recurring items, enhancing understanding of past performance and future prospects[11](index=11&type=chunk) - Non-GAAP financial measures are not defined by US GAAP, have limitations as analytical tools, and should not be considered in isolation or as substitutes for net income or other performance measures[12](index=12&type=chunk) [Reconciliation of GAAP and Non-GAAP Results](index=4&type=section&id=1.3%20Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Results) The report details the reconciliation of GAAP net income to adjusted net income, EBITDA, and adjusted EBITDA, as well as GAAP net income attributable to ordinary shareholders to adjusted net income attributable to ordinary shareholders, with key adjustments including share-based compensation, impairment of equity investments, and disposal gains/losses | Metric | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :---------------------------------------------------------------- | :------------------------- | :------------------------- | | Net income | 4,195,034 | 4,061,744 | | Add: Share-based compensation expense | 254,976 | 305,155 | | Add: Impairment of investment in equity investees | – | 672,816 | | Add: Loss/(Gain) on disposal of equity investees and subsidiaries, net of income taxes | 764 | (9,947) | | **Adjusted net income** | **4,450,774** | **5,029,768** | | Net income | 4,195,034 | 4,061,744 | | Add: Depreciation | 1,322,968 | 1,473,049 | | Add: Amortization | 68,584 | 68,325 | | Add: Interest expenses | 143,928 | 199,771 | | Add: Income tax expenses | 1,030,592 | 1,231,316 | | **EBITDA** | **6,761,106** | **7,034,205** | | Add: Share-based compensation expense | 254,976 | 305,155 | | Add: Impairment of investment in equity investees | – | 672,816 | | Add: Loss/(Gain) on disposal of equity investees and subsidiaries | 764 | (12,134) | | **Adjusted EBITDA** | **7,016,846** | **8,000,042** | | Metric | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :---------------------------------------------------------------- | :------------------------- | :------------------------- | | Net income attributable to ordinary shareholders | 4,211,540 | 4,037,848 | | Add: Share-based compensation expense | 254,976 | 305,155 | | Add: Impairment of investment in equity investees | – | 672,816 | | Add: Loss/(Gain) on disposal of equity investees and subsidiaries, net of income taxes | 764 | (9,947) | | **Adjusted net income attributable to ordinary shareholders** | **4,467,280** | **5,005,872** | | Weighted average shares used in calculating net earnings per ordinary share/ADS (Basic) | 808,916,820 | 805,806,731 | | Weighted average shares used in calculating net earnings per ordinary share/ADS (Diluted) | 840,125,888 | 838,836,131 | | Net earnings per share/ADS attributable to ordinary shareholders (Basic) | 5.21 | 5.01 | | Net earnings per share/ADS attributable to ordinary shareholders (Diluted) | 5.10 | 4.90 | | Adjusted net earnings per share/ADS attributable to ordinary shareholders (Basic) | 5.52 | 6.21 | | Adjusted net earnings per share/ADS attributable to ordinary shareholders (Diluted) | 5.40 | 6.06 | [BUSINESS REVIEW AND OUTLOOK](index=5&type=section&id=BUSINESS%20REVIEW%20AND%20OUTLOOK) [Business Review during the Reporting Period](index=5&type=section&id=2.1%20Business%20Review%20during%20the%20Reporting%20Period) ZTO Express achieved robust financial and operational performance in H1 2024, with **10.5%** revenue growth to RMB **20.686 billion**, driven by increased online consumption and a strategic shift towards high-value customers amidst intense competition - H1 2024 saw robust financial and operational performance, with continuous improvements in operating efficiency and a focus on profitable growth amidst intense industry competition[18](index=18&type=chunk) - Revenue increased by **10.5%** to RMB **20.686 billion**, primarily due to increased express delivery demand from higher online consumption penetration and a structural shift towards high-value customers[18](index=18&type=chunk) [Core Express Delivery Business](index=6&type=section&id=2.2%20Core%20Express%20Delivery%20Business) The core express delivery business generates most revenue by providing parcel sorting and line-haul transportation to network partners and direct express services to enterprise clients, with network transit fees based on fixed waybill amounts and variable amounts tied to parcel weight and route distance - The majority of revenue is derived from express delivery services provided to network partners (parcel sorting and line-haul transportation) and direct express services to enterprise customers[19](index=19&type=chunk) - Network transit fees are priced based on operating costs, market conditions, competition, and service quality, primarily consisting of a fixed waybill amount per parcel and a variable amount based on parcel weight and route distance[20](index=20&type=chunk) - Network partners have full discretion in pricing delivery service fees charged to senders, which have historically decreased due to lower unit operating costs and market competition[21](index=21&type=chunk) [Ecosystem of Integrated Solutions](index=6&type=section&id=2.3%20Ecosystem%20of%20Integrated%20Solutions) ZTO Express aims to become an integrated logistics service provider, expanding beyond its core express business into less-than-truckload, cross-border, warehousing, air freight, cold chain, and commercial solutions to capture diverse market demands - The goal is to become an integrated logistics service provider, expanding beyond core express delivery into less-than-truckload, cross-border, warehousing, air freight, cold chain, and commercial solutions to capture diversified demands[22](index=22&type=chunk) - Services include less-than-truckload logistics focused on heavy cargo, international express services in Southeast Asia and Africa, cross-border services including freight forwarding, and integrated logistics solutions for warehousing, distribution, and transportation[22](index=22&type=chunk) [Logistics Network and Infrastructure](index=6&type=section&id=2.4%20Logistics%20Network%20and%20Infrastructure) ZTO Express operates a highly scalable network partner model covering **99%** of China's cities and counties, supported by **96** sorting centers, **515** automated sorting lines, and over **3,800** line-haul routes served by approximately **10,000** self-owned trucks, with ongoing infrastructure investments to boost capacity and efficiency - The network covers **99%** of China's cities and counties, with over **6,000** direct network partners, more than **31,000** pick-up/delivery outlets, and over **110,000** last-mile stations[23](index=23&type=chunk) - Logistics infrastructure includes **96** sorting centers, **515** automated sorting lines, and over **3,800** line-haul routes, served by approximately **10,000** self-owned line-haul trucks[25](index=25&type=chunk) - Continuous investment in logistics infrastructure, such as sorting centers and the line-haul fleet, aims to enhance parcel handling capacity, accommodate peak volumes, and improve operational efficiency[26](index=26&type=chunk) [Technology Infrastructure](index=7&type=section&id=2.5%20Technology%20Infrastructure) The proprietary 'Zhongtian System' is the technological backbone for efficient network operations and delivery services, encompassing hundreds of modules across all business scenarios, utilizing algorithms for real-time monitoring, order dispatch, and dynamic resource adjustment to optimize scheduling, enhance fulfillment rates, and reduce operating costs - The proprietary "Zhongtian System" is the technological backbone for efficient management of complex network operations and delivery services, comprising hundreds of modules covering all business and operational scenarios[27](index=27&type=chunk) - It utilizes proprietary algorithms for real-time monitoring, order dispatch, and forecasting, supporting high-throughput processing of over **100 million** orders daily and dynamically adjusting resource allocation to optimize transit time and cost[28](index=28&type=chunk) - Ongoing digitalization and intelligent operational optimization have improved scheduling, enhanced order fulfillment rates, and reduced operating costs, leading to a decrease in unit costs for sorting and transportation in H1 2024[29](index=29&type=chunk) [Environment, Social and Governance (ESG)](index=8&type=section&id=2.6%20Environment%2C%20Social%20and%20Governance%20%28ESG%29) ZTO Express is committed to sustainable development by reducing delivery costs, supporting industry growth, and enhancing corporate governance, focusing on 'green' express services, safety, economic development, and social value