ZTO EXPRESS(2057.HK)：UPBEAT GUIDANCE ON PROFITABLE GROWTH IN 2022E; RAISING EARNINGS FORECAST AND TP-格隆汇

机构：招银国际
研究员：Wayne Fung

Reiterate BUY. Management delivered a clear message in the post-results call that ZTO will put the focus on profitable growth, with net profit growth outpacing revenue growth in future. Most importantly, ZTO expects net profit growth in 4Q21E to reach 30% YoY while that in 2022E will potentially reach 30-35% YoY. What’s more, ZTO is confident of expanding market share going forward (3Q21: 20.8%), through continuous capex spending to capture the demand growth. We maintain our view that the profitability for the express delivery industry will continue to improve on the back of ASP recovery, while ZTO will become a long- term winner due to strong execution and cost advantage. We revise up our 2021E/22E/23E earnings by 1%/8%/5% after adjusting up our ASP assumptions that fully offset the lower volume projection. We raise our TP from HK$306 to HK$342, as we roll over our valuation base to 2022E with a new target multiple of 35x.
Earnings highlight in 3Q21. Pretax profit grew 17% YoY to RMB1.38bn, driven by 11% revenue growth YoY and 0.3ppt gross margin expansion YoY to 21.2%. Net profit slightly dropped 3% YoY to RMB1.17bn, due to the lack of tax refund (one-off in 3Q20). SG&A expense increased only 4% YoY, suggesting good cost control.
Parcel volume growth and ASP change in line with the industry in 3Q21. ZTO’s parcel volume in 3Q21 grew 23% YoY to 5.7bn units (growth rate in line with the industry average). Parcel delivery ASP dropped 7% YoY (or RMB0.09/unit) but increased 2.5% QoQ to RMB1.24/unit in 3Q21 (breakdown: [1] RMB0.04 for incentives to support network partners, and [2] RMB0.05 due to lower parcel weight). Similar to the volume, the ASP change was in line with the industry average.
Unit cost dropped 6.7% YoY in 3Q21. ZTO’s sorting hub cost dropped 2% YoY to RMB0.29/unit, driven by the continuous increase in automated sorting equipment (370 sets in 3Q21, vs 300 sets in 3Q20). Unit cost of transportation decreased 6% YoY to RMB0.5/unit, due to continuous investment in high- capacity trucks (81% of self-owned trucks were 15-17 meters long). We expect the total unit cost to drop 4% YoY in 2022E.