OnTrac CEO Mike Duffy will leave the multi-regional parcel carrier at the end of the month to be the Chief Executive Officer of U.K.-based pest control specialist Rentokil Initial PLC. Duffy will be based in North America, Rentokil’s largest market, the company said. Privately-held OnTrac, which is positioning itself as the largest alternative carrier to FedEx and UPS, on Tuesday promoted Mike Brown to succeed Duffy, who led the company for nearly four years. Brown will move into his new role on Feb. 1. ...

Core Viewpoint - ZTO Express (Cayman) Inc. is recognized as one of the leading express delivery companies in China, handling the highest volume of packages in the country [1] Company Overview - ZTO Express operates in the express delivery sector, which is a critical component of China's logistics and e-commerce industries [1] - The company is categorized as a large-cap entity, although it also draws attention from analysts who typically focus on small- to mid-cap companies [1] Market Position - ZTO Express surpasses all competitors in terms of package volume, indicating a strong market presence and operational capacity [1]

Core Insights - ZTO Express (Cayman) Inc. is recognized as one of the leading express delivery companies in China, handling more packages than any other competitor in the country [1] Company Overview - ZTO Express operates primarily in the express delivery sector, which is a critical component of China's logistics and e-commerce infrastructure [1] Market Position - The company is categorized as a large-cap entity, although the focus of the analysis is typically on small- to mid-cap companies that are often overlooked by investors [1]

Core Viewpoint - ZTO Express (ZTO) is currently facing multiple challenges, making it an unattractive investment option [1] Financial Performance - The Zacks Consensus Estimate for ZTO's third-quarter 2025 earnings has decreased by 7.35% over the past 60 days, with a 3.89% downward revision for the current year [2] - ZTO's shares have declined by 7% over the past six months, while the transportation-services industry has grown by 4.9% [3] - ZTO's earnings are projected to decline by 10.78% year over year for 2025 [7] Cost and Revenue Challenges - In 2024, ZTO experienced a 14.2% year-over-year increase in total cost of revenues, which further escalated to a 21.5% increase in the first half of 2025 [8][9] - The company has revised its 2025 parcel volume forecast down to 38.8-40.1 billion from a previous estimate of 40.8-42.2 billion, indicating a reduction in expected year-over-year growth from 20-24% to 14-18% [8][9] Competitive Landscape - The domestic express delivery market is highly competitive, with major players like SF Express and STO Express posing significant challenges to ZTO [10] - ZTO's industry rank is currently at 223 out of 248 groups, placing it in the bottom 9% of Zacks industries, which suggests that the overall industry performance is weak [11]

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].

Summary of ZTO Express Conference Call Company Overview - **Company**: ZTO Express (ZTO US) - **Industry**: Air Freight & Logistics - **Market Cap**: USD 16,049 million - **Current Share Price**: USD 19.95 - **Target Price**: USD 25.00 (previously USD 22.00) with a 25% upside potential [5][28][30] Key Points and Arguments Pricing Environment - **Price Hikes**: The State Post Bureau (SPB) in Guangdong has mandated local express operators to raise floor prices by up to RMB 0.4 per parcel, setting a minimum price of RMB 1.4 per parcel [2] - **Historical Context**: Previous price hikes in the sector have led to significant market rallies, such as a 48% increase in September 2021 following collective fee increases by Tongda players [3] - **Market Reaction**: ZTO's H-share price has rebounded by 23% since mid-June, outperforming the Hang Seng Index, as the market anticipates positive impacts from the SPB's guidance [3] Financial Performance and Projections - **Earnings Estimates**: Net profits for ZTO are projected to increase by 1-4% from 2025 to 2027, with current estimates 16% above consensus [4] - **2Q25 Preview**: Expected revenue growth of 12% year-over-year, with net profits estimated at RMB 2.7 billion, slightly down from the previous year but 2% ahead of consensus [4][20] - **Volume and Pricing**: Anticipated parcel volume growth of 18% in 2025, with average selling price (ASP) expected to decline by 5% [22] Valuation and Market Position - **Valuation Metrics**: ZTO trades at a forward PE of 11.9x, lower than the average of 14.2x for A-share listed peers, indicating potential undervaluation [31] - **Market Share**: ZTO holds a 19% market share as of 1Q25, with expectations of regaining market share due to improved pricing conditions [31][33] Risks and Challenges - **Downside Risks**: Include weaker-than-expected volume growth, aggressive price competition, and potential regulatory changes that could increase operational costs [32] Additional Important Information - **Financial Ratios**: Projected ROE of 16.8% in 2025, with a dividend yield expected to rise to 4.6% [8][14] - **Cash Flow**: Positive cash flow from operations projected to increase, supporting a 50% dividend payout ratio from 2025 onwards [22] - **Analyst Ratings**: The recommendation remains a "Buy" with a raised target price reflecting confidence in the company's ability to navigate the evolving market landscape [5][28] This summary encapsulates the critical insights from the conference call regarding ZTO Express, highlighting its pricing strategies, financial outlook, market position, and associated risks.

