ZTO EXPRESS(2057.HK)：2Q24 CORE EARNINGS +10% WITH STABLE UNIT MARGIN-格隆汇

机构：招银国际
研究员：Wayne Fung

ZTO Express (ZTO) continued its strategic focus on profitable growth in 2Q24. Core net profit in 2Q24 grew 10% YoY to RMB2.74bn, which is largely in line with our expectation. Unit gross margin was largely stable YoY at RMB0.43/parcel in 2Q24. ZTO maintains the 15-18% parcel volume growth target in 2024E (same as previous guidance). It has declared an interim dividend of US$0.35/ADR, implying a 40% payout ratio. With capex to gradually reduce going forward ( Key highlights in 2Q24 results:
Core net profit grew 10% YoY. Reported net income in 2Q24 increased 3% YoY to RMB2.6bn, due to an impairment of RMB194mn (investment in Zhejiang Yizhan Network, a subsidiary of Cainiao Smart Logistics). Excluding the one-off items, the adjusted net profit grew 10% YoY to RMB2.74bn. The earnings growth was driven by (1) 10% YoY revenue growth, (2) a stable gross margin, and (3) an 82% YoY increase in net finance income.
Parcel volume +10% YoY to 8.45bn units. Market share in 2Q24 dropped 3.9ppt YoY to 19.6%, as ZTO focused on profitable parcel volume growth.
Parcel delivery ASP increased YoY, the only one among major players. ASP in 2Q24 increased 0.3% YoY to RMB1.24/unit (breakdown: reverse parcels +RMB0.06, parcel weight -RMB0.02, volume incentives -RMB0.04), much better than other players such as YTO (-4%), STO (-10%) and Yunda (-16%) that reported declines in ASP.
Unit cost +0.7% YoY to RMB0.82/parcel. Unit cost of transportation decreased RMB0.03 (or -7% YoY) to RMB0.39/unit, helped by economies of scale and improved load rate. Unit cost of sorting hubs increased 5% YoY to RMB0.26/unit, as the increase in D&A expense on new equipment offset the standardization in operating procedures and an increase in automation level.
Major risk factors: (1) a prolonged price war; (2) a slowdown in online retail sales; and (3) increases in fuel costs.