Core Viewpoint - ZTO Express (Cayman) Inc. is set to release its unaudited financial results for Q4 and the fiscal year 2024 on March 18, 2025, after U.S. market close [1] Group 1: Financial Results Announcement - The unaudited financial results for the fourth quarter ended December 31, 2024, and the annual results for the fiscal year ended December 31, 2024, will be announced after the U.S. market closes on March 18, 2025 [1] - An earnings conference call will be held at 8:30 P.M. U.S. Eastern Time on March 18, 2025, which corresponds to 8:30 A.M. Beijing Time on March 19, 2025 [2] Group 2: Company Overview - ZTO Express is a leading and fast-growing express delivery company in China, providing express delivery and value-added logistics services through a reliable nationwide network [3] - The company operates a scalable network partner model to support the growth of e-commerce in China, leveraging partners for pickup and last-mile delivery while controlling the line-haul transportation and sorting network [4]

Core Insights - ZTO Express held its National Network Conference on January 9, 2025, to discuss the spirit of the 2025 National Postal Management Work Conference and outline key tasks for 2025 [1][3] - In 2024, ZTO achieved a parcel volume of 34 billion, marking a year-on-year growth of 12.6%, and maintained its position as the industry leader for the ninth consecutive year [2] - The company emphasized the integration of "quality" and "development" as central themes for 2025, focusing on safety, service enhancement, fairness, unity, execution, potential exploration, capability enhancement, and efficiency improvement [3] Company Performance - ZTO's balanced development strategy has led to significant growth in parcel volume, reinforcing its market leadership [2] - The company is committed to high-quality development and operational efficiency, enhancing brand awareness and recognition [2] Industry Outlook - The Chinese express delivery industry is characterized by vast market potential and increasing concentration, with a clear trend towards high-quality development [4] - ZTO aims to leverage its network partners to support the growth of e-commerce in China while maintaining control over critical logistics operations [6]

Core Insights - ZTO Express has experienced a significant decline in share price, falling in double digits over the past six months, underperforming its industry and competitors like C.H. Robinson Worldwide and Expeditors International [1][4] Financial Performance - ZTO updated its 2024 parcel volume guidance to a range of 33.7 billion to 33.9 billion, reflecting a year-over-year increase of 11.6% to 12.3%, down from a previous expectation of 34.73 billion to 35.64 billion, which represented a 15% to 18% increase [5] - The company's SG&A expenses rose by 25.6% year over year in 2023 and increased by 17.5% year over year in the third quarter of 2024, contributing to higher operating expenses [6] - ZTO's revenues from the core express delivery business grew by 18.1% year over year in the third quarter of 2024, driven by a 15.9% increase in parcel volume and a 1.8% rise in unit price [8] - Revenues from freight forwarding services increased by 0.8% year over year, while sales of accessories rose by 27.6% year over year [9] - ZTO's gross profit improved by 23.2% year over year, with the gross margin rate increasing to 31.2% from 29.8% in the previous year [9] Valuation - ZTO is currently trading at a discount compared to the industry based on its forward 12-month price-to-sales ratio, which is also below its median over the last five years, indicating an attractive valuation [10] Investment Outlook - Despite the attractive valuation and growth in parcel volume, the company faces headwinds that suggest it may not be the right time to buy ZTO stock, which currently holds a Zacks Rank of 3 (Hold) [12][13] - Investors are advised to monitor the company's developments for a more suitable entry point while those already invested should consider staying in the stock [13]

Core Insights - ZTO Express has been under scrutiny due to the ongoing price war in China's express delivery industry, which has created challenges for the company and the sector as a whole [1]. Company Overview - ZTO Express is a key player in the Chinese express delivery market, and its performance is closely tied to the competitive dynamics within the industry [1]. Industry Context - The express delivery industry in China is currently experiencing a price war, which is impacting profitability and operational strategies for companies involved [1].

Company Performance - ZTO Express reported third-quarter 2024 earnings of 41 cents per share, showing improvement year over year [1] - Total revenues reached $1.52 billion, reflecting a year-over-year increase [3] - Gross profit improved by 23.2% compared to the same quarter last year, with gross margin rising to 31.2% from 29.8% [5] Operational Statistics - Revenues from the core express delivery business increased by 18.1% year over year, driven by a 15.9% growth in parcel volume and a 1.8% rise in unit price [4] - KA revenues surged by 122.1%, attributed to a higher proportion of valuable parcels, including returns from e-commerce platforms [4] - Revenues from freight forwarding services grew by 0.8%, while accessory sales, primarily thermal paper for digital waybills, climbed by 27.6% year over year [5] Expenses and Cash Position - Total operating expenses amounted to RMB493.0 million (approximately $70.3 million), up from RMB282.8 million in the previous year [6] - ZTO Express ended the third quarter of 2024 with cash and cash equivalents of RMB11.70 billion, an increase from RMB10.54 billion at the end of the prior quarter [6] Guidance - ZTO Express updated its 2024 parcel volume guidance to a range of 33.7 billion to 33.9 billion, representing an increase of 11.6% to 12.3% year over year [7] - The previous guidance anticipated parcel volumes between 34.73 billion and 35.64 billion, indicating a projected increase of 15% to 18% year over year [7] Market Position - ZTO Express currently holds a Zacks Rank of 4 (Sell) [8]

