ZTO Express Q3 Results Beat Expectations

3Q22 Operating revenue was RMB 8.94 billion, up 21.0% year-on-year; adjusted net profit was RMB 1.87 billion, up 63.1% year-on-year. The significant growth in earnings was mainly due to the increase in both volume and revenue per ticket, as well as continued cost optimization.

3Q22 industry shipment volume grew 5.2% YoY, slowing down mainly due to weak demand. 3Q22 company shipment volume grew 11.7% YoY to 6.37 billion pieces and market share increased 1.3pct YoY to 22.1%, highlighting its resilience in the industry downturn as the company maintained market share increase.

In 3Q22, the company's revenue per ticket was RMB1.36 (3Q21/2Q22: RMB1.24/1.34); cost per ticket was RMB0.98 (3Q21/2Q22: RMB0.97/0.99); operating profit per ticket was RMB0.34 (3Q21/2Q22: RMB0.24/0.32). The main reasons for the decrease in trunk transportation cost were the increase in the proportion of large-capacity trailers in the fleet and the increase in loading rate; the cost of sorting per ticket was RMB0.30 (3Q21: RMB0.29), which was mainly due to the increase in staff wages and depreciation costs. Overall, the company's operating profit margin rose 5.9pct/1.4pct YoY/QoQ to 24.3% in 3Q22; adjusted net margin rose 5.4pct/0.6pct YoY/QoQ to 20.9%.

Huatai Securities is bullish on the company's ability to maintain higher-than-industry piece volume growth by enhancing its market share; improving transportation efficiency and scale effect, further reducing cost per ticket, and achieving steady growth in margin level and earnings. Other brokerages are also bullish on the future development of ZTO Express, with a number of brokerages including Guoxin Securities, Zhongtai Securities, Guotai Junan and Haitong International giving ZTO Express the highest investment rating.