creation, with annual ESG reports since 2019 - Actively committed to sustainable development by reducing delivery costs, supporting related industry development, and continuously improving corporate governance, including compliance operations and risk control[31](index=31&type=chunk) - Actively building a broad ecosystem, aiming to transform into an integrated logistics provider to help reduce logistics costs for society as a whole[31](index=31&type=chunk) - Proactively fulfilling social responsibilities, such as developing "green" express services, ensuring safety, contributing to economic development, and creating more value for society, with annual ESG reports published since 2019[31](index=31&type=chunk)[32](index=32&type=chunk) [Important Events after the Reporting Period](index=8&type=section&id=2.7%20Important%20Events%20after%20the%20Reporting%20Period) As of the announcement date, no material events significantly impacting the Group occurred after the reporting period, beyond those already disclosed - As of the date of this announcement, no material events significantly impacting the Group occurred after the reporting period[33](index=33&type=chunk) [Business Outlook](index=8&type=section&id=2.8%20Business%20Outlook) ZTO Express is confident in China's express industry growth, upholding a shared success philosophy, and building competitive advantages through infrastructure and efficient utilization, projecting **15% to 18%** parcel volume growth to **34.73 billion to 35.64 billion** parcels in 2024 - Confident in the growth prospects of China's express delivery industry, adhering to a shared success philosophy, and focusing on infrastructure development and its efficient utilization to build competitive advantages[34](index=34&type=chunk) - Practical improvements in digitalization and data-driven processes will continue to enhance ZTO's competitive edge; an altruistic service philosophy will drive business growth and greater national and social responsibility[35](index=35&type=chunk) | Metric | 2024 Guidance | YoY Change | | :---------------- | :-------------------- | :--------- | | Parcel Volume | 34.73 billion to 35.64 billion | 15% to 18% | [FINANCIAL PERFORMANCE ANALYSIS](index=9&type=section&id=FINANCIAL%20PERFORMANCE%20ANALYSIS) [Revenues](index=9&type=section&id=3.1%20Revenues) Total revenues for H1 2024 increased **10.5%** to RMB **20.686 billion**, primarily driven by **10.7%** growth in express delivery services revenue and a significant **27.4%** increase in accessories sales and other income | Revenue Stream | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | % of Total Revenues (2024) | | :------------------------ | :------------------------- | :------------------------- | :------------------------- | | Express delivery services | 17,387,187 | 19,116,095 | 92.4% | | Freight forwarding services | 431,597 | 435,989 | 2.1% | | Sale of accessories | 836,616 | 1,065,484 | 5.2% | | Others | 68,163 | 68,402 | 0.3% | | **Total revenues** | **18,723,563** | **20,685,970** | **100%** | [Core Express Delivery Business Revenue](index=9&type=section&id=3.1.1%20Core%20Express%20Delivery%20Business%20Revenue) Core express delivery business revenue grew **10.7%** to RMB **20.250 billion** in H1 2024, fueled by an **11.8%** increase in parcel volume and stable average parcel price, with network transit fees accounting for **88.3%** of total express service revenue and KA customer revenue rising **26.2%** - Core express delivery business revenue increased by **10.7%** to RMB **20.250 billion**, driven by an **11.8%** increase in parcel volume and a stable average parcel price[39](index=39&type=chunk) - Network transit fees accounted for **88.3%** of total express delivery service revenue; KA customer revenue (including direct sales organization delivery fees) grew by **26.2%** due to the expansion of high-value platform customers[39](index=39&type=chunk) [Freight Forwarding Services Revenue](index=9&type=section&id=3.1.2%20Freight%20Forwarding%20Services%20Revenue) Freight forwarding services revenue increased **1.0%** in H1 2024, primarily from the acquired business of China Eastern Express Co., Ltd - Freight forwarding services revenue increased by **1.0%** in H1 2024, primarily through the acquired business of China Eastern Express Co., Ltd[40](index=40&type=chunk) [Sale of Accessories and Others Revenue](index=9&type=section&id=3.1.3%20Sale%20of%20Accessories%20and%20Others%20Revenue) Revenue from sales of accessories (mainly thermal paper for e-waybills) and other income (primarily financing services) collectively increased **27.4%** in H1 2024 - Revenue from sales of accessories (primarily thermal paper for e-waybills) and other income (primarily financing services) increased by **27.4%** in H1 2024[41](index=41&type=chunk) [Cost of Revenues](index=10&type=section&id=3.2%20Cost%20of%20Revenues) Total cost of revenues increased **9.1%** to RMB **14.0634 billion** in H1 2024; line-haul transportation costs rose **4.3%** but unit costs decreased **6.7%** due to economies of scale, while sorting hub operating costs increased **11.3%** from labor and depreciation, and other costs grew **20.1%** due to high-value enterprise client services | Cost Component | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | % of Revenues (2024) | | :-------------------------- | :------------------------- | :------------------------- | :------------------- | | Line-haul transportation cost | 6,381,652 | 6,654,616 | 32.2% | | Sorting hub operating cost | 3,948,037 | 4,395,871 | 21.3% | | Freight forwarding cost | 405,244 | 405,106 | 2.0% | | Cost of accessories sold | 234,128 | 293,140 | 1.4% | | Other costs | 1,926,669 | 2,314,675 | 11.1% | | **Total cost of revenues** | **12,895,730** | **14,063,408** | **68.0%** | - Line-haul transportation cost increased by **4.3%**, but unit transportation cost decreased by **6.7%** (or **3 cents**), primarily due to economies of scale, optimized line-haul route planning, and improved load utilization[43](index=43&type=chunk) - Sorting hub operating cost increased by **11.3%**, mainly comprising an increase of RMB **223.4 million** in labor-related costs and RMB **155.0 million** in depreciation and amortization costs related to automated equipment and facility upgrades[43](index=43&type=chunk) - Other costs increased by **20.1%** to RMB **2.3147 billion**, primarily driven by an increase of RMB **462.6 million** in costs for serving high-value enterprise customers[43](index=43&type=chunk) [Gross Profit](index=11&type=section&id=3.3%20Gross%20Profit) Gross profit increased **13.6%** to RMB **6.6226 billion** in H1 2024, with the gross margin improving from **31.1%** in the prior year period to **32.0%** - Gross profit increased by **13.6%** to RMB **6.6226 billion**[44](index=44&type=chunk) - Gross margin improved from **31.1%** in H1 2023 to **32.0%** in H1 2024[44](index=44&type=chunk) [Operating Expenses](index=11&type=section&id=3.4%20Operating%20Expenses) Total operating expenses increased **14.2%** to RMB **1.1407 billion** in H1 2024, primarily due to higher selling, general, and administrative expenses - Total operating expenses increased by **14.2%** to RMB **1.1407 billion**[45](index=45&type=chunk) [Selling, General and Administrative Expenses](index=11&type=section&id=3.4.1%20Selling%2C%20General%20and%20Administrative%20Expenses) Selling, general, and administrative expenses increased **15.4%** to RMB **1.4896 billion**, driven by higher headquarters facility expenses, increased payroll and welfare benefits, and depreciation and amortization costs related to administrative equipment and facilities - Selling, general and administrative expenses increased by **15.4%** to RMB **1.4896 billion**[46](index=46&type=chunk) - Key growth factors include an increase of RMB **78.4 million** in headquarters facility expenses, RMB **70.0 million** in payroll and welfare benefits, and RMB **31.6 million** in depreciation and amortization costs related to administrative equipment and facilities[46](index=46&type=chunk) [Other Operating Income, Net](index=11&type=section&id=3.4.2%20Other%20Operating%20Income%2C%20Net) Other operating income, net, increased **19.3%** to RMB **349.0 million**, primarily from government subsidies and tax refunds (RMB **266.1 million**) and rental and other income (RMB **82.9 million**) - Other operating income, net, increased by **19.3%** to RMB **349.0 million**[47](index=47&type=chunk) - Primarily composed of government subsidies and tax refunds (RMB **266.1 million**) and rental and other income (RMB **82.9 million**)[47](index=47&type=chunk) [Income from Operations](index=11&type=section&id=3.5%20Income%20from%20Operations) Income from