Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Thematic (Sector/Industry)

<ul>
<li>Combined January-February express industry parcel volume was up just 4.6% Y/Y, and ASPs were down -1.8% Y/Y</li>
<li>Listed express companies' parcel volume and government-reported online tangible goods sales in the first two months of 2023 also both up a modest ~5% Y/Y</li>
<li>In a year when one express player hopes to list its shares, it's unclear who will be willing to concede market share. We expect price competition to intensify in 2023.</li>
</ul>


Combined January-February express industry parcel volume was up just 4.6% Y/Y, and ASPs were down -1.8% Y/Y
Listed express companies' parcel volume and government-reported online tangible goods sales in the first two months of 2023 also both up a modest ~5% Y/Y
In a year when one express player hopes to list its shares, it's unclear who will be willing to concede market share. We expect price competition to intensify in 2023.


TRACKING TRAFFIC: Chinese Express / No Signs of a Sharp Recovery in Jan-Feb Data

China/Asia TMT

Shawn Yang

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

Equity Bottom-Up

<ul>
<li>ZTO guided at least 1.5ppt market share gain in 2023, which exceeds our previous expectation. </li>
<li>ZTO, leveraging its highest market share, is the most likely to expand its own end-to-end ecosystem, which leads to improvement in operating efficiency, increase of doorstep delivery, and pricing power.</li>
<li>Maintain BUY and TP due to share gain, efficiency improvement, and early-mover advantage in expanding ecosystem. Our TP implies 23x P/2023E.</li>
</ul>


ZTO guided at least 1.5ppt market share gain in 2023, which exceeds our previous expectation. 
ZTO, leveraging its highest market share, is the most likely to expand its own end-to-end ecosystem, which leads to improvement in operating efficiency, increase of doorstep delivery, and pricing power.
Maintain BUY and TP due to share gain, efficiency improvement, and early-mover advantage in expanding ecosystem. Our TP implies 23x P/2023E.


[ZTO Express (ZTO US) Earnings Review]: Striding Towards Ecosystem Development

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 managed to deliver net profit growth of 25% YoY in 4Q22 amid the tough macro environment, which showed strong resilience.</li><li>This took the full year net profit to RMB6.8bn (+43% YoY). Meanwhile, ZTO achieved positive free cash flow in 2022, the first time since 2018.</li><li>Looking ahead, ZTO is confident of achieving 18-22% parcel volume growth, which will translate into 1.5ppt YoY increase in market share. </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 managed to deliver net profit growth of 25% YoY in 4Q22 amid the tough macro environment, which showed strong resilience.This took the full year net profit to RMB6.8bn (+43% YoY). Meanwhile, ZTO achieved positive free cash flow in 2022, the first time since 2018.Looking ahead, ZTO is confident of achieving 18-22% parcel volume growth, which will translate into 1.5ppt YoY increase in market share. 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) – Clear Guidance on Volume and Market Share Target

<ul>
<li>
<a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US)</a> met consensus Q422 EPS estimate despite a miss on Revenue</li>
<li>Management expects to exceed industry volume growth (around +10%) in 2023</li>
<li>Likely obstacles to a sharp earnings recovery are: ASP momentum, "new-old" competition, and a lack of demonstrated cost control</li>
</ul>



ZTO Express (ZTO US) met consensus Q422 EPS estimate despite a miss on Revenue
Management expects to exceed industry volume growth (around +10%) in 2023
Likely obstacles to a sharp earnings recovery are: ASP momentum, "new-old" competition, and a lack of demonstrated cost control


ZTO Express Q4/2022 Results & Guidance:  Moderate Growth in '23, but Also Obstacles

<ul>
<li>PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from delivery service in Japan (+)</li>
<li>ZTO/PDD: Logistics companies increased parcel prices in Yiwu City (+/-)</li>
<li>BILI:BILI hold content creator seminar to discuss video metrics (+)</li>
</ul>


PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from delivery service in Japan (+)
ZTO/PDD: Logistics companies increased parcel prices in Yiwu City (+/-)
BILI:BILI hold content creator seminar to discuss video metrics (+)


China/Asia TMT Update(Mar.14): PDD/CPNG/BILI/ZTO - Logistics Companies Increased Prices;

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)

TRACKING TRAFFIC: Chinese Express / No Signs of a Sharp Recovery in Jan-Feb Data

So far in 2023, parcel volume has recovered only moderately. We believe the industry may again see price deterioration after a brief respite in 2022.

Tracking Traffic

[ZTO Express (ZTO US) Earnings Review]: Striding Towards Ecosystem Development

ZTO is the most likely to expand its own end-to-end ecosystem, which leads to improvement in operating efficiency, increase of doorstep delivery,...

Blue Lotus Research Institute

ZTO Express Q4/2022 Results & Guidance: Moderate Growth in '23, but Also Obstacles

ZTO guides strong volume growth and potentially better unit economics in '23, but we expect price pressure to return, and the company needs to rein...

Daniel Hellberg

China/Asia TMT Update(Mar.14): PDD/CPNG/BILI/ZTO - Logistics Companies Increased Prices;

PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from Japan (+)l ZTO/PDD: Logistics companies increased prices (+/-)l...

Blue Lotus Research Institute

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