ZTO Express: Thriving in Q3 2024 Amidst Consumption Mix-shift

ZTO Express (Cayman) Inc. (NYSE: ZTO and SEHK: 2057), a leading and fast-growing express delivery company in China, reported robust financial results for the third quarter ended September 30, 2024, demonstrating its ability to navigate market shifts and maintain strong performance. The company grew parcel volume by 15.9% year over year while maintaining high quality of service and customer satisfaction. Adjusted net income increased 2.0% to reach RMB2,387.3 million, reflecting ZTO's strategic focus on improving volume mix and optimizing operations.

ZTO's strategic focus on improving volume mix significantly contributed to its strong Q3 2024 performance. By systematically enhancing cooperations with various e-commerce platforms for reverse logistics, remote area delivery, and premium services, ZTO increased its retail volume by over 40% year-over-year. This strategic shift in volume mix generated positive contributions to both revenue and operating margin, as evidenced by a 17.6% increase in revenues and a 23.2% improvement in gross profit compared to the same period in 2023. Additionally, ZTO's parcel volume grew by 15.9% year-over-year, reaching 8.72 billion, further demonstrating the success of its strategic focus on volume mix.



ZTO Express' expansion of its network and infrastructure played a pivotal role in driving its Q3 2024 results. The company increased its parcel volume by 15.9% year over year, reaching 8.72 billion, while maintaining high quality of service and customer satisfaction. This growth was supported by a significant increase in the number of pickup/delivery outlets, direct network partners, and self-owned line-haul vehicles. Notably, the number of self-owned trucks increased to over 10,000, with over 9,700 being high capacity 15 to 17-meter-long models, indicating a focus on efficiency and capacity. Additionally, the number of line-haul routes between sorting hubs grew to over 3,900, and the number of sorting hubs reached 95. These investments in network and infrastructure expansion allowed ZTO Express to handle increased parcel volume, improve service quality, and drive revenue growth of 17.6% year over year.



ZTO Express' partnerships with various e-commerce platforms also played a significant role in its Q3 2024 performance. The company's retail volume surged by over 40% year-over-year, driven by improved cooperations with e-commerce platforms for reverse logistics, remote area delivery, and premium services. These partnerships not only expanded ZTO's customer base but also enhanced its volume mix, contributing positively to both revenue and operating margin. As a result, ZTO maintained high-quality services and customer satisfaction while achieving 8.72 billion in parcel volume and 2.39 billion in adjusted net income during the quarter.



ZTO Express' cost optimization and operational efficiency initiatives also contributed to its strong Q3 2024 financials. Gross profit surged 23.2% to RMB3,334.8 million, driven by revenue growth and cost productivity gains. The company's gross margin rate improved to 31.2% from 29.8% in the year-ago period, indicating enhanced operational efficiency. Total operating expenses, however, increased to RMB493.0 million (US$70.3 million) from RMB282.8 million in the same period last year, reflecting the company's strategic investments in network expansion and service improvements. Despite this, ZTO's earnings growth demonstrates the effectiveness of its cost management strategies in driving profitability amidst increasing expenses.

In conclusion, ZTO Express' strong Q3 2024 performance was driven by a combination of strategic initiatives, including a focus on improving volume mix, expanding its network and infrastructure, and optimizing cost management. The company's ability to adapt to market shifts and maintain high-quality service has positioned it well for continued growth and success in the express delivery sector. As ZTO continues to invest in its network and partnerships, it is poised to capitalize on emerging opportunities in the rapidly evolving e-commerce landscape.