operations increased **13.5%** to RMB **5.4819 billion** in H1 2024, with the operating margin improving from **25.8%** in the prior year period to **26.5%** - Income from operations increased by **13.5%** to RMB **5.4819 billion**[48](index=48&type=chunk) - Operating margin improved from **25.8%** in the prior year period to **26.5%**[48](index=48&type=chunk) [Other Income and Expense](index=11&type=section&id=3.6%20Other%20Income%20and%20Expense) The company experienced significant changes in other income and expenses, including a substantial increase in interest income, higher interest expenses, reduced gains from fair value changes of financial instruments, and a large impairment of equity investments [Interest Income and Expense](index=11&type=section&id=3.6.1%20Interest%20Income%20and%20Expense) Interest income increased **105.8%** to RMB **533.1 million** in H1 2024, while interest expense rose **38.8%** to RMB **199.8 million** - Interest income increased by **105.8%** to RMB **533.1 million**[49](index=49&type=chunk) - Interest expense increased by **38.8%** to RMB **199.8 million**[49](index=49&type=chunk) [Gain from Fair Value Changes of Financial Instruments](index=11&type=section&id=3.6.2%20Gain%20from%20Fair%20Value%20Changes%20of%20Financial%20Instruments) Gain from fair value changes of financial instruments significantly decreased to RMB **97.6 million** in H1 2024, compared to RMB **207.2 million** in the prior year period - Gain from fair value changes of financial instruments decreased significantly from RMB **207.2 million** in H1 2023 to RMB **97.6 million** in H1 2024[50](index=50&type=chunk) [Impairment of Investment in Equity Investee](index=12&type=section&id=3.6.3%20Impairment%20of%20Investment%20in%20Equity%20Investee) An impairment of investment in equity investees of RMB **672.8 million** was recorded in H1 2024, primarily due to a **479.9 million** impairment from Cainiao Smart Logistics Network Limited's offer price being below book value and a **192.9 million** impairment provision for Zhejiang Yizhan Network Technology Co., Ltd - An impairment of investment in equity investees of RMB **672.8 million** was recorded in H1 2024[51](index=51&type=chunk) - This primarily includes a **479.9 million** impairment due to Cainiao's offer price being below book value and a **192.9 million** impairment provision for the investment in Zhejiang Yizhan[51](index=51&type=chunk) [Foreign Currency Exchange Gain](index=12&type=section&id=3.6.4%20Foreign%20Currency%20Exchange%20Gain) Foreign currency exchange gain decreased **71.0%** to RMB **20.6 million** in H1 2024, primarily due to the appreciation of RMB against US dollar-denominated bank deposits in China - Foreign currency exchange gain decreased by **71.0%** to RMB **20.6 million**[52](index=52&type=chunk) - This was primarily due to the appreciation of RMB against US dollar-denominated bank deposits in China[52](index=52&type=chunk) [Income Tax Expense](index=12&type=section&id=3.7%20Income%20Tax%20Expense) Income tax expense increased **19.5%** to RMB **1.2313 billion** in H1 2024, with the overall income tax rate rising by **3.6** percentage points, mainly due to withholding tax accrual for planned dividends (RMB **98.0 million**) and non-deductible impairment losses on investments in Cainiao (RMB **479.9 million**) and Yizhan (RMB **192.9 million**) - Income tax expense increased by **19.5%** to RMB **1.2313 billion**, with the overall income tax rate rising by **3.6** percentage points[53](index=53&type=chunk) - This was primarily due to the withholding tax accrual for planned dividends (RMB **98.0 million**) and non-deductible impairment losses on investments in Cainiao (RMB **479.9 million**) and Yizhan (RMB **192.9 million**)[53](index=53&type=chunk) [Net Income](index=12&type=section&id=3.8%20Net%20Income) Net income for H1 2024 decreased **3.2%** to RMB **4.1 billion** from RMB **4.2 billion** in H1 2023, impacted by the aforementioned factors - Net income decreased by **3.2%** from RMB **4.2 billion** in H1 2023 to RMB **4.1 billion** in H1 2024[54](index=54&type=chunk) [FINANCIAL POSITION AND LIQUIDITY](index=12&type=section&id=FINANCIAL%20POSITION%20AND%20LIQUIDITY) [Future Plans for Material Investments or Capital Asset](index=12&type=section&id=4.1%20Future%20Plans%20for%20Material%20Investments%20or%20Capital%20Asset) As of June 30, 2024, the company had no detailed future plans for material investments or capital assets - As of June 30, 2024, the company had no detailed future plans for material investments or capital assets[55](index=55&type=chunk) [Gearing Ratio](index=12&type=section&id=4.2%20Gearing%20Ratio) As of June 30, 2024, the gearing ratio increased from **31.9%** on December 31, 2023, to **33.1%**, calculated as total liabilities divided by total assets - The gearing ratio increased from **31.9%** as of December 31, 2023, to **33.1%** as of June 30, 2024[56](index=56&type=chunk) [Liquidity and Capital Resources](index=13&type=section&id=4.3%20Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash flows from operating and financing activities; as of June 30, 2024, total cash, cash equivalents, restricted cash, and short-term investments amounted to RMB **20.4632 billion**, with outstanding bank borrowings of RMB **10.3908 billion** at a **1.8%** weighted average interest rate, and management believes current liquidity is sufficient for the next 12 months, but may seek additional financing for future expansion and acquisitions - Primary liquidity sources are cash flows from operating and financing activities[57](index=57&type=chunk) | Metric | As of June 30, 2024 (RMB in thousands) | | :-------------------------- | :----------------------------------- | | Cash and cash equivalents | 10,542,131 | | Restricted cash | 22,253 | | Short-term investments | 9,898,796 | | **Total Liquid Assets** | **20,463,180** | - As of June 30, 2024, the principal amount of outstanding bank borrowings was RMB **10.3908 billion** (December 31, 2023: RMB **7.7660 billion**), with a weighted average interest rate of **1.8%**[58](index=58&type=chunk) - Management believes existing cash and cash equivalents and anticipated operating cash flows are sufficient to meet operational activities, capital expenditures, and other obligations for at least the next **12 months**, but may enhance liquidity or increase cash reserves through additional financing activities for future expansion and acquisitions[59](index=59&type=chunk) [Significant Investments](index=13&type=section&id=4.4%20Significant%20Investments) The company did not make or hold any significant investments in H1 2024 - The company did not make or hold any significant investments in H1 2024[60](index=60&type=chunk) [Material Acquisitions and Disposals](index=14&type=section&id=4.5%20Material%20Acquisitions%20and%20Disposals) During the reporting period, the company did not undertake any material acquisitions or disposals of subsidiaries, associates, or joint ventures - During the reporting period, the company did not undertake any material acquisitions or disposals of subsidiaries, associates, or joint ventures[61](index=61&type=chunk) [Pledge of Assets](index=14&type=section&id=4.6%20Pledge%20of%20Assets) As of June 30, 2024, the Group had not pledged any assets - As of June 30, 2024, the Group had not pledged any assets[62](index=62&type=chunk) [Foreign Exchange Risk](index=14&type=section&id=4.7%20Foreign%20Exchange%20Risk) The company's revenues, expenses, assets, and liabilities are primarily denominated in RMB, limiting direct foreign exchange risk; however, RMB-to-USD exchange rate fluctuations could impact ADS value and conversion amounts, with RMB appreciation negatively affecting the RMB **4.7433 billion** in USD-denominated liquid assets as of June 30, 2024 - The company's revenues, expenses, assets, and liabilities are primarily denominated in RMB, limiting direct foreign exchange risk[63](index=63&type=chunk) - Fluctuations in the exchange rate between RMB and US dollars could affect the value of ADSs and the amount of US dollars converted from RMB for operations or RMB converted from US dollars for dividend payments[65](index=65&type=chunk) - As of June 30, 2024, the company held RMB **4.7433 billion** in cash and cash equivalents, restricted cash, and short-term investments denominated in US dollars; a **10%** appreciation of RMB against the US dollar would result in a decrease of RMB **431.2 million** in these assets[66](index=66&type=chunk) [Interest Rate Risk](index=14&type=section&id=4.8%20Interest%20Rate%20Risk) The company's interest rate risk primarily relates to interest income from interest-bearing bank deposits, and it neither currently faces