Why Chinese Express Delivery Company ZTO Shares Are Down Today

ZTO Express (Cayman) Inc ZTO shares are trading lower by around 6% after it reported Q3 FY23 results.

Revenues rose 1.5% Y/Y to RMB9.08 billion. In USD terms, revenue stood at $1.244 billion in the quarter.

Revenue from the core express delivery business grew 2.2% Y/Y, with parcel volume up 18.1% Y/Y to 7,523 million.

KA revenue (includes delivery fees) from direct sales organizations, established to serve core express KA customers fell 51.3% Y/Y, and revenue from freight forwarding services tumbled 19.8% Y/Y in the quarter.

As of September 30, 2023, number of pickup/delivery outlets stood at 31,000 and number of direct network partners was about 6,000.

Adjusted EBITDA came in at RMB3.438 billion ($471.3 million), an increase of 14.7% Y/Y.

Adjusted earnings per American depositary share stood at RMB2.83 ($0.39), a 20.9% Y/Y.

Operating cash flow stood at RMB2.94 billion ($402.7 million), compared with RMB2.82 billion a year ago.

As of September 30, 2023, ZTO has purchased shares at an average purchase price of $25.16, including repurchase commissions.

FY23 Outlook: The company believes that the 1.5ppt annual market share gain is no longer justifiable or feasible as ZTO has principally chosen to keep out unprofitable volume given the market circumstances of price competition. 

ZTO reiterated that its parcel volume is expected to be 29.27 billion to 30.24 billion, up 20% to 24% Y/Y in FY23.

Price Action: ZTO shares are down 5.95% at $22.61 premarket on the last check Friday.