August 31, 2025 05:51 PM GMT ZTO Express | Asia Pacific China BEST Conference 3Q 2025 Feedback Key Takeaways Update on anti-involution: ZTO has seen a market volume slowdown in August amid logistics price hikes, and expects more significant impacts in Sep to Oct. Management thinks the reduction of low AOV parcels is a healthy trend for the express delivery segment. However, restrictions on market share and pricing gaps could slow ZTO's market share gains. Retail parcels: | M | | | | --- | --- | --- | | | | ...

China Logistics, Express Parcel & Ecommerce July data highlight benefits of anti-involution efforts on pricing and market dynamics, JDL's index inclusion The logistics industry in China is witnessing a positive shift in average selling price (ASP) trends, driven by successful anti-involution efforts. The narrowing ASP decline reflects interventions by the State Post Bureau (SPB) and local governments, with express revenue rising 9% Y/Y in July. This decline in ASP narrowed further from previous months, indi ...

29 August 2025 | 4:42AM HKT S.F. Holding (002352.SZ/6936.HK) & Kerry Logistics (0636.HK) 2Q25 review: Revenue in-line & profit below; focusing on market share gains; Buy S.F./Neutral on Kerry S.F. Holding reported mixed 2Q print with in-line revenue growth of +11% yoy, while pre-exceptional net profit (excluding a Rmb1bn investment gain) came in below-expectations at Rmb2.6bn, -13% vs. GSe, with gross margin at 13.1% (vs. 14.5% in 2Q24) as a result of flexible pricing strategy amid S.F.'s proactive focus on ...

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Summary of Key Points from the Conference Call on China's Express Delivery Industry Industry Overview - The conference call focused on the express delivery industry in China, specifically discussing the impact of "anti-involution" policies on pricing and profitability within the sector [3][4]. Core Insights 1. **Price Increases in Key Regions** - Express delivery prices have risen in key regions, with Yiwu seeing an increase of RMB0.1 per parcel in July 2025. The current price for a 0.1 kg parcel is above RMB1.2. In Guangdong, prices for 0.1 kg parcels have risen to RMB1.45-1.55, with regular parcels increasing by RMB0.2-0.3 and discount parcels by approximately RMB0.6 [3]. 2. **Impact of Anti-Involution Policies** - The implementation of anti-involution policies has led to stronger price hikes in Guangdong, a key region for express delivery. However, many franchisees may still be operating at a loss due to high operating costs [3]. 3. **New Social Security Regulations** - New regulations effective from September 1, 2025, mandate that employers cannot opt out of social security payments, which will increase costs for express delivery companies by more than RMB0.1 per parcel. This is expected to further support price hikes in the industry [4]. 4. **Rising Delivery Costs** - The expert noted that the mandatory social insurance expenses and long-standing price competition have suppressed delivery fees, affecting couriers' income. The trend of rising delivery fees is also observed in Eastern and Northern China [4]. 5. **Profitability Concerns** - Despite price increases, the expert expressed concerns that the express delivery industry chain may struggle to maintain profitability due to increased mandatory costs. If these costs are passed on to consumers, delivery prices may rise further [4]. Investment Recommendations 1. **Preferred Companies** - The report recommends investing in STO and Yunda, both rated as "Buy" due to their higher earnings resilience. Target prices remain unchanged [5]. 2. **Other Ratings** - YTO and SF Holding-A/H also maintain "Buy" ratings with unchanged target prices. Conversely, Deppon Logistics is rated "Reduce" due to high valuation concerns [5]. Additional Insights - The expert highlighted that the express delivery market is characterized by intense competition, with 30% of the market being low-priced tickets and 7-11% being discount-priced tickets in Guangdong [3]. - The report anticipates more regional policy tailwinds that could drive further re-rating of express delivery companies [5]. This summary encapsulates the key points discussed during the conference call, providing insights into the current state and future outlook of the express delivery industry in China.

Core Insights - ZTO Express reported second-quarter 2025 earnings of 35 cents per share, a decline from the previous year, while total revenues increased to $1.65 billion [1][8] - The company revised its 2025 parcel volume guidance down to 38.8 billion to 40.1 billion, reflecting a year-over-year growth of 14-18%, from a prior estimate of 40.8 billion to 42.2 billion, which indicated 20-24% growth [1][8] Financial Performance - Revenues from the core express delivery business rose by 11% year over year, driven by a 16.5% increase in parcel volume, despite a 4.7% decrease in parcel unit price [3] - Gross profit decreased by 18.7% compared to the same quarter last year, with the gross margin rate falling to 24.9% from 33.8% [4][8] - Total operating expenses increased to RMB469.3 million ($65.5 million) from RMB405.3 million in the prior year [4] Operational Highlights - ZTO Express handled over 9.8 billion parcels in the second quarter, achieving an adjusted net income of 2.1 billion [2] - Retail volume growth remained strong, exceeding 50% compared to the previous year, positively impacting overall margins [2] - Revenue from KA (Key Accounts) increased significantly by 149.7% due to a rise in e-commerce return parcels [3] Cash Position - At the end of the second quarter, ZTO Express had cash and cash equivalents of $1.85 billion, up from $1.71 billion at the end of the previous quarter [5]

Group 1 - The research service "Asia Value & Moat Stocks" targets value investors looking for Asia-listed stocks with significant discrepancies between price and intrinsic value, focusing on deep value balance sheet bargains and wide moat stocks [1][2] - ZTO Express (NYSE: ZTO) is currently rated as a Hold, considering both its earnings miss and favorable regulatory developments [1] Group 2 - The author of the investing group provides investment ideas specifically for the Hong Kong market, emphasizing deep value balance sheet bargains and wide moat stocks, along with monthly updates on watch lists [2]

