ZTO EXPRESS(US:ZTO)2021-11-18 06:41Financial Data and Key Metrics Changes - In Q3 2021, ZTO achieved a parcel volume of 5.7 billion, representing a 23.3% year-over-year growth and securing a market share of 20.8% [6][12] - Total revenue increased by 11.3% to RMB 7.4 billion, while adjusted net income rose by 13.7% year-over-year to RMB 1.15 billion [12][13] - The average selling price (ASP) for the core express delivery business declined by 7.2%, attributed to normal parcel weight drop and volume incentives [13] Business Line Data and Key Metrics Changes - The cost of revenue increased by 10.9% to RMB 5.8 billion, but the overall unit cost of revenue decreased by 7.3% [13] - Gross profit increased by 12.7% to RMB 1.6 billion, with a gross profit margin of 21.2% [13][14] - SG&A expenses rose by 4.2% to RMB 389 million, but as a percentage of revenue, it dropped to 5.3% [14] Market Data and Key Metrics Changes - The express delivery industry is expected to stabilize pricing by 2022, with a shift towards profitability among top players [7][18] - The market dynamics indicate that second and third-tier express delivery companies have exited, leading to clearer distinctions among top players [7] Company Strategy and Development Direction - ZTO's strategy focuses on maintaining high-quality customer service while achieving targeted profits and expanding market share [8][10] - The company plans to invest in capacity expansion and improve operational efficiency through digitization and data analytics [9][10] - ZTO aims to develop a comprehensive logistics ecosystem, including LTL, cloud warehouse, and other services to enhance brand value [9][34] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects of the express delivery industry, despite a slowdown in e-commerce growth [10][37] - The company anticipates that earnings growth will exceed revenue growth, with adjusted net income expected to grow no less than 30% year-over-year for 2021 [15][20] Other Important Information - Capital expenditures for 2021 are projected to be around RMB 9 billion, with expectations for a decrease in 2022 [22] - The VAT super deduction policy is expected to expire by the end of 2021, which will remove its positive impact on earnings [22] Q&A Session Summary Question: Impact of J&T and Best M&A on competitive landscape - Management noted that the integration of J&T and Best may present challenges and does not guarantee a stronger competitive position, allowing ZTO to leverage its strengths [18] Question: Earnings growth faster than revenue growth - Management explained that ASP decline is due to market developments and incentives, but expects ASP to stabilize and increase as competition becomes more rational [19][20] Question: CapEx guidance for next year - Management indicated that capital spending will focus on land use rights and facility construction, with expectations for a decrease in total spending next year [22] Question: Industry pricing trends in 2022 - Management believes that ASP will increase in line with market trends, driven by a more sensible pricing environment [25] Question: Fourth quarter earnings guidance - Management confirmed that fourth quarter earnings growth is expected to be no less than 30% year-on-year [27] Question: Market share performance during Double 11 Shopping Festival - Management reported strong performance during the festival, achieving significant order and delivery volumes, and emphasized ZTO's competitive advantages [28][29] Question: New growth drivers beyond e-commerce - Management acknowledged the slowdown in e-commerce growth but highlighted opportunities in community grocery shopping and international expansion [37][39]