FAST NEWS: ZTO Express’ market share falls, even as parcel volume grows

The Latest: Logistics provider ZTO Express (Cayman) Inc. (ZTO.US; 2057.HK) reported Tuesday its net profit rose 3.3% year-over-year to 2.6 billion yuan ($366 million) in the second quarter, while its non-GAAP net profit increased 10.9% to 2.8 billion yuan.

Looking Up: The company’s parcel volume grew 10.1% in the second quarter to 8.54 billion units year-on-year, and it expects the full-year figure to rise 15% to 18%, to between 34.73 billion units and 35.64 billion units.

Take Note: Due to intense competition, the company’s market share declined by 2 percentage points during the quarter year-on-year to 19.6%.

Digging Deeper: ZTO is one of the most profitable companies in China’s ultra-competitive parcel delivery business. The company’s gross margin last year was as high as 30.4%, which has attracted claims of exaggeration because it is far higher than its top competitors, including S.F. Holding (002352.SZ), YTO Express (600233.SH) and STO Express (002468.SZ). It 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 half of this year, its gross margin rose even further to 32%, an increase of 0.9 percentage points over the same period last year.

Market Reaction: ZTO’s Hong Kong-listed shares rose on Wednesday, closing up 2.6% at HK$162.8 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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