Investment Rating - The report maintains a "Buy" rating on ZTO Express (ZTO US, TP USD22.00) and STO Express (002468 CH, TP RMB14.10), while J&T Express (1519 HK, Hold, TP HKD9.00) is seen as having upside potential [6][10][49]. Core Insights - The express delivery sector in China is expected to benefit from new policy guidance aimed at preventing aggressive price competition, which has previously led to an 8% decline in average revenue per parcel (ARPP) despite a 20% increase in volume [2][10]. - Historical trends indicate that the sector has re-rated positively following government interventions to stabilize pricing, with a notable 48% rally in September 2021 after delivery fee increases [4][10]. - The current consensus has cut ZTO's earnings estimates by 15% due to intensified price competition, resulting in a forward PE multiple of 10.4x, significantly below its historical average of 19.2x, suggesting potential downside protection for the stock [3][10]. Summary by Sections Policy Impact - The State Post Bureau's recent conference emphasized tighter regulations to curb aggressive pricing strategies, which has already led to a 5-10% increase in share prices for express delivery companies [2][10]. - The report anticipates that if express delivery companies respond to the new policy with price hikes, a sustainable re-rating of the sector could occur [4]. Financial Projections - ZTO is projected to achieve 9% earnings growth by 2025, with a 21% increase in volume, despite an expected 11% decline in ARPP [5]. - A sensitivity analysis indicates that a 1 percentage point improvement in ARPP could lead to a 3 percentage point increase in net profit growth [5]. Company Ratings and Targets - ZTO Express is highlighted as the domestic leader with a target price of USD22.00, while STO Express is also rated as a "Buy" with a target price of RMB14.10, benefiting from potential regulatory interventions [6][10]. - J&T Express is rated as a "Hold" with a target price of HKD9.00, reflecting its position as a laggard in the market but with potential upside as competition eases [6][10].

Investment Rating - The report maintains an Overweight (OW) rating for SF Holding Co. Ltd - A and H shares, with price targets of Rmb52.00 and HK$46.00 respectively [4][39]. Core Insights - SF Holding has shown exceptional performance in the logistics sector, with A and H shares rising 24% and 38% year-to-date, significantly outperforming the CSI300 index, which is down 2% [2][10]. - The company's growth is attributed to operational optimization, innovative pricing models, and the use of advanced technologies like AI and robotics, enhancing efficiency and profitability [2][14]. - SF's business model reveals substantial upside potential, particularly in international parcels and supply chain management, positioning it favorably against global competitors like UPS [9][11]. Summary by Sections Operational Performance - SF has achieved robust parcel volume growth, with increases of 25%, 30%, and 32% year-over-year in March, April, and May respectively [3]. - The average selling price (ASP) has declined by 12-14% year-over-year due to the introduction of lower-priced parcels, but this strategy is expected to improve overall infrastructure utilization [3][10]. Market Positioning - SF's integrated business model allows it to capture market share across both high-end and low-end segments, maintaining profitability despite competitive pressures [2][3]. - The company views tariff impacts as manageable, with minimal effects on its bottom line, and anticipates growth in its logistics routes due to increased demand for comprehensive solutions [7][10]. Valuation Analysis - SF's valuation premium is justified by its unique position in China's logistics market, trading at 18x and 15x EV/EBITDA for FY26E, compared to peers at 11.5x [10][35]. - The report suggests that SF can trade at above 8-10x EV/EBITDA, reflecting its promising growth rates and significant upside potential in international and supply chain management [10][35].