nor anticipates significant interest rate fluctuation risks, nor has it used derivative financial instruments to manage interest rate exposure - Interest rate risk primarily relates to interest income generated from interest-bearing bank deposits[67](index=67&type=chunk) - The company has not and does not expect to face significant interest rate fluctuation risks in the future, nor has it used derivative financial instruments to manage interest rate exposure[67](index=67&type=chunk) [Contingent Liabilities](index=15&type=section&id=4.9%20Contingent%20Liabilities) As of June 30, 2024, the company had no material contingent liabilities - As of June 30, 2024, the company had no material contingent liabilities[68](index=68&type=chunk) [Capital Expenditures and Capital Commitment](index=15&type=section&id=4.10%20Capital%20Expenditures%20and%20Capital%20Commitment) Capital expenditures for H1 2024 totaled approximately RMB **3.0 billion** (H1 2023: RMB **4.5 billion**), primarily for property and equipment, land use rights, and expanding the self-owned truck fleet and upgrading facilities; as of June 30, 2024, total capital commitments were RMB **4.4 billion** for office buildings, sorting centers, and warehouse facilities, to be funded by existing cash and other financing - Capital expenditures for H1 2024 totaled approximately RMB **3.0 billion** (H1 2023: RMB **4.5 billion**), primarily for the acquisition of property and equipment, land use rights, and expanding the self-owned truck fleet and upgrading equipment and facilities[69](index=69&type=chunk) - As of June 30, 2024, total capital commitments amounted to RMB **4.4 billion**, mainly related to commitments for the construction of office buildings, sorting centers, and warehouse facilities[70](index=70&type=chunk) - The company plans to fund future capital expenditures using existing cash balances and other financing methods[69](index=69&type=chunk) [EMPLOYEES AND REMUNERATION](index=15&type=section&id=EMPLOYEES%20AND%20REMUNERATION) [Employee Breakdown and Compensation](index=15&type=section&id=5.1%20Employee%20Breakdown%20and%20Compensation) As of June 30, 2024, ZTO Express had **23,906** employees, with sorting personnel (**31.8%**) and operation support & customer service (**27.0%**) being the largest functional areas, and total employee compensation costs (excluding share-based compensation) increased to RMB **1.7178 billion** in H1 2024 | Functional Area | Number of Employees (June 30, 2024) | % of Total | | :-------------------------- | :---------------------------------- | :--------- | | Sorting | 7,608 | 31.8% | | Transportation | 3,578 | 15.0% | | Management and Administration | 4,569 | 19.1% | | Operation Support & Customer Service | 6,460 | 27.0% | | Technology and Engineering | 1,327 | 5.6% | | Sales and Marketing | 364 | 1.5% | | **Total** | **23,906** | **100.0%** | - Total employee compensation costs (excluding share-based compensation) for H1 2024 were RMB **1.7178 billion**, up from RMB **1.5764 billion** in H1 2023[72](index=72&type=chunk) - As of June 30, 2024, the company's workforce also included over **60,000** outsourced workers[71](index=71&type=chunk) [Employee Benefits and Agreements](index=16&type=section&id=5.2%20Employee%20Benefits%20and%20Agreements) The company participates in statutory employee benefit plans in China, including social insurance funds and housing provident funds, and maintains good working relationships with employees, with no material labor disputes during the reporting period - The company participates in statutory employee benefit plans in China, including pension, medical insurance, unemployment insurance, work-related injury insurance, and maternity insurance, as well as housing provident funds[73](index=73&type=chunk) - Standard labor agreements are signed with employees, and confidentiality and non-competition agreements are signed with key employees, with non-competition periods typically two years post-termination, during which the company pays a percentage of pre-termination salary[74](index=74&type=chunk) - The company maintains good working relationships with its employees, with no material labor disputes during the reporting period[75](index=75&type=chunk) [Training and Development](index=16&type=section&id=5.3%20Training%20and%20Development) ZTO Express continuously invests in employee training and education programs, providing formal comprehensive company-level and departmental training for new hires, supplemented by on-the-job training, and regularly offers development programs to ensure policy and procedure compliance - Continuous investment in employee training and education programs provides formal and comprehensive company-level and departmental training for new employees, supplemented by on-the-job training[76](index=76&type=chunk) [Share Incentive Plans](index=16&type=section&id=5.4%20Share%20Incentive%20Plans) The company operates the 2016 Plan and a cash incentive plan through ZTO ES; in March 2024, the Board approved and adopted the 2024 Plan, which does not involve issuing new company shares, with further details available in the company's annual report for the year ended December 31, 2023 - The company operates the 2016 Plan and a cash incentive plan implemented through ZTO ES[77](index=77&type=chunk) - In March 2024, the Board approved and adopted the 2024 Plan, which does not involve the issuance of new company shares[77](index=77&type=chunk) [CORPORATE GOVERNANCE](index=16&type=section&id=CORPORATE%20GOVERNANCE) [Compliance with CG Code](index=16&type=section&id=6.1%20Compliance%20with%20CG%20Code) ZTO Express complied with all provisions of the Corporate Governance Code in H1 2024, except for the combined roles of Chairman and CEO held by Mr. Lai Meisong, an arrangement the Board believes ensures leadership consistency and strategic planning effectiveness, with a review of separation to be conducted when appropriate - The company complied with all code provisions of the Corporate Governance Code in H1 2024, except for the roles of Chairman and Chief Executive Officer not being separate, both held by Mr. Lai Meisong[78](index=78&type=chunk)[79](index=79&type=chunk) - The Board believes this arrangement ensures consistent leadership and effective strategic planning for the Group and will continue to review the appropriateness of separating the roles of Chairman and Chief Executive Officer at an opportune time[79](index=79&type=chunk)[80](index=80&type=chunk) [Compliance with the Model Code](index=17&type=section&id=6.2%20Compliance%20with%20the%20Model%20Code) The company adopted a Securities Dealing Code for Management, with terms no less exacting than the Model Code, and all directors and relevant employees confirmed compliance during the reporting period, with Mr. Wang Jilei's Rule 10b5-1 trading plan being exempted - The company has adopted a Securities Dealing Code for Management, with terms no less exacting than those set out in the Model Code[81](index=81&type=chunk) - All directors and relevant employees confirmed compliance with the code during the reporting period; Mr. Wang Jilei's Rule 10b5-1 trading plan was exempted[82](index=82&type=chunk) [Audit Committee](index=17&type=section&id=6.3%20Audit%20Committee) The Audit Committee, comprising two independent non-executive directors (Mr. Yu Hando and Mr. Huang Qin Charles) and one non-executive director (Mr. Liu Xing), oversees accounting and financial reporting processes and financial statement audits; Mr. Yu Hando chairs as an 'audit committee financial expert,' and the committee reviewed H1 2024 unaudited interim results, discussing accounting policies, internal controls, and financial reporting with management and auditors - The Audit Committee consists of two independent non-executive directors (Mr. Yu Hando and Mr. Huang Qin Charles) and one non-executive director (Mr. Liu Xing), with Mr. Yu Hando serving as Chairman and qualifying as an "audit committee financial expert"[83](index=83&type=chunk) - The Audit Committee is responsible for overseeing the accounting and financial reporting processes and the audit of the company's financial statements[83](index=83&type=chunk) - The committee reviewed the unaudited interim results for H1 2024 and discussed accounting policies, internal controls, and financial reporting matters with management and the independent auditors[84](index=84&type=chunk) [OTHER INFORMATION](index=18&type=section&id=OTHER%20INFORMATION) [Purchase, Sale or Redemption of the Company's Listed Securities](index=18&type=section&id=7.1%20Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) Neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities on the HKEX or NYSE in H1 2024, and