Bank of America Securities analyst Fan Tso has reiterated their bullish stance on ZTO stock, giving a Buy rating today.
Fan Tso has given his Buy rating due to a combination of factors including ZTO Express’s strong first quarter performance and its attractive valuation. ZTO’s adjusted net profit surpassed expectations, rising by 15.8% year-over-year and exceeding forecasts by 6%. This performance was notably driven by a higher average selling price (ASP) compared to its peers, suggesting effective pricing strategies. Additionally, ZTO’s proactive parcel revamp campaign has successfully improved unit economics, which is expected to result in a reduced decline in ASP over the coming quarters and stabilization by fiscal year 2025. The stock’s current price-to-earnings ratio for the forecasted years of 2024/2025 is deemed appealing by Tso, at 13 times earnings.
Further contributing to the positive outlook, ZTO exhibited year-over-year growth in revenue and parcel volume, although there was a slight contraction in market share. Nonetheless, operational efficiencies were evidenced by decreased unit transportation and sorting costs, which bolstered unit gross profit both year-over-year and sequentially. Beyond these cost improvements, ZTO is also focusing on optimizing its parcel network, which could lead to significant cost savings and allow the company to reduce subsidies while maintaining a higher ASP. Management’s expectations for volume growth align with industry projections, and the planned capital expenditures are manageable, all of which supports the Buy rating and the target price set by Fan Tso.
In another report released today, CMB International Securities also maintained a Buy rating on the stock with a $38.50 price target.
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ZTO Express (ZTO) Company Description:
ZTO Express (Cayman) Inc. is a China-based express delivery services company. The firm provides domestic and international express delivery as well as other value-added logistics services.
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