Financial Performance - Total revenues for Q3 2024 were RMB10,675.0 million (US$1,521.2 million), an increase of 17.6% from RMB9,075.9 million in Q3 2023[3] - Adjusted net income grew 2.0% to RMB2,387.3 million (US$340.2 million) compared to RMB2,340.7 million in the same period last year[3] - Gross profit rose 23.2% to RMB3,334.8 million (US$475.2 million), with a gross margin improvement to 31.2% from 29.8%[12] - Net income for the period was RMB2,379.0 million (US$339.0 million), reflecting a year-over-year increase of 1.3% from RMB2,349.6 million[18] - Basic and diluted earnings per ADS attributable to ordinary shareholders were RMB2.98 (US$0.42) and RMB2.90 (US$0.41), compared to RMB2.91 and RMB2.84 in the same period last year, representing increases of 2.4% and 2.1% respectively[19] - EBITDA increased to RMB3,731.3 million (US$531.7 million), compared to RMB3,449.5 million in the same period last year, marking an increase of approximately 8.2%[21] - Adjusted net income rose to RMB2,387.3 million (US$340.2 million), up from RMB2,340.7 million during the same period last year[20] - Adjusted EBITDA was RMB3,729.5 million (US$532.8 million), compared to RMB3,438.6 million in the same period last year, reflecting an increase of approximately 8.5%[22] Operational Metrics - Parcel volume increased by 15.9% year over year to 8.72 billion parcels[4] - The number of pickup/delivery outlets exceeded 31,000 as of September 30, 2024[4] - The express delivery industry experienced high growth despite soft macroeconomic conditions, prompting the company to adjust annual volume targets[6] - The core express average selling price (ASP) increased by 1.8% due to improved key account mix[6] Cash Flow and Liquidity - Cash generated from operating activities was RMB3,112.0 million (US$443.5 million), up from RMB2,938.1 million in Q3 2023[3] - Net cash provided by operating activities was RMB3,112.0 million (US$443.5 million), an increase from RMB2,938.1 million in the same period last year[22] - Cash and cash equivalents decreased to RMB11,703,151 as of September 30, 2024, from RMB12,333,884 as of December 31, 2023, a decline of 5.1%[37] - The total cash, cash equivalents, and restricted cash as of September 30, 2024, amounted to RMB11,747,744, compared to RMB10,108,507 in the previous year, indicating a strong liquidity position[39] - The company’s net cash provided by financing activities significantly decreased from RMB2,529,988 in the three months ended September 30, 2023, to RMB10,183 in 2024, a decline of 99.6%[38] Assets and Liabilities - Total current assets increased to RMB30,156,630 as of September 30, 2024, compared to RMB26,953,548 as of December 31, 2023, reflecting a growth of 8.1%[37] - Total assets reached RMB93,320,033 as of September 30, 2024, up from RMB88,465,221 as of December 31, 2023, indicating a growth of 5.5%[37] - Total liabilities increased to RMB32,197,962 as of September 30, 2024, compared to RMB28,184,813 as of December 31, 2023, representing a rise of 14.3%[37] - The company’s total equity increased to RMB61,122,071 as of September 30, 2024, from RMB60,280,408 as of December 31, 2023, indicating a growth of 1.4%[37] Tax and Other Income - The company received an income tax refund of RMB207.1 million for being a "Key Software Enterprise" for the tax year 2022[18] Year-over-Year Comparisons - Revenues for the three months ended September 30, 2023, were RMB9,075,918, representing a year-over-year increase of 17.6% compared to RMB10,675,048 for the same period in 2024[36] - Gross profit for the nine months ended September 30, 2023, was RMB8,534,277, up 16.7% from RMB9,957,373 in 2024[36] - Net income attributable to ZTO Express (Cayman) Inc. for the three months ended September 30, 2023, was RMB2,345,158, a slight increase from RMB2,396,297 in 2024[36] - Net cash used in investing activities decreased significantly from RMB4,025,760 in the three months ended September 30, 2023, to RMB1,910,131 in 2024, indicating a reduction of 52.6%[38] - Net income for the three months ended September 30, 2023, was RMB2,349,610, slightly increasing to RMB2,379,042 in 2024, representing a growth of 1.3%[40] - Adjusted net income attributable to ordinary shareholders for the three months ended September 30, 2023, was RMB2,336,292, rising to RMB2,404,506 in 2024, an increase of 2.9%[41] - EBITDA for the three months ended September 30, 2023, was RMB3,449,483, increasing to RMB3,731,315 in 2024, which is a growth of 8.2%[40] - The company reported a diluted net earnings per share of RMB2.84 for the three months ended September 30, 2024, compared to RMB2.90 in the previous year, reflecting a decrease of 2.1%[43] - Net earnings per share (diluted) for the nine months ended September 30, 2023, was RMB7.94, compared to RMB7.80 in 2024, showing a slight increase[36] - Weighted average shares used in calculating net earnings per share for the three months ended September 30, 2024, were 838,131,679, compared to 838,290,093 in the previous year, showing a slight decrease[41]

