FAST NEWS: ZTO Express profit rises despite lower revenue per order

The latest: Logistics provider ZTO Express (Cayman) Inc. (ZTO.US; 2057.HK) reported Wednesday its annual net profit rose 28.5% year-over-year to 8.76 billion yuan ($1.22 billion) in 2023, while its non-GAAP net profit rose 29.4% to 9 billion yuan.

Looking up: The company’s parcel volume grew 23.8% to 30.2 billion last year, fueling an 8.6% increase in its revenue to 38.42 billion yuan. It expects its parcel volume this year to rise 15% to 18% to between 34.73 billion to 35.64 billion units.

Take Note: The company’s core revenue per unit parcel declined 11.3% to just 0.16 yuan last year as competition in the express delivery industry remained intense. But the negative impact was partially offset by continued improvements in its capacity.

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%, 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 firm was attacked last March by short seller Grizzly Research, which accused ZTO of financial fraud. ZTO countered that the report lacked a basic understanding of the company’s business model, and last April it cited the results of an independent investigation to show the allegations were unsubstantiated.

Market Reaction: ZTO’s Hong Kong-listed shares jumped on Wednesday, closing up 6.5% at HK$179.70 by the midday break. The stock now trades in the middle of its 52-week range.

Translation by A. Au

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