Morgan Stanley released a report, downgrading ZTO Express (ZTO.US) (02057.HK) profit forecast for the next two years by 2% and 4%, reflecting revenue pressure. The target price of ZTO Express listed in US stock market was reduced from $25.8 to $21.2. The investment rating was downgraded from "outperform" to "neutral". The bank pointed out that the downward trend of mainland Chinese consumer index (CSI China Mainland Consumer Index) continues, resulting in frequent promotions and merchant discounts. The related pressure will be transferred to delivery companies because merchants and e-commerce platforms will promote more cost-effective delivery solutions. The bank also pointed out that the price competition among third-party logistics companies is still extremely fierce. After the industry average freight fell by 4% last year, it has fallen year-on-year by 12% this year. Despite the recent change of strategy by ZTO Express from focusing on growth to focusing on profit, it is expected to cause greater market share loss in the medium term and damage its growth prospects.

The bank expects ZTO Express package volume to increase by 11% year-on-year for the second quarter and for the whole year, which is the lower limit of the market's expectations and means its market share will fall by 1.2 percentage points year-on-year. The bank believes that ZTO Express's more cautious cost control and superior service quality can ensure stable profitability. The bank also expects the unit cost to continue to improve, driving the unit gross profit to increase by 8% year-on-year, and it expects adjusted net income to increase by 19% year-on-year to RMB 10.7 billion in 2024.

The bank expects ZTO Express package volume to increase by 11% year-on-year for the second quarter and for the whole year, which is the lower limit of the market's expectations and means its market share will fall by 1.2 percentage points year-on-year. The bank believes that ZTO Express's more cautious cost control and superior service quality can ensure stable profitability. The bank also expects the unit cost to continue to improve, driving the unit gross profit to increase by 8% year-on-year, and it expects adjusted net income to increase by 19% year-on-year to RMB 10.7 billion in 2024.