as of June 30, 2024, the company held no treasury shares - Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities on the HKEX or NYSE during H1 2024[85](index=85&type=chunk) - As of June 30, 2024, the company did not hold any treasury shares[85](index=85&type=chunk) [Interim Dividend](index=18&type=section&id=7.2%20Interim%20Dividend) The Board approved an interim dividend of US$**0.35** per ADS and ordinary share for H1 2024, representing a **40%** payout ratio, with a record date of September 10, 2024, and expected payment dates of October 10, 2024, for ordinary shareholders and October 17, 2024, for ADS holders - The Board approved an interim dividend of US$**0.35** per ADS and ordinary share for H1 2024[86](index=86&type=chunk) - This dividend represents a **40%** payout ratio[86](index=86&type=chunk) - The record date for the dividend is September 10, 2024; ordinary shareholders are expected to receive the dividend on October 10, 2024, and ADS holders on October 17, 2024[86](index=86&type=chunk) [Use of Proceeds from the Notes Offering](index=19&type=section&id=7.3%20Use%20of%20Proceeds%20from%20the%20Notes%20Offering) In August 2022, the company completed a US$**1.0 billion** convertible senior notes offering, yielding approximately US$**930.3 million** net proceeds after capping call option costs; as of June 30, 2024, all net proceeds were utilized as planned, with US$**282.1 million** for logistics operations, US$**7.0 million** for logistics ecosystem investments, and US$**641.2 million** for working capital and general corporate purposes - In August 2022, the company completed a US$**1.0 billion** convertible senior notes offering, with net proceeds of approximately US$**930.3 million** after deducting capping call option costs[88](index=88&type=chunk)[89](index=89&type=chunk) - As of June 30, 2024, all net proceeds from the notes offering have been utilized as planned[90](index=90&type=chunk) | Use of Proceeds | Amount Utilized (US$ in millions) | | :------------------------------------ | :-------------------------------- | | Enhancement of logistics operations | 282.1 | | Investment in logistics ecosystem | 7.0 | | Working capital and general corporate purposes | 641.2 | [CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=20&type=section&id=CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [Condensed Consolidated Balance Sheets](index=20&type=section&id=8.1%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets increased to RMB **91.1038 billion** from RMB **88.4652 billion** on December 31, 2023; total liabilities rose to RMB **30.1299 billion** from RMB **28.1848 billion**, and total equity grew to RMB **60.9739 billion** from RMB **60.2804 billion** | Metric | As of Dec 31, 2023 (RMB in thousands) | As of June 30, 2024 (RMB in thousands) | | :-------------------------------- | :------------------------------------ | :----------------------------------- | | Total current assets | 26,953,548 | 27,937,389 | | Investments in equity investees | 3,455,119 | 2,095,453 | | Property and equipment, net | 32,181,025 | 33,180,203 | | Long-term investment | 12,170,881 | 14,034,434 | | **TOTAL ASSETS** | **88,465,221** | **91,103,798** | | Total current liabilities | 20,061,184 | 22,089,069 | | Convertible senior notes | 7,029,550 | 7,216,538 | | **TOTAL LIABILITIES** | **28,184,813** | **30,129,924** | | ZTO Express (Cayman) Inc. shareholders' equity | 59,801,745 | 60,426,679 | | Non-controlling interests | 478,663 | 547,195 | | **Total Equity** | **60,280,408** | **60,973,874** | [Condensed Consolidated Statements of Comprehensive Income](index=22&type=section&id=8.2%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The comprehensive income statement shows H1 2024 net income at RMB **4.0617 billion**, down from RMB **4.1950 billion** in H1 2023, with total comprehensive income attributable to ZTO Express (Cayman) Inc. also decreasing from RMB **4.0696 billion** to RMB **3.9203 billion** | Metric | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :------------------------------------------------ | :------------------------- | :------------------------- | | Revenues | 18,723,563 | 20,685,970 | | Cost of revenues | (12,895,730) | (14,063,408) | | Gross profit | 5,827,833 | 6,622,562 | | Income from operations | 4,829,217 | 5,481,898 | | Income before income tax and share of gain in equity method investments | 5,221,679 | 5,272,687 | | Income tax expense | (1,030,592) | (1,231,316) | | Net income | 4,195,034 | 4,061,744 | | Net income attributable to ZTO Express (Cayman) Inc. | 4,211,540 | 4,037,848 | | Foreign currency translation adjustment | (141,897) | (117,560) | | Comprehensive income attributable to ZTO Express (Cayman) Inc. | 4,069,643 | 3,920,288 | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=24&type=section&id=8.3%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This statement details changes in shareholders' equity, including net income, foreign currency translation adjustments, share-based compensation, non-controlling interest acquisitions/disposals, capital contributions, share repurchases, and dividend distributions, with total equity increasing from RMB **60.2804 billion** on January 1, 2024, to RMB **60.9739 billion** on June 30, 2024 - Total equity increased from RMB **60.2804 billion** as of January 1, 2024, to RMB **60.9739 billion** as of June 30, 2024[99](index=99&type=chunk) | Metric (H1 2024) | RMB in thousands | | :------------------------------------------------ | :----------------- | | Balance at January 1, 2024 | 60,280,408 | | Net income | 4,061,744 | | Foreign currency translation adjustments | (117,560) | | Share-based compensation and ordinary shares issued | 305,155 | | Acquisition of non-controlling interests of subsidiaries | (3) | | Decrease of non-controlling interests from disposal of subsidiaries | (2,630) | | Capital contribution from non-controlling interest holders | 47,276 | | Distribution of dividends | (3,600,516) | | **Balance at June 30, 2024** | **60,973,874** | [Condensed Consolidated Statements of Cash Flows](index=26&type=section&id=8.4%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased to RMB **5.5111 billion** in H1 2024 from RMB **6.4996 billion** in H1 2023; net cash used in investing activities decreased to RMB **7.0449 billion**, and net cash used in financing activities also decreased to RMB **973.5 million**, with cash, cash equivalents, and restricted cash at period-end increasing to RMB **10.5791 billion** | Cash Flow Activity | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :------------------------------------ | :------------------------- | :------------------------- | | Net cash provided by operating activities | 6,499,578 | 5,511,115 | | Net cash used in investing activities | (9,408,160) | (7,044,941) | | Net cash used in financing activities | (1,133,723) | (973,492) | | Effect of exchange rate changes | 95,934 | 35,077 | | Net change in cash, cash equivalents and restricted cash | (3,946,371) | (2,472,241) | | Cash, cash equivalents and restricted cash at end of period | 8,656,716 | 10,579,069 | - Total cash, cash equivalents, and restricted cash at period-end amounted to RMB **10.5791 billion**[103](index=103&type=chunk) [NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=28&type=section&id=NOTES%20TO%20THE%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [Organization and Principal Activities](index=28&type=section&id=9.1%20Organization%20and%20Principal%20Activities) ZTO Express (Cayman) Inc. and its Group primarily engage in express delivery services in China through a nationwide network partner model, having been incorporated in the Cayman Islands on April 8, 2015 - ZTO Express (Cayman) Inc. and its Group primarily engage in express delivery services in China through a nationwide network partner model[106](index=106&type=chunk) - The company was incorporated in the Cayman Islands on April 8, 2015[106](index=106&type=chunk) [Summary of Significant Accounting Policies](index=28&type=section&id=9.2%20Summary%20of%20Significant%20Accounting%20Policies) The condensed consolidated financial statements are prepared in accordance with US GAAP interim financial information requirements, with certain disclosures condensed or omitted per Regulation S-X, maintaining consistency with prior audited financial statements, and interim results do not necessarily indicate full-year performance [Basis of Presentation](index=28&type=section&id=9.2.1%20Basis%20of%20Presentation) The condensed consolidated financial statements are prepared under US GAAP interim financial information requirements, with certain disclosures condensed or omitted, based on prior fiscal year audited statements, and