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ZTO Express (Cayman) Inc ADR ZTO

Morningstar Rating
$20.31 +1.12 (5.84%)
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Company Report

We Initiate Coverage on Narrow-Moat ZTO Express With Fair Values of USD 14.70 and HKD 115.00

The network partner model-based companies in China have gained parcel volume share from direct operation-based companies, with share rising to 76% in 2022 from 66% in 2011. The six largest express delivery companies controlled around 86% of China’s parcel deliveries by volume in 2022, based on data from the companies and China’s State Post Bureau. With share already high, we think further volume share gain is limited for the network partner model-based companies.

Price vs Fair Value

ZTO is trading at a 38% premium.
Price
$20.31
Fair Value
$43.20
Uncertainty
High
1-Star Price
$38.99
5-Star Price
$2.21
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

If ZTO achieves the top end of its targeted 30%-40% market share by 2032, it implies faster-than-expected revenue growth and higher-than-expected economies of scale and profits.

Bears

A rising mix of a lower-margin non-express delivery business leads to faster deterioration of margin.

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News

Trading Information

Previous Close Price
$19.19
Day Range
$19.7020.79
52-Week Range
$15.9030.05
Bid/Ask
$20.00 / $20.58
Market Cap
$16.51 Bil
Volume/Avg
5.9 Mil / 3.4 Mil

Key Statistics

Price/Earnings (Normalized)
13.86
Price/Sales
3.19
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

ZTO Express is China’s largest express delivery company by parcel volume, with a volume share of 22.1% in 2022. It operates a network partner model where it provides line-haul transportation and sorting services, while its local network partners provide first-mile pickup and last-mile delivery services under the ZTO brand name. Headquartered in Shanghai, the company was founded in 2002 by Meisong Lai, who remains the Chairman, CEO, and its major shareholder with 77% voting rights as of June 30, 2023. ZTO’s strategic shareholder is leading China e-commerce company, Alibaba Group, with around an 11.7% interest.
Sector
Industrials
Industry
Integrated Freight & Logistics
Stock Style Box
Large Core
Total Number of Employees
24,888

Competitors

Valuation

Metric
ZTO
UPS
FDX
Price/Earnings (Normalized)
13.8616.8614.60
Price/Book Value
2.097.312.30
Price/Sales
3.191.400.71
Price/Cash Flow
9.1112.005.22
Price/Earnings
ZTO
UPS
FDX

Financial Strength

Metric
ZTO
UPS
FDX
Quick Ratio
0.920.981.22
Current Ratio
1.171.101.34
Interest Coverage
33.2911.9214.92
Quick Ratio
ZTO
UPS
FDX

Profitability

Metric
ZTO
UPS
FDX
Return on Assets (Normalized)
11.02%10.65%5.63%
Return on Equity (Normalized)
16.39%39.23%19.07%
Return on Invested Capital (Normalized)
12.43%18.27%8.15%
Return on Assets
ZTO
UPS
FDX
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Integrated Freight & Logistics Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
UPS
United Parcel Service Inc Class BKgqm$126.2 Bil
FDX
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DPSTF
DHL GroupHcgmkk$54.8 Bil
DHLGY
DHL Group ADRWykbrsl$54.8 Bil
JBHT
JB Hunt Transport Services IncFgthmy$21.0 Bil
EXPD
Expeditors International of Washington IncHjbt$17.4 Bil
CHRW
C.H. Robinson Worldwide IncNnxk$8.6 Bil
LSTR
Landstar System IncZvft$6.7 Bil
HUBG
Hub Group Inc Class AGtwpywm$2.7 Bil

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