November 20, 2025 12:00 PM GMT ZTO Express | Asia Pacific M Idea High-Quality Market Share Gain; Can it Sustain? | What's Changed | | | | --- | --- | --- | | ZTO Express (ZTO.N) | From | To | | Price Target | US$23.80 | US$25.00 | ZTO has been gaining share in 4Q to date amid anti-involution, a positive surprise to us. Management thinks market competition has turned healthier and leading players are resuming share gains. Although some investors may doubt whether this rosy scenario can sustain, things are mo ...

Core Insights - ZTO Express reported third-quarter 2025 earnings of 43 cents per share, an improvement from the previous year, with total revenues reaching $1.66 billion, also showing year-over-year growth [1][6] Revenue Performance - Revenue from the core express delivery business increased by 11.6% year over year, driven by a 9.8% growth in parcel volume and a 1.7% increase in parcel unit price [2] - Key account revenues surged by 141.2% year over year, attributed to a rise in e-commerce return parcels [2] - Revenue from freight forwarding services declined by 7.4% year over year [2] Gross Profit and Margins - Gross profit decreased by 11.4% compared to the year-ago quarter, with the gross margin rate falling to 24.9% from 31.2% [3][6] Operating Expenses - Total operating expenses amounted to RMB550.9 million (approximately $77.4 million), an increase from RMB493.0 million in the previous year [3] Share Repurchase Program - ZTO's board approved a share repurchase program with an increased aggregate value of $2.0 billion, extended through June 30, 2026; as of September 30, 2025, ZTO had repurchased 52,919,506 ADSs for $1.3 billion, leaving $0.7 billion available under the program [4] Cash Position - ZTO Express ended the third quarter of 2025 with cash and cash equivalents of $1.31 billion, down from $1.85 billion at the end of the previous quarter [7]

November 18, 2025 08:15 AM GMT China Express | Asia Pacific October 2025: Volume Growth Slowed; Industry Consolidation Accelerated Key Takeaways Volume growth slowed amid anti-involution. According to the State Post Bureau (SPB), China's overall express volume rose 7.9% YoY in October, vs. 12.7% in September. Intra-city parcel volume dropped 7.9% YoY in October vs. a 5% decline in September. Inter-city parcel growth slowed to 9.5% YoY in October vs. 15% in September, while international parcel growth slight ...

Core Viewpoint - FedEx Corp expresses optimism for the upcoming holiday peak shipping season despite ongoing industry challenges, projecting improved profits for the fiscal second quarter [3][4]. Financial Performance - FedEx anticipates adjusted earnings per share to exceed last year's benchmark of $4.05, surpassing analyst expectations of $4.02 per share [3]. - The update led to a 5.3% increase in FedEx shares during early trading on the New York Stock Exchange [4]. Operational Insights - FedEx has reported an increase in operating income for the first time despite declining revenues, although it faces a $1 billion headwind from the end of the de minimis tariff exemption [4]. - The company experienced a $150 million adjusted operating income impact for Q1 and expects a similar impact at the midpoint of its guidance range [5]. - U.S. outbound air freight has increased by 22%, contributing approximately $40 million to revenue [5]. Strategic Initiatives - FedEx is adapting to changing demand by shifting from trans-Pacific to intra-Asia routes and plans to spin off its FedEx Freight segment into a separate company [5]. - The company is optimistic about its future capabilities due to its existing networks, cost structure, and logistics intelligence [6]. Challenges and Mitigation - Both FedEx and UPS may face disruptions and increased expenses due to the grounding of MD-11 aircraft following a recent fatal crash [7]. - FedEx is collaborating with Boeing and the FAA to ensure safe inspections and return of aircraft to service, while managing capacity through spare aircraft and adjustments to maintenance schedules [8].

Core Insights - DHL is hiring hundreds of customs experts to assist businesses in navigating the complexities of current trade turbulence, anticipating a muted peak shipping season this fall [1] Group 1: Trade Environment - The U.S. tariff policies have created volatility in freight markets, leading to shippers accelerating overseas orders to avoid tariffs, then reducing imports due to high inventories, and seeking suppliers outside China where tariffs average 58% [2] - The cancellation of the de minimis rule on May 2 has significantly reduced airfreight for e-commerce shipments [2] Group 2: Company Response - DHL executives are working overtime to help customers manage the rising costs and complexities associated with the changing tariff landscape [3] - The company has added over 680 customs, finance, and customer service specialists this year to assist small businesses with new compliance requirements [5] - A strong customs broker operation is emphasized as a competitive advantage in the current volatile trade environment [6] Group 3: Operational Adjustments - DHL Express has seen a 30% year-over-year drop in volumes from China and Hong Kong to the U.S., partially offset by growth from countries like Vietnam, India, Malaysia, and Mexico [6] - Due to the decline in inbound volume, DHL Express has reduced daily ground delivery routes and will hire fewer seasonal workers for the holiday rush, expecting only a 20% to 25% sequential lift in business during peak season, compared to the usual 40% to 50% [7]

