ZTO’s reported/core net profit was +5%/-3% in 3Q25, which is largely in-line with our expectation. ZTO revised down the parcel volume growth guidance for the full year (12.3-13.8%, vs. 14-18% in Aug). This is the second downward revision this year, which we believe is a continuous reaction to the antiinvolution campaign. In the post-results call, ZTO expected the industry parcel volume growth of ~10% YoY in 2026E. We slightly revise down our 2026E/27E earnings forecast by 2%/5%, after incorporating higher ASP but lower volume along with higher cost related to KA. Major peers’ parcel ASP saw a YoY rebound in Oct in general, and we expect the improvement to continue into early 2026. Our TP for ZTO US/2057 HK is slightly revised down to US$23.3/HK$183 (previously US$23.9/HK$187) based on an unchanged 15x target P/E for 2026E (1SD below historical average to reflect continuous slowdown of earnings growth). Maintain BUY.
Key highlights in 3Q25 results:
Core net profit -3% YoY to RMB2.39bn, after excluding the fair value gains. Revenue grew 11% YoY but gross profit dropped 11% YoY due to a unit gross profit contraction of 19% YoY (to RMB0.31/parcel). Net profit slightly increased 5% YoY to RMB2.5bn, helped largely by fair value gains and low effective tax rate of 5.9% (bolstered by one-off tax rebate). In 9M25, the core net profit dropped 10% YoY to ~RMB6.37bn, which accounted for 73% of our full-year estimate (run rate in 9M24: 74%).
Parcel volume +9.7% YoY to 9.57bn units. Market share in 3Q25 was 19.4% (-0.6ppts YoY and +0.1ppt QoQ). ZTO remained the largest player in terms of express delivery parcel volume in 3Q, followed by YTO (15.6%) and STO (13.2%).
ASP +1.7% YoY. ASP increased RMB0.02/parcel (or 1.7%) YoY in 3Q25 to RMB1.22/unit (breakdown: KA +RMB0.18, parcel weight -RMB0.02, volume incentives -RMB0.14).
Total unit cost increased 11.5% YoY to RMB0.91/parcel. Unit cost of transportation decreased RMB0.05 (or 11.5%) YoY to RMB0.34/parcel, helped by economies of scale, improved route planning and decrease in diesel prices. Unit cost of sorting hubs dropped 2% YoY to RMB0.25/parcel, helped by scale and the increase in automation level but slightly offset by opening of new facilities. Other unit cost surged RMB0.15/unit (or 97%) YoY to RMB0.30/unit, due to an increase in KA cost, which is the key reason for the increase in total unit cost.