ZTO Delivers Solid Volume Growth Amid Margin Pressures in Q1 2025

ZTO Express kicked off 2025 with a strong operational performance, highlighted by a 19.1% year-over-year surge in parcel volume to 8.5 billion—a clear reflection of robust market demand and the company's deepening competitive moat in China’s express delivery landscape. The company reiterated its full-year volume growth guidance of 20% to 24%, underscoring management's confidence in sustained momentum.

Despite revenue increasing 9.4% to RMB10.89 billion, gross profit fell 10.4% year-over-year to RMB2.69 billion, pointing to margin compression likely driven by elevated operating costs or pricing pressures in a competitive market. Nonetheless, ZTO preserved earnings growth, with net income rising sharply by 40.9% to RMB2.04 billion, reflecting favorable tax items or non-operating income, though this was moderated when adjusted: adjusted net income rose 1.6% to RMB2.3 billion.

Cash flow generation remained healthy with RMB2.36 billion in net operating cash, an improvement from the prior-year quarter, signaling solid underlying business fundamentals and cash discipline.

Operational infrastructure continued to scale, with over 31,000 pickup/delivery outlets, 6,000 direct network partners, and a growing fleet of over 10,000 self-owned line-haul vehicles, of which more than 9,400 are high-capacity models. This positions ZTO well to absorb increasing demand while maintaining service reliability.

In summary, ZTO’s volume-driven strategy is working, even as profitability faces some pressure. The company’s ability to grow parcel volume ahead of market growth while preserving service quality and cash flow bodes well for its medium-term outlook. Focus now turns to managing costs and maintaining pricing discipline to support margin recovery in upcoming quarter.

ZTO Express Misses Q1 Expectations Despite Parcel Growth, Maintains Full-Year Guidance

ZTO Express (NYSE: ZTO) reported Q1 2025 results that missed analyst expectations, as revenue and earnings per ADS came in below consensus amid intensifying competition in China’s express delivery market.

• Adjusted EPS came in at RMB2.71 ($0.37), falling short of the RMB2.93 analyst estimate.
• Revenue rose 9.4% year-on-year to RMB10.89 billion ($1.50 billion), below the RMB11.68 billion consensus forecast.

While parcel volume surged 19.1% to 8.54 billion packages, average revenue per parcel declined 7.8%, reflecting increased volume-based incentives to defend market share in what CEO Meisong Lai described as a “white-hot” competitive landscape.

“A larger portion of parcel volume is now either low-value or loss-making for logistics providers,” Lai said, highlighting the margin pressure facing the industry.

Despite top-line pressures, adjusted net income increased 1.6% to RMB2.26 billion ($311.3 million), supported by scale efficiencies and cost control.

Key financial metrics:

• Operating cash flow: RMB2.4 billion
• Capital expenditures: RMB2 billion
• Gross profit: RMB2.69 billion, down from RMB3.00 billion a year ago
• Adjusted EBITDA: RMB3.69 billion, up 0.7% YoY

The company reiterated its full-year 2025 parcel volume guidance of 40.8–42.2 billion packages, representing 20–24% year-over-year growth.

CFO Huiping Yan emphasized financial discipline and long-term positioning, noting that ZTO still has $771.7 million in repurchase capacity under its existing $2 billion authorization, which has now been extended through June 2026.

Outlook:

Although facing near-term margin compression from aggressive pricing tactics, ZTO's continued volume expansion and sustained capital returns strategy may reassure long-term investors. However, profitability pressure and top-line softness could keep the stock range-bound until signs of margin recovery emerge.

Q4 2024 Earnings Call Highlights

• Parcel Volume (Q4 2024): RMB9.67 billion, up 11% year-over-year.
• Annual Parcel Volume (2024): RMB34 billion, growing 12.6% year-over-year.
• Adjusted Net Income (Q4 2024): RMB2.73 billion, up 23.4% year-over-year.
• Adjusted Annual Net Income (2024): RMB10.15 billion, increasing by 12.7% year-over-year.
• Total Revenue (Q4 2024): RMB12.9 billion, up 21.7% year-over-year.
• Total Revenue (2024): RMB44 billion, up 15.3% year-over-year.
• ASP Increase (Q4 2024): 10.3% or RMB0.13.
• ASP Increase (2024): 2.7% or RMB0.04.
• Total Cost of Revenue (Q4 2024): RMB9.2 billion, up 22.3% year-over-year.
• Total Cost of Revenue (2024): RMB30.6 billion, up 14.2% year-over-year.
• Gross Profit (Q4 2024): RMB3.8 billion, up 20.2% year-over-year.
• Gross Profit (2024): RMB13.7 billion, up 17.6% year-over-year.
• Gross Profit Margin (Q4 2024): 29.1%, decreased by 0.4 points.
• Gross Profit Margin (2024): 31%, increased by 0.6 points.
• Operating Cash Flow (Q4 2024): RMB2.8 billion, decreased by 28.5% year-over-year.
• Operating Cash Flow (2024): RMB11.4 billion, decreased by 14.5% year-over-year.
• Adjusted EBITDA (Q4 2024): RMB4.6 billion.
• Adjusted EBITDA (2024): RMB16.4 billion.
• Capital Expenditure (Q4 2024): RMB1.2 billion.
• Capital Expenditure (2024): RMB5.9 billion.

  Positive Points

• achieved an 11% year-over-year increase in parcel volume for Q4 2024, reaching RMB9.67 billion.
• The company reported a 23.4% year-over-year growth in adjusted net income for Q4 2024, amounting to RMB2.73 billion.
• maintained high service quality and improved end-to-end timeliness, reducing loss, damage, and complaint rates.
• The company successfully increased its annual parcel volume by 12.6% year-over-year, reaching RMB34 billion.
• plans to grow its parcel volume by 20% to 24% in 2025, aiming to exceed industry growth expectations.

Negative Points

• The express delivery industry faces downward pressure on logistics pricing due to increased lower-value parcels and intense price competition.
• Operating cash flow decreased by 28.5% for Q4 and 14.5% for the year, primarily due to a one-time refund of franchise deposits and other factors.
• The company anticipates continued intense price competition in the express delivery industry in 2025.
• faces challenges from consumption downgrades and the need to align closely with market dynamics.
• The company incurred additional costs for sorting activities conducted on behalf of franchise partners, impacting overall cost efficiency.

ZTO Express Non-GAAP EPS of $0.44 misses by $0.01, revenue of $1.77B beats by $150M

• Q4 Non-GAAP EPS of $0.44 misses by $0.01.
• Revenue of $1.77B (+18.0% Y/Y) beats by $150M.
• Based on current market and operating conditions, the company's parcel volume for 2025 is expected to be in the range of 40.8 billion to 42.2 billion, representing a 20% to 24% increase year over year.