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ZTO Sees Faster Parcel Volume Growth Than China's Delivery Industry; Stock Climbs 7%

Alibaba-backed Chinese delivery network said its income doubled during the second quarter, sending its shares up intraday Thursday.

Anna Vodopyanova
    Aug 09, 2018 10:00 AM  PT
ZTO Sees Faster Parcel Volume Growth Than China's Delivery Industry; Stock Climbs 7%

The stock of ZTO Express (Cayman) Inc. (NYSE: ZTO) rose 7 percent intraday Thursday after the Alibaba-backed delivery network announced its income more than doubled in the second quarter.

The Shanghai-based company said its net income in the second three months this year soared 108 percent to $225.5 million, or 31 cents per American depositary share. Revenue was $634.4 million, a 41 percent increase from the second quarter of 2017.

In response, shares of ZTO jumped to $21.04 per share, up $1.39 before noon. 

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The stock of ZTO was trading at $21.04 per ADS, up 7 percent by noon Thursday.

(Source: Thomson Reuters Eikon)

The chairman, founder, and chief executive officer of ZTO, Meisong Lai, said in a statement Thursday that the second-quarter results are "consistent" with the firm's strategy and that he sees potential in China's delivery industry that would fuel growth in the long-term, despite fierce competition in the market today.

"Our near-term primary focus on parcel volume growth and market share expansion is predicated on generating systemic profit increase while maintaining the high quality of service and customer satisfaction," he added.

ZTO attributed its revenue gain to an increase in parcel volume, offset by a decrease in weight per parcel. During the quarter, express delivery made up 87 percent of total revenue, while the rest came from the freight forwarding service and the sale of accessories. In addition, the company has delved into new services, including financing, advertising, and cloud warehousing solutions.

Huiping Yan, the company's chief financial officer, said that ZTO outpaced the country's express delivery industry in the first six months by nearly 12 percentage points, showing a 39 percent increase in parcel volume. Yan also said the company reduced its transportation costs by 13 cents per parcel.

Costs of revenue reached $414.2 million for the quarter, a 48 percent increase from a year ago. Operating expenses were $40.6 million, a 32 percent increase.

In May, ZTO implemented a one-year share repurchase program to buy back $300 million worth of its ADSs. The company said it has confidence in its ability to generate cash and thus aims to increase shareholders' value. As of June 30, it has repurchased 15.6 million shares at the average price of $14.42 per share.

Looking ahead, the company said for the third quarter it expects revenue increase in the range of 35 to 38 percent from the third quarter of 2017.

The logistics network has been supported by Chinese e-commerce giant, Alibaba Group Holding Ltd. (NYSE: BABA). As of May, Alibaba owned a 10 percent stake in ZTO. In return, ZTO recently invested in the giant's Last-Mile Delivery Network, Cainiao Post.


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