Financial Data and Key Metrics Changes - In Q3 2024, the total parcel volume reached $8.72 billion, representing a 15.9% year-over-year growth [5] - Adjusted net profit increased to $2.39 billion, maintaining profitability ahead of peers [5] - Total revenue rose by 17.6% to $10.7 billion, while total cost of revenue increased by 15.2% to $7.3 billion [9] - Gross profit increased by 23.2% to $3.3 billion, with a gross profit margin of 31.2% [9] - Operating cash flow was $3.1 billion, an increase of 5.9% [9] Business Line Data and Key Metrics Changes - Retail parcels grew over 40% year-over-year, driven by enhanced partnerships with e-commerce platforms [5] - The average selling price (ASP) for the core express delivery business increased by 1.8% [9] - Unit cost of line haul transportation decreased by 9.7% to $0.39, while unit sorting costs decreased by 6.4% to $0.25 [9] Market Data and Key Metrics Changes - The express delivery industry in China experienced a 28.1% year-over-year increase in Q3 2024 [5] - The proportion of low-cost single-seller e-commerce products has expanded, reflecting a shift in consumer price sensitivity [5] Company Strategy and Development Direction - The company aims to accelerate the establishment of differentiated products and services while enhancing brand awareness [5] - Focus on maintaining and expanding competitive advantages in scale and service quality [6] - Strategic adjustments are being made to pricing practices to stimulate high-volume customer engagement [10] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of balancing service quality, scale, and profitability amidst macroeconomic uncertainties [5] - The company anticipates challenges due to an increasing proportion of low-value e-commerce packages [10] - Future strategies will focus on improving service quality and operational efficiency to regain volume growth momentum [10] Other Important Information - Capital expenditure for the year is projected to be around $6 billion, with a focus on maximizing resource utilization [9] - The company is on track to achieve another year of free cash flow [9] Q&A Session Summary Question: What is the capacity growth plan for next year? - Management indicated that they will maintain a balanced approach focusing on quality of services, volume market share, and profit, with a goal to increase capacity by 30% to 40% [12][13] Question: What updates are there on the share buyback plan? - The company aims to complete its buyback plan as a primary method of returning value to shareholders, with a systematic approach to increase buyback frequency [15] Question: How will the cooperation between Taobao and JDL impact the company? - Management believes that the open and cooperative market environment will not significantly impact the company, as it remains an open platform addressing diverse service needs [20] Question: What is the outlook for other operating income items in the next quarter? - Management expects minimal fluctuations in operating income, with stability anticipated despite the expiration of certain tax deductions [21] Question: What is the reason behind the rapid growth in KA customer revenue? - The company reported a significant increase in KA customer revenue due to a higher proportion of high-end platform business clients, with a gross profit margin expected to contribute positively to net profit [22][24]

