ZTO - ZTO Momentum Slows In Third Quarter As Headwinds Build | Benzinga
Key Takeaways:
- ZTO earned 2.35 billion yuan in revenue in the third quarter, up year-on-year but 8.4% lower than the previous quarter
- The package delivery company said it might not meet its earlier goal for market share gains as it prioritizes maintaining profitability
By Lau Chi Hang
China’s economy may be slowing, but ZTO Express (Cayman) Ltd. (NYSE: ZTO) still managed to deliver growth in the face of such headwinds, albeit small growth. The company, one of China’s top parcel delivery firms, reported this month that its third-quarter revenue rose 1.5% year-on-year to 9.08 billion yuan ($1.27 billion), and its profit rose by an even larger 21% to 2.35 billion yuan.
Its parcel deliveries for the quarter reached 7.5 billion, up nearly 18%, though its core express service revenue increased by a far smaller 2.2%, reflecting pricing pressure in the fiercely competitive sector. Its market share rose to 22.4% for the third quarter. The results look quite impressive in general against the backdrop of stiff competition and China’s slowing economy.
ZTO already outperforms many of its rivals where it counts the most, on the bottom line. Its revenue trails giants like S.F. Holding (002352.SZ), with quarterly revenue of 64.7 billion yuan, as well as YTO (600233.SH), Yunda (002120.SZ) and STO Express(002468.SZ), all with more than 10 billion yuan. But ZTO wins in terms of profitability, posting a profit that’s 12% higher than S.F.’s 2.09 billion yuan, despite SF’s far larger revenue.
Its ability to trample its competitors on the bottom line is reflected in its enviable 29.8% gross margin in the third quarter, more than double the figures between 11% and 12% for S.F. Express, YTO and Yunda, and light years ahead of STO’s paltry 3.1%.
The company attributes its high gross margin to its ...