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>Non-Core items boosted Q3 earnings, but core margins plunged vs Q2</li>
<li>In a surprise move, ZTO has abandoned its aggressive pursuit of share</li>
<li>Medium term growth is likely to slow, and pressure on margins remains</li>
</ul>


Non-Core items boosted Q3 earnings, but core margins plunged vs Q2
In a surprise move, ZTO has abandoned its aggressive pursuit of share
Medium term growth is likely to slow, and pressure on margins remains


ZTO Express Q3: Margins Plunge Vs Q2 | Abandons Pursuit of Share Gains | Is There a New Strategy?

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’s revenue/ net profit in 3Q23 came in at RMB9.08bn/ RMB2.35bn, up 1.5%/21% YoY, on the back of excellent cost control that offset the ASP decline.</li><li>While the full-year parcel volume growth guidance of 20-24% YoY is maintained, the 1.5ppt market share gain target is removed as ZTO chose to avoid unprofitable volume amid the price competition.</li><li>While we continue to like ZTO’s strong execution and cost advantage, we are incrementally concerned about a potential transformation of price competition to price war. </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’s revenue/ net profit in 3Q23 came in at RMB9.08bn/ RMB2.35bn, up 1.5%/21% YoY, on the back of excellent cost control that offset the ASP decline.While the full-year parcel volume growth guidance of 20-24% YoY is maintained, the 1.5ppt market share gain target is removed as ZTO chose to avoid unprofitable volume amid the price competition.While we continue to like ZTO’s strong execution and cost advantage, we are incrementally concerned about a potential transformation of price competition to price war. 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) – Good Execution but Rising Concerns on Price Competition

<ul>
<li>Given declining prices and slowing volume growth, we anticipated lower Q3 express margins</li>
<li>The four China-listed express firms saw Op Inc margin fall from 5.3% in Q2 to 3.9% in Q3</li>
<li>SF fared better than 'sort &amp; transport' names, but its freight forwarding segment still a drag</li>
</ul>


Given declining prices and slowing volume growth, we anticipated lower Q3 express margins
The four China-listed express firms saw Op Inc margin fall from 5.3% in Q2 to 3.9% in Q3
SF fared better than 'sort &amp; transport' names, but its freight forwarding segment still a drag


The Four Listed Chinese Express Companies Suffered Significant Margin Erosion in Q323

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.</li>
<li>The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.</li>
<li>In this note, we'll talk about the latest developments, possible outcomes and implications.</li>
</ul>


PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we'll talk about the latest developments, possible outcomes and implications.


China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

<ul>
<li>In this month's Tracker, we focus on a new price war among the 'sort &amp; transport' names</li>
<li>Q3 ASPs at these express companies fell by -12% Y/Y, and volume growth softened</li>
<li>We believe margins are under increasing pressure in China's mainstream express segment</li>
</ul>


In this month's Tracker, we focus on a new price war among the 'sort &amp; transport' names
Q3 ASPs at these express companies fell by -12% Y/Y, and volume growth softened
We believe margins are under increasing pressure in China's mainstream express segment


Monthly Chinese Express Tracker | A New Price War Among China's 'Sort & Transport' Express Names

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)

ZTO Express (ZTO US) – Good Execution but Rising Concerns on Price Competition

ZTO’s revenue/ net profit in 3Q23 came in at RMB9.08bn/ RMB2.35bn, up 1.5%/21% YoY, on the back of excellent cost control that offset the ASP decline.

CMB International

The Four Listed Chinese Express Companies Suffered Significant Margin Erosion in Q323

A new price war among China's 'sort and transport' express companies drove down the group's core margins in Q3, and we expect the pain to continue...

Tracking Traffic

China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US...

Sumeet Singh

Monthly Chinese Express Tracker | A New Price War Among China's 'Sort & Transport' Express Names

In this insight we discuss a developing price war among China's 'sort and transport' express names, which likely added to margin pressures on these...

Tracking Traffic

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ZTO Express Q3: Margins Plunge Vs Q2 | Abandons Pursuit of Share Gains | Is There a New Strategy?

ZTO has long employed a strategy of market share gains it uses to offset declining unit prices. Under current depressed market conditions, it has...

Tracking Traffic

ZTO Express (ZTO US) – Good Execution but Rising Concerns on Price Competition

ZTO’s revenue/ net profit in 3Q23 came in at RMB9.08bn/ RMB2.35bn, up 1.5%/21% YoY, on the back of excellent cost control that offset the ASP decline.

CMB International

The Four Listed Chinese Express Companies Suffered Significant Margin Erosion in Q323

A new price war among China's 'sort and transport' express companies drove down the group's core margins in Q3, and we expect the pain to continue...

Tracking Traffic

China ADRs Delisting - Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US...

Sumeet Singh

Monthly Chinese Express Tracker | A New Price War Among China's 'Sort & Transport' Express Names

In this insight we discuss a developing price war among China's 'sort and transport' express names, which likely added to margin pressures on these...

Tracking Traffic