Core Viewpoint - Zhongtong Express reported its Q3 2025 financial performance, showing steady revenue growth and stable market share despite a competitive environment [1] Financial Performance - Q3 2025 revenue reached 11.86 billion yuan, a year-on-year increase of 11.1% [1] - Net profit attributable to shareholders was 2.52 billion yuan, up 5.2% year-on-year, while adjusted net profit was 2.51 billion yuan, reflecting a 5.0% increase [1] Operational Highlights - The express delivery industry maintained stable growth, with Zhongtong Express achieving a volume of 9.6 billion parcels in Q3, a 9.8% year-on-year increase [1] - The company's single ticket revenue increased by 0.02 yuan, contributing to steady revenue growth [1] - The growth rate of the scattered order business approached 50% year-on-year [1] Cost Management - Q3 operating costs amounted to 8.91 billion yuan, a 21.4% increase year-on-year, with line haul transportation costs decreasing by 2.8% to 3.30 billion yuan [1] - Sorting center operating costs rose by 7.6% to 2.39 billion yuan, while unit transfer transportation costs continued to decline [1] - The company experienced a significant increase in other costs, which reached 2.87 billion yuan, up 115.9% year-on-year [1] Future Outlook - The company is expected to focus on service quality, business scale, and profitability balance, with projected net profits of 9.28 billion yuan, 10.09 billion yuan, and 10.91 billion yuan for 2025-2027, representing year-on-year growth of 5.3%, 8.7%, and 8.1% respectively [2] - The current PE valuation levels for 2025-2027 are 11.8X, 10.8X, and 10.0X, indicating a relatively low valuation [2]

Investment Rating - The investment rating for the company is "Buy" and is maintained [2] Core Insights - The company reported a 5% growth in adjusted net profit for Q3 2025, with total revenue reaching 11.86 billion yuan, a year-on-year increase of 11.1% [5][8] - The express delivery industry is experiencing stable growth, with the company maintaining its market share and achieving a volume of 9.6 billion parcels in Q3, a 9.8% increase year-on-year [6] - The company aims to balance service quality, business scale, and profitability, with projected net profits of 9.28 billion yuan, 10.09 billion yuan, and 10.91 billion yuan for 2025-2027, representing year-on-year growth rates of 5.3%, 8.7%, and 8.1% respectively [8] Financial Performance Summary - For Q3 2025, the company's operating costs were 8.91 billion yuan, a year-on-year increase of 21.4%, while gross profit was 2.96 billion yuan, down 11.4% year-on-year [7] - The company's earnings per share (EPS) for 2025 is projected to be 11.54 yuan, with a price-to-earnings (P/E) ratio of 11.75 [10][11] - The company’s total revenue for 2025 is estimated at 48.94 billion yuan, reflecting a growth rate of 10.53% [10]

Group 1 - ZTO Express reported a 11% year-on-year increase in revenue and a 7% increase in adjusted net profit for Q3 2025, with adjusted net profit per order at approximately 0.27 RMB, improving from 0.21 RMB in Q2 [1] - The company’s core per order cost increased by only 0.02 RMB due to the launch of a new transit center, indicating operational efficiency [1] - The expectation of continued implementation of anti-competition policies in the industry is likely to support ZTO's market share recovery in 2026, leading to a slight upward revision of net profit forecasts for 2025 and 2026 by 2% [1] Group 2 - In Q3 2025, ZTO Express completed 9.57 billion parcels, representing a year-on-year growth of 9.8%, with a market share of 19.4% [2] - The growth momentum in the piece business remains strong, with a nearly 50% year-on-year increase, contributing positively to profits [2] - The company adjusted its annual guidance, forecasting parcel volume for 2025 to be between 38.2 billion and 38.7 billion, reflecting a year-on-year growth of 12.3% to 13.8% [2]

Summary of Conference Call on the Express Delivery Industry Industry Overview - The express delivery industry is experiencing intensified competition, leading to price and profit per shipment declines, particularly noted in July 2023 [1][3] - The market's expectations for Q3 performance did not fully account for the pressures from July, resulting in adjustments to performance forecasts [3] Key Insights and Arguments - **Price Increases**: A second round of price increases is being implemented in various regions, such as Guangdong, which is expected to raise prices again in October. This is aimed at benefiting franchisees and stabilizing networks [1][4] - **Profitability Outlook**: Despite a downward revision of Q3 earnings, the profitability for Q4 and 2024 remains robust, with major companies like YTO and ZTO expected to maintain high growth rates [1][7] - **Valuation Metrics**: Companies like YTO and Shentong are currently trading at an implied valuation of approximately 10 times PE, which is at the historical low end, indicating limited downside risk and significant upside potential [2][8] - **Regulatory Environment**: Increased regulation is expected to lead to a concentration of market share among leading companies, which will improve profitability margins and support long-term growth [7] Important but Overlooked Aspects - **Discriminatory Delivery Fees**: There is a significant disparity in delivery fees across different regions, which could hinder the establishment of a unified national market. Addressing these discrepancies is crucial for maintaining price stability and reinforcing anti-competitive measures [1][6] - **Market Dynamics**: The decline in growth rates is attributed to rising logistics costs impacting low-cost e-commerce, extreme weather affecting clothing sales, and stricter regulations on fraudulent practices. A projected growth rate of 5%-10% for the second half of the year is considered normal and not detrimental to overall valuations [7] - **Investment Timing**: The current market conditions present a favorable opportunity for investors to increase their allocation to the express delivery sector, given the attractive valuation and potential for recovery in earnings [8]