interim results do not necessarily predict full-year performance - The financial statements are prepared in accordance with US GAAP interim financial information requirements, with certain information and footnote disclosures condensed or omitted[107](index=107&type=chunk) - Accounting policies are consistent with the audited financial statements of the prior fiscal year, and interim operating results do not necessarily indicate results for the full year or any future period[107](index=107&type=chunk) [Principles of Consolidation](index=28&type=section&id=9.2.2%20Principles%20of%20Consolidation) The condensed consolidated financial statements include the company, its subsidiaries, and variable interest entities (VIEs); the Group consolidates VIEs when it is the primary beneficiary, possessing the ability to direct economic performance and bearing significant losses or enjoying significant benefits, though Chinese law restricts VIEs from transferring certain net assets to the Group - The condensed consolidated financial statements include the company, its subsidiaries, and variable interest entities (VIEs)[108](index=108&type=chunk) - The Group consolidates VIEs when it is the primary beneficiary, meaning it has the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb the VIE's potential significant losses or the right to receive its potential significant benefits[109](index=109&type=chunk) - Relevant Chinese laws and regulations restrict VIEs from transferring a portion of their net assets (equivalent to statutory reserves and share capital balances) to the Group in the form of loans, advances, or cash dividends[111](index=111&type=chunk) [Use of Estimates](index=29&type=section&id=9.2.3%20Use%20of%20Estimates) Financial statement preparation requires management to make estimates and assumptions that affect reported asset and liability amounts and period revenues and expenses, with actual results potentially differing from these estimates - The preparation of financial statements requires management to make estimates and assumptions, and actual results may differ from these estimates[112](index=112&type=chunk) [Convenience Translation](index=29&type=section&id=9.2.4%20Convenience%20Translation) Financial amounts are primarily denominated in RMB, with US dollar translations provided for convenience using the June 28, 2024, Federal Reserve H.10 noon buying rate (US$**1.00** = RMB **7.2672**), which does not imply RMB convertibility at this rate - Financial amounts are primarily denominated in RMB; US dollar translations are included in periodic reports for the convenience of readers outside China, using the noon buying rate of US$**1.00** = RMB **7.2672** on June 28, 2024, as published in the Federal Reserve Board's H.10 statistical release[113](index=113&type=chunk) - This translation does not imply that RMB could be converted into US dollars at this rate on June 30, 2024, or at any other rate, or realized or settled in US dollars[113](index=113&type=chunk) [Revenue Recognition](index=29&type=section&id=9.2.5%20Revenue%20Recognition) Revenue disaggregation indicates express delivery services as the primary revenue source, with contract assets (billed and unbilled in-transit parcel receivables) and contract liabilities (advances and deferred revenue) being immaterial as of December 31, 2023, and June 30, 2024 | Revenue Stream | H1 2023 (RMB) | H1 2024 (RMB) | % (2024) | | :------------------------ | :------------ | :------------ | :------- | | Express delivery services | 17,387,187 | 19,116,095 | 92.4 | | Freight forwarding services | 431,597 | 435,989 | 2.1 | | Sale of accessories | 836,616 | 1,065,484 | 5.2 | | Others | 68,163 | 68,402 | 0.3 | | **Total revenues** | **18,723,563** | **20,685,970** | **100.0** | - Contract assets (billed and unbilled in-transit parcel receivables) and contract liabilities (advances and deferred revenue) were not material as of December 31, 2023, and June 30, 2024[115](index=115&type=chunk) [Income Taxes](index=29&type=section&id=9.2.6%20Income%20Taxes) Income taxes are accounted for using the asset and liability method, recognizing deferred income taxes for temporary differences and offsetting deferred tax assets with a valuation allowance when realization is unlikely; uncertain tax positions are recognized only when probable of being sustained upon examination, and interim tax provisions are based on the estimated annual effective tax rate - Income taxes are accounted for using the asset and liability method, recognizing deferred income taxes for temporary differences and offsetting deferred tax assets with a valuation allowance when realization is unlikely[116](index=116&type=chunk) - The tax benefit from an uncertain tax position is recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities; interim tax provisions are based on the estimated annual effective tax rate[116](index=116&type=chunk)[117](index=117&type=chunk) [Earnings Per Share](index=30&type=section&id=9.2.7%20Earnings%20Per%20Share) Basic earnings per share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding, while diluted earnings per share includes the potential dilutive effect of convertible senior notes; the dual-class share structure has no impact on EPS calculation as Class A and Class B ordinary shares have identical dividend rights - Basic earnings per share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period[118](index=118&type=chunk) - Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares[119](index=119&type=chunk) - Class A and Class B ordinary shares have identical dividend rights, so the dual-class share structure has no impact on the calculation of earnings per share[120](index=120&type=chunk) [Accounts Receivable, Net](index=30&type=section&id=9.3%20Accounts%20Receivable%2C%20Net) As of June 30, 2024, gross accounts receivable increased to RMB **738.1 million** from RMB **613.5 million** on December 31, 2023, with an allowance for credit losses of RMB **50.3 million**, and the majority (RMB **606.7 million**) were aged within six months | Metric | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :-------------------------- | :----------------------- | :---------------------- | | Accounts receivable, gross | 613,541 | 738,088 | | Less: Allowance for credit losses | (40,983) | (50,296) | | **Total** | **572,558** | **687,792** | | Aging (based on invoice date) | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :-------------------------- | :----------------------- | :---------------------- | | Within 6 months | 450,769 | 606,696 | | Between 6 months and 1 year | 57,615 | 38,209 | | Between 1 year and 2 years | 49,726 | 36,948 | | More than 2 years | 55,431 | 56,235 | | **Accounts receivable, gross** | **613,541** | **738,088** | [Property and Equipment, Net](index=31&type=section&id=9.4%20Property%20and%20Equipment%2C%20Net) As of June 30, 2024, property and equipment, net, increased to RMB **33.1802 billion** from RMB **32.1810 billion** on December 31, 2023, with depreciation expense of RMB **1.4730 billion** and impairment charges of RMB **22.6 million** related to property and equipment held for disposal in H1 2024 | Component | As of Dec 31, 2023 (RMB in thousands) | As of June 30, 2024 (RMB in thousands) | | :-------------------------------- | :------------------------------------ | :----------------------------------- | | Buildings | 21,731,960 | 22,312,557 | | Machinery and equipment | 8,861,939 | 9,389,627 | | Vehicles | 5,642,905 | 5,531,688 | | Construction in progress | 4,929,745 | 5,998,150 | | Accumulated depreciation | (10,916,806) | (12,121,695) | | **Property and equipment, net** | **32,181,025** | **33,180,203** | - Depreciation expense for H1 2024 was RMB **1.4730 billion** (H1 2023: RMB **1.3230 billion**)[123](index=123&type=chunk) - Impairment charges of RMB **22.6 million** related to property and equipment held for disposal were recognized in H1 2024[124](index=124&type=chunk) [Accounts Payable](index=31&type=section&id=9.5%20Accounts%20Payable) As of June 30, 2024, total accounts payable decreased to RMB **2.2003 billion** from RMB **2.5570 billion** on December 31, 2023, with the majority (RMB **2.1897 billion**) aged within six months | Aging (based on invoice date) | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :-------------------------- | :----------------------- | :---------------------- | | Within 6 months | 2,548,617 | 2,189,748 | | Between 6 months and 1 year | 4,789 | 7,654 | | Between 1 year and 2 years | 1,366 | 1,441 | | More than 2 years | 2,238 | 1,472 | | **Total** | **2,557,010** | **2,200,315** | [Income Tax](index=32&type=section&id=9.6%20Income%20Tax) Income tax expense for H1 2024 was RMB **1.2313 