Core Viewpoint - J&T Express reported strong mid-year results with significant revenue and profit growth despite a competitive market environment [1] Financial Performance - Total revenue for the first half reached $5.5 billion, a year-on-year increase of 13.1% [1] - Adjusted net profit was $160 million, up 147.1% year-on-year [1] - The overall profit for the period was $89 million, reflecting a 186.6% increase compared to the previous year [1] - Total package volume reached 13.99 billion, marking a 27% year-on-year growth [1] Market Performance - In the Chinese market, package volume increased by 20%, with market share rising by 0.1 percentage points to 11.1% [1] - Adjusted EBIT for the Chinese business was $13 million, down from $60 million in the same period last year, with an adjusted EBIT margin of 0.4% [1] - Adjusted EBITDA was $155 million, compared to $200 million in the previous year [1] Industry Context - The express delivery industry is experiencing intense competition, leading to continuous price reductions [1] - The average revenue per package decreased to $0.30 from $0.34 year-on-year [1] - The company is optimizing the package volume structure across different e-commerce platforms and improving the types of goods handled [1] - Since July, following the State Post Bureau's advocacy for rational pricing, price competition in the industry has become more reasonable, with marginal price increases observed in key production areas like Yiwu and Guangdong [1]

Core Viewpoint - The express delivery industry in China is experiencing intense competition, with SF Express leading in business volume growth while facing significant pressure on single-package revenue. The "Tongda system" companies are struggling to maintain market share without overly relying on price wars [2][5]. Group 1: Business Performance - In May, SF Express achieved a business volume of 1.477 billion packages, a year-on-year increase of 31.76%, significantly outpacing the industry average [5][6]. - YTO Express reported a business volume of 2.764 billion packages, up 21.02%, while Yunda and Shentong reported volumes of 2.303 billion and 2.264 billion packages, growing 12.78% and 16.35% respectively [5][6]. - SF Express has consistently led in business volume growth since the beginning of the year, with growth rates of 25.4%, 29.9%, and 31.8% from March to May [5][6]. Group 2: Revenue and Pricing - SF Express's revenue from express delivery was 19.381 billion yuan, with a revenue growth rate of 13.36%. However, its single-package revenue fell to 13.12 yuan, a decrease of 13.97% [3][7]. - YTO's single-package revenue was 2.12 yuan, down 5.09%, while Yunda and Shentong's revenues dropped to 1.92 yuan and 1.95 yuan, reflecting declines of 5.42% and 2.99% respectively [3][8]. - The overall trend indicates that while the "Tongda system" companies maintain revenue growth through scale effects, they face downward pressure on pricing, necessitating a balance between price competition and service quality [2][8]. Group 3: Market Strategy and Outlook - SF Express is focusing on high-end market positioning and has benefited from increased demand for high-tech product deliveries, driven by national consumption stimulus policies [6][7]. - The competitive landscape is becoming more pronounced, with SF Express leveraging its high-end services to capture higher value markets, while YTO relies on its established network for steady growth [6][8]. - The industry experts suggest that the key challenge for Yunda and Shentong is to enhance service quality and optimize cost structures while navigating the ongoing price competition [8].

Investment Rating - The investment rating for the company is "Accumulate" [7] Core Views - In Q1 2025, the company achieved an operating revenue of 10.89 billion yuan, a year-on-year increase of 9.4%, and an adjusted net profit of 2.26 billion yuan, up 1.6% year-on-year. The core express service revenue was 10.12 billion yuan, reflecting a 9.8% increase, driven by a 19.1% growth in package volume and a 7.8% decrease in package price [2] - The company reiterated its package volume guidance for 2025 to be between 40.8 billion and 42.2 billion pieces, representing a year-on-year growth of 20% to 24% [5] - The company is focusing on enhancing cost efficiency amid intense industry price competition, with a single ticket revenue of 1.25 yuan, down 0.11 yuan year-on-year, and a single ticket transportation cost of 0.41 yuan, down 0.06 yuan year-on-year [6] Financial Summary - For 2025, the company is projected to have an operating revenue of 50.17 billion yuan, with an adjusted net profit of 9.64 billion yuan, reflecting a decrease of 5% compared to 2024. The earnings per share (EPS) is expected to be 11.39 yuan, with a price-to-earnings (P/E) ratio of 11.04 [9] - The company reported a net cash flow from operating activities of 2.36 billion yuan in Q1 2025, with capital expenditures of 1.97 billion yuan [3]

