On March 20th, Caixin News Agency (Reporter Hu Haoqiong) reported that the competition in the express delivery industry is fierce, and Zhongtong Express (ZTO.US/2057.HK) has further expanded its market share. At today's performance briefing, the price competition in the industry and the impact of the new express delivery regulations implemented on March 1st were the focus of attention for investors.
"From the perspective of the overall industry competition pattern, express delivery (industry development) is a 'marathon'. Enterprises that have good cost advantages and strong service efficiency will become stronger, which is an inevitable law. In the long run, the market share will become more concentrated." Lai Meisong, founder, chairman and CEO of Zhongtong Express Group, explained at the performance meeting that this year the company will pay more attention to improving service quality, personalized and diversified needs, and the strategy is to ensure the improvement of profitability and investment quality, while ensuring the stability of market share on a reasonable profit basis.
Lai Meisong further stated that the competition in express delivery prices is prolonged, but the industry landscape will gradually return to the construction of long-term competitive strength, and the share growth brought by low prices is temporary. The essence of competition in the express delivery industry is still high-quality and stable network.
As for the "new regulations on express delivery" raised by investors, Lai Meisong believes that the new regulations on on-site express delivery can accelerate and promote standardized industry management, make express delivery companies pay more attention to customer experience, and in the long run, it is beneficial for the industry to transform towards high-quality development. Zhongtong's strategy is still to do well in oneself and improve service quality.
In terms of investment return, according to Yan Huiping, CFO of Zhongtong, the company's capital expenditure in 2023 was 6.7 billion yuan, and the cash flow generated from operating activities increased by 16.4%, reaching 13.4 billion yuan. The board of directors has approved the regular dividend policy, with a cash dividend of $0.62 per share for 2023 and a dividend payout ratio of no less than 40% for 2024. In addition, the board of directors has authorized the approval of an additional $500 million on top of the existing $1.5 billion repurchase plan, and the repurchase period will be extended until June 30, 2025.
Today, the unaudited financial results for the fourth quarter and full year of 2023 released by Zhongtong Express show that in 2023, Zhongtong Express achieved a revenue of 38.419 billion yuan, a year-on-year increase of 8.6%; The adjusted net profit increased by 32.3% year-on-year to 9.006 billion yuan. The adjusted net profit in Q4 was 2.21 billion yuan, a year-on-year increase of 4.4%.
In terms of business volume, Zhongtong Express achieved an increase of 5.8 billion items, with a total package volume of 30.2 billion items for the year, a year-on-year increase of 23.8%; Market share expanded by 0.8 percentage points to 22.9%. In the fourth quarter of 2023, Zhongtong's package volume was 8.705 billion, a 32% increase from 6.593 billion in the same period of 2022.
As of December 31, 2023, Zhongtong has more than 31000 branches, 99 sorting centers, more than 6000 direct network partners, more than 3900 trunk transportation routes, and over 10000 trunk vehicles, of which more than 9200 are high capacity vehicles with a length of 15 to 17 meters.
In addition, the company expects the total number of packages for the year 2024 to be between 34.73 billion and 35.64 billion, a year-on-year increase of 15% to 18%.
"We predict that the express delivery industry will maintain a medium to high speed of development. We hope that through the implementation of a series of policies by the company, Zhongtong can break away from 'accessibility' and form differentiated competitiveness." Lai Haisong said.