billion**, resulting in an effective tax rate of **23.35%** (H1 2023: **19.74%**), comprising current tax expenses of RMB **1.3199 billion** and deferred tax benefits of RMB **88.6 million** | Component | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :------------------ | :------------------------- | :------------------------- | | Current tax expenses | 1,159,643 | 1,319,902 | | Deferred tax | (129,051) | (88,586) | | **Total** | **1,030,592** | **1,231,316** | - The effective tax rate for H1 2024 was **23.35%**, higher than **19.74%** in H1 2023[127](index=127&type=chunk) [Share-Based Compensation](index=32&type=section&id=9.7%20Share-Based%20Compensation) The company operates an employee shareholding platform through ZTO ES and has the 2016 and 2024 share incentive plans; total share-based compensation expense for H1 2024 was RMB **305.2 million**, including grants of ordinary share units, restricted share units, and share options [Employee Share Holding Platform](index=32&type=section&id=9.7.1%20Employee%20Share%20Holding%20Platform) The employee shareholding platform, established in June 2016 via ZTO ES and limited partnerships, has issued **16.0 million** ordinary shares; in March 2024, **6,027,415** ordinary share units (representing **1,205,483** company ordinary shares) were granted to certain executives and employees, resulting in RMB **183.2 million** in share-based compensation expense - The employee shareholding platform was established in June 2016 through ZTO ES and limited partnerships, and **16.0 million** ordinary shares have been issued to ZTO ES[128](index=128&type=chunk)[129](index=129&type=chunk) - In March 2024, **6,027,415** ordinary share units (representing **1,205,483** company ordinary shares) were granted to certain executives and employees, resulting in RMB **183.2 million** of share-based compensation expense[130](index=130&type=chunk) [2016 Share Incentive Plan](index=33&type=section&id=9.7.2%202016%20Share%20Incentive%20Plan) The 2016 Share Incentive Plan, amended in September 2016, initially allowed for **3.0 million** shares and annual increases; since May 1, 2023, the plan's limit has been capped at **21.0 million** shares, with future awards to be satisfied by existing shares, not new issuances - The 2016 Share Incentive Plan, amended in September 2016, initially allowed for the issuance of **3.0 million** shares and annual increases; since May 1, 2023, the plan's limit has been capped at **21.0 million** shares[131](index=131&type=chunk)[132](index=132&type=chunk) - Awards under the 2016 Plan will be satisfied by the company's existing shares, with no new shares to be issued[132](index=132&type=chunk) [Restricted Share Units](index=33&type=section&id=9.7.3%20Restricted%20Share%20Units) In March 2024, **743,366** Restricted Share Units (RSUs) were granted under the 2016 Plan, vesting immediately upon grant, resulting in RMB **113.0 million** of share-based compensation expense in H1 2024 - In March 2024, **743,366** Restricted Share Units (RSUs) were granted under the 2016 Plan, vesting immediately upon grant[133](index=133&type=chunk) - This resulted in RMB **113.0 million** of share-based compensation expense in H1 2024[133](index=133&type=chunk) [2024 Share Incentive Plan](index=33&type=section&id=9.7.4%202024%20Share%20Incentive%20Plan) The 2024 Share Incentive Plan, approved by the Board in March 2024, authorizes up to **30.0 million** Class A ordinary shares for awards to directors, employees, and consultants - The 2024 Share Incentive Plan, approved by the Board in March 2024, authorizes up to **30.0 million** Class A ordinary shares for awards to directors, employees, and consultants[134](index=134&type=chunk) [Share Options](index=33&type=section&id=9.7.5%20Share%20Options) On March 22, 2024, **916,200** share options were granted under the 2024 Plan with an exercise price of US$**21.88**, vesting **33%**, **33%**, and **34%** on the first, second, and third anniversaries of the grant date, respectively; the weighted average grant-date fair value was US$**6.7** per share, leading to RMB **9.024 million** in share-based compensation expense in H1 2024 - On March 22, 2024, **916,200** share options were granted under the 2024 Plan with an exercise price of US$**21.88**[135](index=135&type=chunk) - The options will vest **33%**, **33%**, and **34%** on the first, second, and third anniversaries of the grant date, respectively, with a contractual term of ten years[135](index=135&type=chunk) - The weighted average grant-date fair value was US$**6.7** per share, resulting in RMB **9.024 million** of share-based compensation expense in H1 2024[136](index=136&type=chunk)[137](index=137&type=chunk) [Earnings Per Share](index=35&type=section&id=9.8%20Earnings%20Per%20Share) Basic earnings per share for H1 2024 was RMB **5.01**, and diluted earnings per share was RMB **4.90**, with the calculation including the dilutive effect of convertible senior notes; all outstanding share options were anti-dilutive and thus excluded from diluted EPS calculation | Metric | H1 2023 (RMB) | H1 2024 (RMB) | | :------------------------------------------------ | :------------ | :------------ | | Net income attributable to ordinary shareholders – basic | 4,211,540 | 4,037,848 | | Plus: Interest expense of convertible senior notes | 73,406 | 74,977 | | Net income attributable to ordinary shareholders – diluted | 4,284,946 | 4,112,825 | | Weight average ordinary shares outstanding – basic | 808,916,820 | 805,806,731 | | Plus: Dilutive effect of convertible senior notes | 31,209,068 | 33,029,400 | | Weight average ordinary shares outstanding – diluted | 840,125,888 | 838,836,131 | | **Earnings per share – basic** | **5.21** | **5.01** | | **Earnings per share – diluted** | **5.10** | **4.90** | - All outstanding share options were anti-dilutive in H1 2024 and thus excluded from the diluted earnings per share calculation[140](index=140&type=chunk) [Related Party Transactions](index=35&type=section&id=9.9%20Related%20Party%20Transactions) The company engages in various transactions with related parties, including equity investees and entities controlled by the Chairman's brother or the Chairman, involving transportation revenue, service fees, material purchases, rental income, and interest income; amounts due to related parties primarily include payables for transportation and material purchases, while amounts due from related parties include receivables and loans | Transaction Type | H1 2023 (RMB in thousands) | H1 2024 (RMB in thousands) | | :---------------------------------------------------------------- | :------------------------- | :------------------------- | | **Revenues:** | | | | Transportation revenue from ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries | 281,841 | 79,969 | | Express delivery service revenue from Tonglu Antong Management LLP and its subsidiaries | 108,331 | – | | Others | 22,920 | 31,385 | | **Total Revenues from Related Parties** | **413,092** | **111,354** | | **Cost of revenues:** | | | | Transportation service fees paid to ZTO Supply Chain Management Co., Ltd. and its subsidiaries | 539,484 | 366,360 | | Purchases of supplies from Shanghai Mingyu Barcode Technology Ltd. | 164,332 | 161,415 | | Others | 93,388 | 80,787 | | **Total Cost of Revenues from Related Parties** | **798,204** | **608,562** | | **Other operating income:** | | | | Rental income from ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries | 27,374 | 39,948 | | Rental income from ZTO Supply Chain Management Co., Ltd. and its subsidiaries | 28,675 | 26,501 | | Others | 1,446 | 2,190 | | **Total Other Operating Income from Related Parties** | **57,495** | **68,639** | | **Other income:** | | | | Interest Income derived from Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd | 16,982 | 10,928 | | Others | 5,515 | 4,645 | | **Total Other Income from Related Parties** | **22,497** | **15,573** | | Amounts Due To Related Parties | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :---------------------------------------------------------------- | :----------------------- | :---------------------- | | Shanghai Mingyu Barcode Technology Ltd. | 28,924 | 30,290 | | ZTO Supply Chain Management Co., Ltd. and its subsidiaries | 149,495 | 86,727 | | Zhongtong Yunleng Network Technology (Zhejiang) Co., LTD and its subsidiaries | 14,988 | 15,041 | | ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries | 16,415 | 12,952 | | Others | 24,861 | 9,436 | | **Total** | **234,683** | **154,446** | | Amounts Due From Related Parties (Current) | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :---------------------------------------------------------------- | :----------------------- | :---------------------- | | ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries | 72,377 | 75,906 | | ZTO Supply Chain Management Co., Ltd. | 69,881 | 5,664 | | Zhejiang Tongyu Intelligent Industry Development Co., Ltd. | — | 84,700 | | Others | 5,809 | 3,768 | | **Total** | **148,067** | **170,038** | | Amounts Due From Related Parties (Non-Current) | As of Dec 31, 2023 (RMB) | As of June 30, 2024 (RMB) | | :---------------------------------------------------------------- | :----------------------- | :---------------------- | | Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd | 502,083 | 514,583 | | Zhejiang Tongyu Intelligent Industry Development Co., Ltd. | 82,180 | — | | **Total** | **5

