ZTO EXPRESS(US:ZTO) Ge Long Hui·2025-05-22 02:27Core Insights - ZTO Express's 1Q25 core net profit increased by 5% YoY to RMB1.96 billion, primarily supported by government subsidies and tax rebates amounting to RMB407 million, which are likely to be one-off in nature [1][2] - The average selling price (ASP) dropped by 8% YoY to RMB1.25 per parcel, while parcel volume grew by 19% YoY to 8.54 billion units, indicating a lag behind the industry average [1][3] - The company has revised its earnings forecast for 2025E-27E down by 18-21% due to lower parcel ASP assumptions and has adjusted its target price to US$22.2/HK$174 [1] Financial Performance - Core net profit growth of 5% was driven by a 9% revenue increase but offset by a 25% YoY contraction in unit gross profit to RMB0.31 per parcel [2] - Reported net profit grew by 40% YoY to RMB1.99 billion, largely due to a low base from the previous year [2] - EBIT increased by 6% YoY, primarily aided by government subsidies and tax rebates [2] Cost Structure - Unit cost decreased by 0.4% YoY to RMB0.94 per parcel, with transportation costs dropping by 13% YoY to RMB0.41 per parcel due to economies of scale and lower diesel prices [4] - Unit cost of sorting hubs fell by 10% YoY to RMB0.27, benefiting from increased automation [4] - Other unit costs surged by 61% YoY to RMB0.25 per unit, attributed to rising key account costs [4] Market Position - ZTO's market share in 1Q25 was 18.9%, reflecting a decline of 0.4 percentage points YoY [3] - The company may need to adopt a more aggressive pricing strategy to enhance market share moving forward [3]