20220318-招银国际-中通快递-SW-02057.HK-Solid_4Q21_results__Expect_strong_earnings_recovery_in_2022E_8页_1mb

报告摘要

ZTO Express (2057 HK) Company Update Summary

Core Content and Key Highlights

ZTO Express (2057 HK) reported solid results for the fourth quarter of 2021 (4Q21), with a 37% YoY increase in net profit to RMB1.76bn, in line with expectations. The company is expected to achieve 18-24% YoY parcel volume growth in 2022E, driven by resilient average selling price (ASP) and strong market share. ZTO is anticipated to start generating positive free cash flow in 2022E, supported by volume growth and good capital expenditure (capex) discipline.

The company's market share in 4Q21 was 20.1%, slightly down from 20.8% in 3Q21, but still outperforming the industry average of 16%. The ASP for parcel delivery only dropped 1.3% YoY to RMB1.39/unit, but increased 12% QoQ, with the decline attributed to incentives for network partners and lower parcel weight. The unit cost decreased 3% YoY to RMB0.96/unit, primarily due to investment in high-capacity trucks (83% of self-owned trucks are 15-17 meters long). However, sorting hub costs increased 4% YoY (10% QoY) to RMB0.32/unit due to higher labor costs. As a result, unit gross margin rose 4% YoY and 30% QoQ to RMB0.35/unit.

The 1Q22E net profit is projected to double YoY to ~RMB1.06bn, which is expected to serve as the next catalyst for the stock. The company is also exploring dual primary listing options to enhance its market presence.

Earnings and Valuation

Revenue for FY20A to FY24E is forecasted to grow steadily, from RMB25,214mn to RMB47,406mn, with a 14% to 21% YoY growth in FY20A to FY22E.
Core net profit is expected to increase from RMB4,312mn in FY20A to RMB9,270mn in FY24E, with 30.3% YoY growth in FY22E and 28.7% YoY growth in FY23E.
Core EPS is projected to grow from RMB5.43 in FY20A to RMB11.10 in FY24E, with a 30.3% YoY increase in FY22E.
Consensus EPS for FY22E is RMB7.68, and the target price (TP) has been trimmed to HK$317 from HK$342, based on an unchanged target multiple of 35x. The current price is HK$196, which is 17x forward P/E, close to the trough valuation in 2018.

Key Financial Ratios

Gross margin expanded 1.9ppt YoY to 24.4% in 4Q21.
EBIT margin increased 3.3ppt YoY to 22.3%.
After tax profit margin rose 3.3ppt YoY to 19.0%.
ROE improved to 14.7% in FY24E.
P/B is expected to increase from 2.8x in FY21A to 2.0x in FY24E.
Yield is projected to grow from 1.0% in FY20A to 2.1% in FY24E.

Risk Factors

Further slowdown in online retail sales.
Volatile ASP trends.
Further increase in diesel prices.

Shareholder Structure and Performance

Meisong Lai holds 25.6% of the shares, with 76.8% of the total voting rights.
Alibaba holds 8.6% of the shares.
Others hold 65.8% of the shares.
Share performance has been -18.6% over 1-month, -15.6% over 3-months, and -16.1% over 6-months, with a 12-month price performance showing a relative gain of 3.0%.

Valuation Metrics

EV/EBITDA is projected to decrease from 17.9x in FY20A to 7.8x in FY24E.
P/E is expected to fall from 32.0x in FY20A to 14.5x in FY24E.
P/B is projected to decrease from 3.0x in FY20A to 2.0x in FY24E.

Earnings Sensitivity

Net profit in 2022E is sensitive to ASP and unit costs.
The sensitivity analysis shows that a 1.40 RMB/unit ASP and 0.49 RMB/unit line-haul transportation cost could lead to a RMB7,037mn net profit.

Financial Summary

Cash flow from operations is expected to increase from RMB4,508mn in FY20A to RMB12,717mn in FY24E.
Net capex on PP&E is projected to decrease from RMB7,237mn in FY20A to RMB7,000mn in FY24E.
Cash at the end of the year is expected to increase from RMB14,213mn in FY20A to RMB10,633mn in FY24E.

Analyst Rating

BUY (Maintain): The stock is expected to deliver a potential return of over 15% over the next 12 months.
Target Price: HK$317 (Previous: HK$342).
Current Price: HK$196.

Conclusion

ZTO Express is showing signs of profitable growth and market share expansion, supported by resilient ASP, cost efficiency, and volume growth. The company is well-positioned for a strong earnings recovery in 2022E, with the potential to generate positive free cash flow. Despite higher operating costs, the company's financial performance and valuation suggest a BUY rating with a target price of HK$317.