Financial Data and Key Metrics Changes - In Q3 2024, the total parcel volume reached $8.72 billion, representing a 15.9% year-over-year growth [5] - Adjusted net profit increased by 2% to $2.39 billion, maintaining profitability ahead of peers [5][9] - Total revenue rose by 17.6% to $10.7 billion, while total cost of revenue increased by 15.2% to $7.3 billion [9] - Gross profit increased by 23.2% to $3.3 billion, with a gross profit margin of 31.2% [9] - Operating cash flow was $3.1 billion, an increase of 5.9% [9] Business Line Data and Key Metrics Changes - Retail parcels grew over 40% year-over-year, driven by enhanced partnerships with e-commerce platforms [5] - The average selling price (ASP) for the core express delivery business increased by 1.8% [9] - Unit cost for line haul transportation decreased by 9.7% to $0.39, while unit sorting costs decreased by 6.4% to $0.25 [9] Market Data and Key Metrics Changes - The express delivery industry in China experienced a 28.1% year-over-year increase in Q3 2024 [5] - The proportion of low-cost e-commerce products has expanded, influenced by consumer price sensitivity [5] Company Strategy and Development Direction - The company is focused on high-quality development, aiming to differentiate products and services while enhancing brand awareness [5] - Strategic initiatives include optimizing revenue structure, improving service quality, and maintaining scale leadership [5][6] - The company plans to balance service quality, scale, operating profit, and partner interests to achieve sustainable growth [6][7] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of macroeconomic recovery for the express delivery industry's growth [5][6] - The company is recalibrating its focus on quality of services, volume, market share, and profit in response to changing market dynamics [10] - Future strategies include enhancing last-mile operations and leveraging financial technology to improve service efficiency [7][8] Other Important Information - Capital expenditure for the year is anticipated to be around $6 billion, with a focus on maximizing resource utilization [9] - The company is on track to achieve another year of free cash flow [9] Q&A Session Summary Question: What is the capacity growth plan for next year? - Management indicated that they will maintain a balanced approach focusing on quality and profitability while also considering volume growth [11][12] Question: What updates are there on the share buyback plan? - The company aims to complete its share buyback plan as a primary method of returning value to shareholders, with adjustments based on market conditions [15] Question: How will the cooperation between Taobao and JDL impact the company? - Management believes that the open and cooperative market environment will not significantly impact the company, as it remains an open platform catering to various e-commerce needs [20] Question: What is the outlook for other operating income items in the next quarter? - The company expects minimal fluctuations in operating income, with stability anticipated despite the expiration of certain tax deductions [21] Question: What is driving the rapid growth in direct customer income? - The significant growth in direct customer income is attributed to an increase in high-end platform business clients, with a gross profit margin expected to improve [22][24]

Core Viewpoint - ZTO Express reported robust financial performance in Q3 2024, with adjusted net income growing by 2.0% to RMB2.4 billion and parcel volume increasing by 15.9% to 8.7 billion, despite challenging macroeconomic conditions [1][2][5]. Financial Highlights - Total revenues reached RMB10,675.0 million (US$1,521.2 million), marking a 17.6% increase from RMB9,075.9 million in Q3 2023 [2]. - Gross profit was RMB3,334.8 million (US$475.2 million), up 23.2% from RMB2,706.4 million in the same period last year [11]. - Net income increased by 1.3% to RMB2,379.0 million (US$339.0 million) compared to RMB2,349.6 million in Q3 2023 [17]. - Adjusted EBITDA rose by 8.7% to RMB3,739.5 million (US$532.9 million) from RMB3,438.6 million in the previous year [2][21]. - Basic and diluted net earnings per American depositary share (ADS) were RMB2.98 (US$0.42) and RMB2.90 (US$0.41), reflecting increases of 2.4% and 2.1% respectively from the same period last year [18]. Operational Highlights - Parcel volume reached 8,723 million, a 15.9% increase from 7,523 million in Q3 2023 [3]. - The number of pickup/delivery outlets exceeded 31,000, and direct network partners surpassed 6,000 as of September 30, 2024 [3]. - The fleet included over 10,000 self-owned line-haul vehicles, with more than 9,700 being high-capacity models [3]. Cost and Efficiency - Total cost of revenues was RMB7,340.2 million (US$1,046.0 million), an increase of 15.2% from RMB6,369.5 million in the same period last year [7]. - Line-haul transportation costs increased by 4.7% to RMB3,398.0 million (US$484.2 million), while unit transportation costs decreased by 9.7% [8]. - Sorting hub operating costs rose by 8.6% to RMB2,224.2 million (US$316.9 million), with a decrease in cost per unit by 6.4% [9]. Strategic Outlook - The company anticipates parcel volume for 2024 to be between 33.7 billion and 33.9 billion, representing an 11.6% to 12.3% year-over-year increase [22]. - ZTO aims to maintain high service quality and customer satisfaction while regaining market share and expanding its leadership in parcel volume [5][6].

Core Viewpoint - ZTO Express Cayman Inc. is experiencing significant challenges due to escalating operating expenses and weak financial stability, making it an unattractive investment option for investors' portfolios [1] Financial Performance - The Zacks Consensus Estimate for current-year earnings has been revised downward by 1.7% over the past 60 days, with a 0.5% decrease for the next year, indicating a lack of confidence from brokers [2] - ZTO shares have declined by 5.7% over the past year, contrasting with a 5.9% rise in the industry [2] Industry Ranking - ZTO currently holds a Zacks Rank of 4 (Sell) and belongs to an industry with a Zacks Industry Rank of 191 out of 251, placing it in the bottom 24% of Zacks Industries [3] Operating Expenses - In Q2 2024, total operating expenses increased by 5% year over year, primarily due to a 17.5% rise in labor costs, totaling $683.7 million [4][5] - General supplies and expenses rose by 15% to $81.6 million, while interest expenses increased to $15.94 million during the same period [5] Competitive Landscape - The domestic express delivery market is highly competitive, with major players like SF Express and STO Express, which could further pressure ZTO's stock price if competition intensifies [6]