Summary of ZTO Express 2Q25 Earnings Call Company Overview - **Company**: ZTO Express (ZTO.N) - **Industry**: Transportation & Infrastructure - **Market**: Hong Kong/China Key Financial Metrics - **2Q25 Non-GAAP Net Income**: Rmb2.05 billion, down 27% YoY, compared to market expectations of Rmb2.29 billion [2] - **Operating Cash Flow**: Rmb4.5 billion in 1H25, down from Rmb5.5 billion in 1H24 [3] - **Capital Expenditures (Capex)**: Rmb3.1 billion in 1H25 [3] - **Total Revenue for 2Q25**: Rmb11.83 billion, up 10.3% YoY [9] - **Gross Profit Margin**: 24.9%, down from 33.8% YoY [9] - **Operating Profit Margin**: 20.9%, down from 30.0% YoY [9] - **Net Income**: Rmb1.94 billion reported, with a YoY decrease of 26.8% [9] Market Performance - **Market Share**: 19.5%, a slight decrease of 0.1 percentage points YoY [3] - **Parcel Volume Outlook for 2025**: Revised to 38.8-40.1 billion parcels, down from 40.8 billion, representing a growth of 14-18% YoY [3] Revenue and Cost Analysis - **Parcel Revenue Growth**: 11% YoY to Rmb11.7 billion, driven by a 16.5% YoY increase in volume [7] - **Average Selling Price (ASP)**: Core ASP decreased by 4.7% YoY [7] - **Unit Cost**: Increased by Rmb0.07 YoY, primarily due to higher KA costs [7] - **Gross Profit (GP)**: Decreased by 19% YoY, indicating higher costs than expected [7] - **Operating Profit (OP)**: Decreased by 23% YoY [7] Strategic Insights - **Management Discussion**: Focused on market outlook, competition strategy, and profitability [7] - **Interim Payout Ratio**: Remained at 40%, in line with expectations [7] - **Risks**: Potential upside from anti-involution initiatives, but full-year estimates are lower than consensus [7] Valuation and Price Target - **Current Stock Price**: US$19.74 as of August 19, 2025 [5] - **Price Target**: US$24.60, indicating a potential upside of 25% [5] - **Market Capitalization**: Rmb112.32 billion [5] - **Estimated EPS**: Expected to be Rmb10.54 for FY25 [5] Conclusion ZTO Express reported a significant decline in profits for 2Q25, leading to a downward revision of its full-year volume targets. Despite a modest revenue growth, the company faces challenges with rising costs and competitive pressures. The management's focus on strategic initiatives and market outlook will be crucial for navigating these challenges moving forward.

Company Overview - ZTO is a leading express delivery company in China, holding the 1 market share by parcel volume since 2016[12] - In 2Q25, ZTO delivered 98 billion parcels, capturing a 195% market share[12] - ZTO's network covers >99% of county-level cities in China[12] Competitive Advantages - ZTO operates 94 sorting hubs and has deployed 690 automation lines[12,69] - The company has a self-owned line-haul fleet of over 10,000 vehicles and operates approximately 3,900 line-haul routes[12] - ZTO's Network Partner Model (NPM) has increased its market share from 66% in 2011 to 73% in 2024, compared to the Direct Model[21] Financial Performance (Q2 2025) - ZTO's quarterly revenue reached RMB 11832 million, representing a 10% year-over-year growth[157] - The company's adjusted EBITDA margin was 299%[161] - Adjusted Net Income margin was 173%[166] ESG Initiatives - The company aims for a 20% reduction in GHG emissions intensity per parcel by 2028, using 2023 as the base year[120] - ZTO is increasing the proportion of women in management positions to 39% by 2030[123] - The company is actively involved in community and rural revitalization programs[123]

Core Viewpoint - ZTO Express reported a strong growth in parcel volume and adjusted net income for the second quarter of 2025, despite facing challenges in the industry, indicating resilience and a focus on quality service [1][7][8]. Financial Highlights - Total revenues increased by 10.3% to RMB 11,831.8 million (US$1,651.7 million) compared to RMB 10,726.0 million in the same period of 2024 [8][10]. - Adjusted net income reached RMB 2.1 billion, a decrease of 26.8% from RMB 2.8 billion in the same period of 2024 [1][23]. - Basic and diluted earnings per American depositary share (ADS) were RMB 2.42 (US$0.34) and RMB 2.37 (US$0.33), down 25.3% and 25.0% respectively from the previous year [22]. Operational Highlights - Parcel volume grew by 16.5% year-over-year to 9.8 billion parcels [1][8]. - The number of pickup/delivery outlets exceeded 31,000, and the number of sorting hubs was 94 as of June 30, 2025 [8][10]. - The company maintained a stable SG&A expense ratio at 5.2% of revenue [9]. Cost and Profitability - Gross profit decreased by 18.7% to RMB 2,944.4 million (US$411.0 million), with a gross margin of 24.9% compared to 33.8% in the same period last year [15]. - Total cost of revenues increased by 25.1% to RMB 8,887.4 million (US$1,240.6 million) [11]. - Line-haul transportation costs remained stable, with a slight increase of 0.2% [12]. Business Outlook - The company revised its annual parcel volume guidance to a range of 38.8 billion to 40.1 billion, representing a growth rate of 14.0% to 18.0% [26]. - ZTO aims to stay ahead of the industry average growth rate while focusing on quality and operational efficiency [9][26]. Dividend Declaration - An interim cash dividend of US$0.30 per ADS and ordinary share was announced, representing a 40% payout ratio [25].