Here's Why Investors Should Retain ZTO Express (ZTO) Stock

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