Core 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]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][3][17] Core Views - The company's profit performance has come under pressure, but its competitiveness continues to strengthen. In Q1 2025, the company reported a revenue of 170.6 billion yuan, a year-on-year increase of 10.6%, while the net profit attributable to the parent company was 8.1 billion yuan, down 10.3% year-on-year [1][7] - The company achieved rapid growth in parcel volume, with a total of 265.7 billion parcels delivered in 2024, representing a year-on-year increase of 25.3%, which is higher than the industry growth rate of 21.5% [1][10] - The company is currently in a phase of solidifying its network foundation and expanding market share, leading to high capital expenditures, which are expected to remain elevated in 2025 [2][15] Summary by Sections Financial Performance - For 2024, the company expects a total revenue of 690.3 billion yuan, an increase of 19.7%, and a net profit of 38.4 billion yuan, up 6.6% [1][4] - The company’s single-ticket express delivery prices have seen a decline, with prices in Q2 2024, Q3 2024, Q4 2024, and Q1 2025 being 2.26 yuan, 2.20 yuan, 2.29 yuan, and 2.28 yuan respectively, reflecting year-on-year decreases of -3.9%, -5.8%, -5.3%, and -6.3% [1][10] Cost Management - The company has implemented refined cost control measures, resulting in a reduction in single-ticket transportation costs to 0.42 yuan in both 2024 and Q1 2025, down by 0.04 yuan and 0.05 yuan year-on-year respectively [2][15] - The net profit contribution from the express delivery business, excluding the impact of air and international operations, showed a year-on-year increase of 12.2% in 2024 but a decrease of 4.7% in Q1 2025 [2][15] Future Outlook - The profit forecast for 2025-2027 has been slightly adjusted, with expected net profits of 43.0 billion yuan, 49.0 billion yuan, and 55.1 billion yuan, reflecting year-on-year changes of +7%, +14%, and +12% respectively [3][17] - The company is expected to maintain a competitive advantage in the express delivery industry, which is anticipated to remain robust [3][17]

Investment Rating - The investment rating for the company is "Outperform the Market" [6][19]. Core Views - The company is expected to achieve a rapid profit growth in 2024, with a projected revenue of 48.543 billion yuan (+7.9%) and a non-net profit of 1.64 billion yuan (+18.3%) for the year [1][9]. - The company has experienced a recovery in business volume growth, with a market share stabilizing despite significant year-on-year declines in single-package prices due to intense industry competition [2][9]. - The company has seen a rebound in capacity utilization and a significant decrease in single-package costs, although the first quarter's profitability per package has declined due to increased competition [3][17]. Summary by Sections Financial Performance - In 2024, the company is projected to have a revenue of 48.543 billion yuan, with a year-on-year growth of 7.9%. The non-net profit is expected to be 1.64 billion yuan, reflecting an 18.3% increase [1][5]. - The first quarter of 2025 is expected to show a revenue of 12.19 billion yuan (+9.3%) but a decline in non-net profit to 308 million yuan (-19.9%) [1][9]. Market Position - The company has adopted a relatively aggressive pricing strategy, leading to a 12.3% decrease in single-package express delivery prices for 2024. The prices for the fourth quarter and the first quarter were approximately 2.02 yuan and 1.98 yuan, respectively [2][9]. - The business volume growth for 2024 is expected to be 26.1%, with the fourth quarter and first quarter showing year-on-year increases of 22.4% and 22.9%, respectively [2][9]. Cost and Profitability - The company's core operating costs have decreased significantly, with the single-package core operating cost (transit + transportation) at 0.68 yuan, down 21.9% year-on-year. The first quarter's single-package operating cost further optimized to 0.62 yuan, a decrease of 18.4% [3][17]. - The single-package non-net profit for the fourth quarter was stable at 0.07 yuan, but it dropped to 0.05 yuan in the first quarter of 2025 due to intensified price competition [3][17]. Future Outlook - The profit forecast for 2025-2027 has been adjusted downward, with expected net profits of 2.0 billion yuan, 2.33 billion yuan, and 2.6 billion yuan, reflecting year-on-year growth rates of 4.7%, 16.2%, and 11.5%, respectively [4][19]. - The current stock price corresponds to a PE valuation of 10X and 9X for 2025 and 2026, respectively [4][19].