Summary of the Conference Call on the China Logistics Sector Industry Overview - The conference call focused on the **China Logistics Sector**, particularly the **parcel delivery** and **freight forwarding** industries, highlighting the earnings outlook and potential risks for key players in the market [2][4]. Key Points and Arguments Earnings Outlook - **Parcel Sector Recovery**: The earnings outlook for the parcel sector is improving, with industry prices recovering since late July due to regulatory measures against price competition. This recovery has exceeded previous expectations [2][3]. - **Earnings Revisions**: - EPS estimates for Tongda companies (ZTO, YTO, STO, Yunda) have been raised by approximately **0-65%** for 2025-27, reflecting a more positive average selling price (ASP) outlook [2][3]. - SF Holding's recurring net profit (NP) in Q2 was disappointing, leading to a **13%** reduction in EPS estimates for 2025-27 and a downgrade to a Neutral rating [2][5]. Pricing Impact - **Price Hikes**: Price increases began in key regions like Yiwu and Guangdong, affecting **80%** of industry volumes. An average sequential price hike of **Rmb0.3** per parcel is expected by year-end, with **1/3** of this benefiting Tongda companies [3]. - **Profit Boost**: Assuming stabilized pricing beyond 2025, profit boosts for Tongda companies could average **Rmb0.03** per parcel for the full year 2025 [3]. Risks - **Volume Slowdown**: A potential slowdown in industry volumes, which grew by **12%** in August, poses a significant downside risk. This could disrupt the current favorable pricing environment and impact higher-tier firms more severely due to their larger capacities [3]. Freight Forwarding Sector - **Resilience Amid Challenges**: Despite macroeconomic headwinds and US-China trade tensions, freight forwarding companies are expected to maintain bottom-line resilience by capturing business opportunities in the global logistics value chain [4]. - **Kerry Logistics Network (KLN)**: KLN has seen **15%** of its total revenue from ASEAN, with **40%** of its freight volume being air-related, which is higher margin compared to sea freight [4]. Company-Specific Insights - **J&T as Top Pick**: J&T is highlighted as a top pick due to its significant growth potential overseas and higher margin sensitivity to improving pricing in China [5]. - **SF Holding Downgrade**: SF Holding's earnings growth is expected to be only **12%** CAGR over 2024-27, down from **17%**, leading to lower price targets and a downgrade in ratings [5]. Additional Important Information - **Market Share and Performance**: The express delivery market share and performance metrics for major players like Yunda, YTO, STO, and SF were discussed, showing varying growth rates and revenue figures [7][21]. - **Valuation Comparisons**: Valuation metrics for parcel and freight forwarding companies were provided, indicating the market cap, P/E ratios, and expected growth rates for 2025-27 [17][18]. This summary encapsulates the key insights and data points from the conference call, providing a comprehensive overview of the current state and outlook of the China logistics sector.

Core Insights - The postal industry in China has seen a cumulative delivery volume of 1,399.2 billion pieces from January to August this year, representing a year-on-year growth of 15.5% [1] - The express delivery volume during the same period reached 1,282 billion pieces, with a year-on-year increase of 17.8% [1] - In August alone, the postal industry completed a delivery volume of 176.2 billion pieces, growing by 10.5% year-on-year, while express delivery volume was 161.5 billion pieces, up by 12.3% [1] Business Segmentation - From January to August, the same-city express delivery volume totaled 105.8 billion pieces, marking a growth of 5.6% year-on-year; the intercity express delivery volume was 1,149.2 billion pieces, up by 19.1%; and international/Hong Kong, Macau, and Taiwan express delivery volume reached 27.0 billion pieces, increasing by 16.2% [1] - The proportions of same-city, intercity, and international express delivery volumes in the total express delivery volume were 8.3%, 89.6%, and 2.1%, respectively [1] Regional Analysis - In terms of regional distribution, the express delivery volume shares for the eastern, central, and western regions were 71.4%, 19.4%, and 9.2%, respectively [1] - Compared to the same period last year, the share of express delivery volume in the central region increased by 0.9 percentage points, while the western region's share rose by 0.5 percentage points [1] Revenue Growth - The postal industry's cumulative business revenue from January to August reached 11,610.6 billion yuan, reflecting a year-on-year growth of 7.8% [1] - The express delivery business revenue during this period amounted to 9,583.7 billion yuan, with a year-on-year increase of 9.2% [1]

Summary of the Expert Call on China's Express Delivery Industry Industry Overview - The expert call focused on the express delivery industry in China, particularly discussing recent price hikes and the competitive landscape [2][10]. Key Takeaways Price Hikes - Recent price hikes are expected to expand from Guangdong and Yiwu to other provinces by late September, with the potential to sustain for another year [3][10]. - The State Post Bureau may intervene in price competition, providing legal grounds to regulate operators competing below cost [3][10]. - Price hikes are anticipated to last until the Double-Eleven shopping festival in November, with a lower likelihood of further hikes [3][10]. - Uncertainties remain due to macroeconomic pressures and overcapacity in the market [3][10]. Impact on Listed Companies - Listed companies are benefiting from price hikes to varying extents; for instance, ZTO retains about one-third of the price increases, while other Tongda operators capture around half [4][10]. - There is a call for listed companies to share more benefits with network partners and couriers to maintain service stability amid rising operating costs [4][10]. Competition Dynamics - Long-term consolidation in the express delivery market is viewed as limited due to overlapping infrastructure and cultural challenges [5][10]. - Recent price hikes may improve the financial health of weaker players, delaying market exits [5][10]. - Listed companies agree that consolidation is likely slowed by price hikes, favoring short-term profits [5][10]. Investment Recommendations - ZTO Express (ZTO US, current price USD 18.19, target price USD 23) is expected to benefit from the broadening price hikes and easing competition [6][10]. - STO Express (002468 CH, current price RMB 16.54, target price RMB 20.70) is projected to benefit significantly from increased floored prices [6][10]. Additional Insights - The expert emphasized the need for network partners to receive a larger share of the benefits from price hikes to cope with increased operating expenses [4][10]. - The ongoing theme of competition in the express delivery market suggests that companies may need to adapt strategies to maintain profitability amidst regulatory changes and market dynamics [5][10].

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]