ZTO Earnings: Revenue and Cost Control Stronger Than Expected; Increasing Capital Return

Narrow-moat ZTO Express' fourth-quarter revenue increased 7.6% year on year, 6% higher than our estimate, thanks to stronger-than-expected express delivery industry parcel volume growth. Operating profit grew 14% year on year and beat our estimate by 11%, as ZTO's cost control measures surpassed our expectation. However, ZTO's parcel volume market share in the quarter was 22.4%, flat compared with the third quarter, and below our estimate of 23.5%. Our USD 14.70 fair value estimate on ZTO is unchanged. We think ZTO is overvalued, as we believe price competition will eventually weigh on ZTO's profitability.