FAST NEWS: ZTO Express profit falls, maintains high gross margin

The Latest: Logistics provider ZTO Express (Cayman) Inc. (ZTO.US; 2057.HK) announced Thursday its net profit fell 13% year-over-year to 1.45 billion yuan ($201 million) in the first quarter of 2024, but its non-GAAP net profit rose 15.8% to 2.22 billion yuan.

Looking Up: The company’s parcel volume grew 13.9% in the first quarter to 7.17 billion, and it expects the full-year figure to rise 15% to 18% to between 34.73 billion to 35.64 billion units.

Take Note: ZTO’s core express delivery service revenue grew 11% in the first quarter, driven by a 13.9% increase in parcel volumes. But that was partially offset by a 2.5% decrease in its average parcel unit price.

Digging Deeper: ZTO is one of the most profitable companies in China’s ultra-competitive parcel delivery business. Its gross margin last year was as high as 30.4%, which has attracted claims of exaggeration because it is far higher than the 12% to 16% for its top competitors, including S.F. Holding (002352.SZ), YTO Express (600233.SH) and STO Express (002468.SZ). The company was accused of financial fraud last year by short-seller Grizzly Research, but later said the accusations were unsubstantiated after conducting its own internal investigation. In the first quarter of 2024, its gross margin reached 30.1%, an increase of two percentage points over the same period last year, as it continued to outperform its peers.

Market Reaction: ZTO’s Hong Kong-listed shares rose on Thursday, closing up 7.2% at HK$186.1 by the midday break. The stock now trades in the middle of its 52-week range.

Translation by A. Au

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