Investment Rating - The investment rating for ZTO Express (2057.HK) is "Buy" [1] Core Views - The report highlights stable single-package profitability and operational improvements leading to valuation recovery [2] - The express delivery industry continues to have growth potential, with an expected increase in package volume driven by e-commerce expansion [3] - The company plans to maintain a dividend payout ratio of no less than 40% in 2024, reflecting a commitment to enhancing shareholder returns [4] Summary by Sections Financial Performance - In Q2 2024, ZTO Express achieved a package volume of 8.452 billion, a year-on-year increase of 10.1%. The adjusted net profit was 2.8 billion, up 10.9% year-on-year [2] - The core revenue per package in Q2 2024 was 1.24 RMB, a decrease of 0.12 RMB (-8.8%) from the previous quarter but stable year-on-year [2] - The core cost per package decreased by 0.02 RMB to 0.65 RMB, with a reduction in line-haul transportation costs by 0.03 RMB (-6.8%) [2] Industry Outlook - The express delivery industry is expected to maintain growth, supported by the rise of live e-commerce and increased penetration of online shopping [3] - The competitive landscape is anticipated to stabilize, reducing price competition in the industry [3] Profit Forecast and Valuation - The forecasted net profits for ZTO Express from 2024 to 2026 are 10.562 billion, 12.164 billion, and 13.483 billion respectively, with year-on-year growth rates of 20.7%, 15.2%, and 10.8% [6] - The company is positioned to achieve steady growth in both package volume and profitability due to its scale and management advantages [6]

ZTO Express (Cayman) Inc. (NYSE:ZTO) Q2 2024 Earnings Conference Call August 20, 2024 8:30 PM ET Company Participants Sophie Li - Corporate Secretary and Director of Capital Markets Meisong Lai - Chairman and CEO Huiping Yan - CFO Conference Call Participants Ronald Keung - Goldman Sachs Qianlei Fan - Morgan Stanley Lu Wei Jiang - Haitong Securities Operator Good day and welcome to the ZTO Express to announce Second Quarter and Half Year 2024 Financial Results Conference Call. All participants will be in a ...

2Q 2024 INVESTOR PRESENTATION August 2024 1 Safe Harbor Statement and Disclaimer This presentation contains statements that may constitute "forward-looking" statements pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to," and other similar expressions. Among other things, the bu ...

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 20,685,970, representing a 10.5% increase compared to RMB 18,723,563 for the same period in 2023[2] - Gross profit for the period was RMB 6,622,562, reflecting a 13.6% increase from RMB 5,827,833 in the previous year[2] - Net profit decreased by 3.2% to RMB 4,061,744 compared to RMB 4,195,034 in the same period last year[2] - Adjusted EBITDA for the six months was RMB 7,034,205, a 4.0% increase from RMB 6,761,106 in 2023[2] - Adjusted net profit was RMB 5,029,768, which is a 13.0% increase from RMB 4,450,774 in the previous year[2] - Basic and diluted earnings per American Depositary Share (ADS) were RMB 6.21 and RMB 6.06 respectively, representing increases of 12.5% and 12.2% year-over-year[2] Operating Costs and Efficiency - Operating costs increased by 9.1% to RMB 14,063,408 from RMB 12,895,730 year-over-year[2] - The total operating costs increased by 9.1% to RMB 14,063.41 million for the six months ended June 30, 2024, compared to RMB 12,895.73 million in the same period of 2023[19] - The sorting center operating cost was RMB 4,395.9 million, up 11.3% from RMB 3,948.0 million in the same period of 2023, primarily due to labor-related cost increases of RMB 223.4 million and depreciation costs related to automation upgrades increasing by RMB 155.0 million[20] - The company’s operating efficiency improvements have contributed to its robust financial performance despite intense industry competition[7] Revenue Streams - The core express business revenue increased by 10.7% to RMB 20,250 million for the six months ended June 30, 2024, driven by an 11.8% growth in package volume[16] - Express delivery services accounted for 92.9% of total revenue in 2023, with RMB 17,387,187, while freight forwarding services contributed 2.3% with RMB 431,597[59] - Material sales revenue increased by 27.4% for the six months ended June 30, 2024, compared to the same period in 2023[18] - Direct customer business revenue increased by 26.2% due to the expansion of higher-value platform customers[16] Cash Flow and Investments - Cash and cash equivalents, restricted cash, and short-term investments totaled RMB 10,542.1 million, RMB 22.3 million, and RMB 9,898.8 million, respectively, as of June 30, 2024[29] - The company incurred capital expenditures of approximately RMB 3 billion for the six months ended June 30, 2024, compared to RMB 4.5 billion for the same period in 2023[34] - The company has capital commitments as of June 30, 2024, amounting to RMB 4.4 billion, primarily related to the construction of office buildings, sorting centers, and warehouse facilities[34] - The company has maintained a strong cash position with total cash and cash equivalents of RMB 10,542,131 as of June 30, 2024, which supports future growth initiatives[52] Shareholder Returns - The company approved an interim dividend of $0.35 per American Depositary Share and ordinary share for the six months ended June 30, 2024, with a payout ratio of 40%[43] - The company plans to pay the interim dividend to shareholders on October 10, 2024, for ordinary shares and on October 17, 2024, for American Depositary Shares[43] - The company declared dividends amounting to RMB (3,600,516) for the six months ended June 30, 2024[50] Related Party Transactions - Revenue from transportation services provided to Zhongtong Cloud Warehouse Technology Co., Ltd. and its subsidiaries was RMB 281,841,000 for the six months ended June 30, 2024, compared to RMB 413,092,000 for the same period in 2023, representing a decrease of 31.8%[80] - Operating costs paid to Zhongtong Supply Chain Management Co., Ltd. and its subsidiaries amounted to RMB 539,484,000 for the six months ended June 30, 2024, compared to RMB 798,204,000 for the same period in 2023, a decrease of 32.5%[80] - The total amount payable to related parties as of June 30, 2024, was RMB 154,446,000, down from RMB 234,683,000 as of December 31, 2023, indicating a reduction of 34.2%[81] - The total receivables from related parties as of June 30, 2024, increased to RMB 170,038,000 from RMB 148,067,000 as of December 31, 2023, reflecting an increase of 14.8%[82] Audit and Compliance - The financial results were reviewed by the audit committee and are prepared in accordance with US GAAP[1] - The audit committee is responsible for overseeing the company's accounting and financial reporting processes, including the appointment of independent auditors and the review of financial statements[41] - The audit committee consists of two independent non-executive directors and one non-executive director, ensuring compliance with independence requirements[40] Employee and Labor Relations - The total employee count as of June 30, 2024, is 23,906, with sorting employees making up 31.8% of the total[35] - Employee compensation costs for the six months ended June 30, 2024, totaled RMB 1,717.8 million, an increase from RMB 1,576.4 million for the same period in 2023[35] - The company has not faced significant labor disputes during the reporting period[36] Market Strategy and Future Outlook - The company aims to expand its service offerings to create an ecosystem that includes express delivery, less-than-truckload logistics, cross-border services, warehousing, and cold chain solutions[9] - The company expects the total package volume for 2024 to be between 34.73 billion and 35.64 billion, reflecting a year-on-year growth of 15% to 18%[14] - The company is focused on expanding its market presence and enhancing its service offerings through strategic investments and partnerships[54]