Hot stock to watch: ZTO Express (Cayman) Inc (NYSE: ZTO)

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ZTO Express (Cayman) Inc (NYSE: ZTO) stock rose over 3.6% on 16th August 2019 (As of 9:49 am GMT-4; Source: Google finance) after the company in the second quarter of FY 19 has reported 25.6% rise in the adjusted net income to RMB1.38 billion. ZTO has reported a 47 percent year-over-year rise in parcel volume to 3.1 billion. As of June 30, it had 30,000 pickup/delivery outlets across China and 4,650 direct network partners. It had 5,800 line-haul vehicles and 4,950 self-owned trucks by the end of the second quarter of 2019. Operating expenses in the company were $40.2 million, up 3 percent from a year ago. The parcel volume grew 18.8 percentage points faster than the industry average and the market share was 19.9% for the second quarter.

Moreover, the total revenue for the core express business grew by 30.2%. The 33.4% cost of goods sold increased against a 46.8% parcel volume growth indicated healthy scale leverage and effective cost management at ZTO. Gross profit grew 21.4% and income from operations grew 25.6%, as we maintain a stable and efficient corporate structure, where SG&A, excluding SBC as a percentage of revenue decreased to 5.4% compared that of 5.7% last year. Income from operations, excluding SBC grew 23.6%, and op margin rate decreased 1.3 percentage points as a result of volume increase.

Additionally, Operating cash flow was RMB1.99 billion and CapEx spending was RMB812 million, which brings year-to-date total CapEx spending to RMB1.7 billion. The annual CapEx commitment remains RMB6 billion to RMB8 billion, as the company expects cash outlay to be around RMB4 billion to RMB6 billion for the year.


Meanwhile, China’s express delivery industry benefited greatly from the rapid growth of the country’s e-commerce-driven consumer economy. New business models for consumption, sales and distribution and logistics continue to rise and quickly evolved. Together with added attention from strategic and financial investments that become more evolved, China’s express delivery businesses are facing new commercial demands and the new challenges from changing industry dynamics.

Going forward, ZTO said it expects to deliver between 11.5 billion and 11.9 billion parcels this year, representing an increase of between 35 and 40 percent from 2018.

In addition, as of this quarter, Alibaba’s volume represents 56% of the total and Pinduoduo was 20%. And compared to last year, Alibaba was at 63% and Pinduoduo was 13%.

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