Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>Q424 revenue growth &amp; EBITDA margin both improved noticeably vs Q324 </li>
<li>Additionally, ZTO gave FY25 parcel volume guidance that implies an acceleration of growth</li>
<li>But "key" change in revenue mix is crushing cash returns (Q424 OpCF down -28% Y/Y)</li>
</ul>


Q424 revenue growth &amp; EBITDA margin both improved noticeably vs Q324 
Additionally, ZTO gave FY25 parcel volume guidance that implies an acceleration of growth
But "key" change in revenue mix is crushing cash returns (Q424 OpCF down -28% Y/Y)


Q424 ZTO Express Results & FY25 Guidance: Revenue Growth & Margin Better, But OpCF Shrinking; AVOID

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>ZTO Express (ZTO)’s 4Q24 core net profit grew 11% YoY to RMB2.49bn, which is in line with our expectation.</li><li>The company targets to achieve full year parcel volume of 40.8-42.2bn (20-24% YoY growth), which is expected to outpace the industry growth of 15% (ZTO’s forecast).</li><li>This suggests a shift of strategy from profitability to volume growth, which we believe was due to the continuous decline in market share (18.8% in 4Q24, in terms of parcel volume). </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

ZTO Express (ZTO)’s 4Q24 core net profit grew 11% YoY to RMB2.49bn, which is in line with our expectation.The company targets to achieve full year parcel volume of 40.8-42.2bn (20-24% YoY growth), which is expected to outpace the industry growth of 15% (ZTO’s forecast).This suggests a shift of strategy from profitability to volume growth, which we believe was due to the continuous decline in market share (18.8% in 4Q24, in terms of parcel volume). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

ZTO Express (ZTO US/2057 HK) - Shifting Back to Volume Growth Strategy

<ul>
<li>In Q424, there were dramatic shifts in share among the six listed Chinese express companies</li>
<li>STO and J&amp;T gained the most volume share, while volume leader ZTO gave up the most</li>
<li>STO won share without ceding much price; ZTO still has not settled on a new strategy</li>
</ul>


In Q424, there were dramatic shifts in share among the six listed Chinese express companies
STO and J&amp;T gained the most volume share, while volume leader ZTO gave up the most
STO won share without ceding much price; ZTO still has not settled on a new strategy


Monthly Chinese Express Tracker: Fight For Parcel Volume Share Heated Up in Q424 (January 2025)

China New Economy Equity Analyst, Blue Lotus Research Institute

Robert McKay

China New Economy Equity Analyst

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>ZTO's market share losses may accelerate as peers continue to cut prices. Worse yet, margins of its competitors are improving, which will sustain the war for a longer time;</li>
<li>ZTO has maintained profitability growth despite the price war, but we think this situation is unsustainable. Management will eventually need to sacrifice profitability or suffer accelerated share loss. </li>
<li>We now take a more bearish view on ZTO as we see no quick solution to the profit and market share balancing act. </li>
</ul>


ZTO's market share losses may accelerate as peers continue to cut prices. Worse yet, margins of its competitors are improving, which will sustain the war for a longer time;
ZTO has maintained profitability growth despite the price war, but we think this situation is unsustainable. Management will eventually need to sacrifice profitability or suffer accelerated share loss. 
We now take a more bearish view on ZTO as we see no quick solution to the profit and market share balancing act. 


China Logistics (Part 1): ZTO Has a Unit Economics Problem

<ul>
<li>Industry and company reports show ASP declines gained momentum in April</li>
<li>April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)</li>
<li>Our thesis: pricing is getting weaker, and this trend will soon impact margins</li>
</ul>


Industry and company reports show ASP declines gained momentum in April
April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
Our thesis: pricing is getting weaker, and this trend will soon impact margins


Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)

China

ZTO Express (Cayman) Inc. operates as an express delivery company. The Company provides express delivery service through their nationwide network, as well as other value-added logistics services. ZTO Express serves customers globally.

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ZTO Express Cayman (ZTO US)

Q424 ZTO Express Results & FY25 Guidance: Revenue Growth & Margin Better, But OpCF Shrinking; AVOID

ZTO's revenue momentum and core margin improved in Q424, but at the cost of deteriorating Cash Flow. We view the strong recent growth of "key...

Tracking Traffic

ZTO Express (ZTO US/2057 HK) - Shifting Back to Volume Growth Strategy

The company targets to achieve full year parcel volume of 40.8-42.2bn (20-24% YoY growth), which is expected to outpace the industry growth of 15%...

CMB International

China Logistics (Part 1): ZTO Has a Unit Economics Problem

ZTO faces increasing market share losses and margin pressure as competitors cut prices, leading to a more bearish outlook on the company's future...

Blue Lotus Research Institute

Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)

In April, express volume shot up 36% against easy Y/Y comps, but ASPs deepened their recent decline. We believe pricing will continue to...

Tracking Traffic

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Q424 ZTO Express Results & FY25 Guidance: Revenue Growth & Margin Better, But OpCF Shrinking; AVOID

ZTO's revenue momentum and core margin improved in Q424, but at the cost of deteriorating Cash Flow. We view the strong recent growth of "key...

Tracking Traffic

ZTO Express (ZTO US/2057 HK) - Shifting Back to Volume Growth Strategy

The company targets to achieve full year parcel volume of 40.8-42.2bn (20-24% YoY growth), which is expected to outpace the industry growth of 15%...

CMB International

Monthly Chinese Express Tracker: Fight For Parcel Volume Share Heated Up in Q424 (January 2025)

Although Chinese domestic express pricing has moderated in recent months, the main players in this sector continue to battle one another for...

Tracking Traffic

China Logistics (Part 1): ZTO Has a Unit Economics Problem

​ZTO faces increasing market share losses and margin pressure as competitors cut prices, leading to a more bearish outlook on the company's future...

Blue Lotus Research Institute

Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)

In April, express volume shot up 36% against easy Y/Y comps, but ASPs deepened their recent decline. We believe pricing will continue to...

Tracking Traffic

ZTO faces increasing market share losses and margin pressure as competitors cut prices, leading to a more bearish outlook on the company's future...