Shulou(Shulou.com)11/24 Report--

According to news in the morning of November 22, Beijing time, Zhongtong Express today released the company's unaudited financial results for the third quarter of fiscal year 2022 ended September 30. According to the report, the revenue of Zhongtong Express in the third quarter was 8.9449 billion yuan ($1.2575 billion), an increase of 21.0% compared with 7.3907 billion yuan in the same period last year, and the net profit was 1.8955 billion yuan ($2.665 billion). An increase of 65.1% compared with the net profit of 11.479 billion yuan in the same period last year Basic and diluted earnings per American depositary share belonging to common shareholders were 2.39 yuan ($0.34) and 2.37 yuan ($0.33), respectively, compared with 1.43 yuan per American depositary share in the same period last year, up 67.1% and 65.7% respectively from a year earlier.

On average, four Wall Street analysts expected diluted earnings per American depositary share (ADS) of Zhongtong Express to reach 19 cents a share in the third quarter, according to data compiled by Yahoo Finance Channel. In the third quarter, adjusted diluted earnings per American depositary share classified to common shareholders were 2.34 yuan ($0.33), beating analysts' expectations, according to the results.

In addition, on average, four Wall Street analysts had expected Zhongtong Express to generate $1.11 billion in revenue in the second quarter. Revenue of Zhongtong Express in the third quarter was 8.9449 billion yuan ($1.2575 billion), exceeding analysts' expectations, according to the results.

Financial points:-revenue of Zhongtong Express in the third quarter was 8.9449 billion yuan ($1.2575 billion), an increase of 21.0% compared with 7.3907 billion yuan in the same period last year.

-Zhongtong Express posted a gross profit of 2.4444 billion yuan ($343.6 million) in the third quarter, up 55.9% from 1.5683 billion yuan in the same period last year.

-the net profit of Zhongtong Express in the third quarter was 1.8955 billion yuan (US $266.5 million), an increase of 65.1% compared with 1.1479 billion yuan in the same period last year.

-not in accordance with US general accounting principles (excluding equity incentive expenses and income regarded as income from investments under the stock law), Zhongtong Express adjusted EBITDA (defined as net profit excluding discount, amortization, interest expenses and income tax expenses) was 2.9976 billion yuan (about $421.4 million) in the third quarter, an increase of 52.3% compared with 1.9677 billion yuan in the same period last year.

-excluding US general accounting principles (excluding equity incentive expenses and income regarded as income from investments under the stock law), Zhongtong Express's adjusted net profit in the third quarter was 1.8726 billion yuan ($263.2 million), an increase of 63.1 percent compared with 1.1479 billion yuan in the same period last year.

Basic and diluted earnings per American depositary share belonging to common shareholders in the third quarter of Zhongtong Express were 2.39 yuan ($0.34) and 2.37 yuan ($0.33) respectively, compared with 1.43 yuan per American depositary share in the same period last year, an increase of 67.1% and 65.7% respectively over the same period last year.

-the adjusted basic and diluted earnings per American depositary share belonging to common shareholders in the third quarter of Zhongtong Express were 2.36 yuan ($0.33) and 2.34 yuan ($0.33) respectively, compared with 1.43 yuan per adjusted American depositary share in the same period last year, up 65.0% and 63.6% respectively from the same period last year.

-the net cash provided by Zhongtong Express's operating activities in the third quarter was 2.8233 billion yuan ($396.9 million), compared with 1.7871 billion yuan in the same period last year.

Operation points:-Zhongtong Express delivered 6.368 billion parcels in the third quarter, an increase of 11.7% compared with 5.7 billion in the same period last year.

-as of September 30, 2022, the total number of receiving / delivery points of Zhongtong Express is about 31000.

-as of September 30, 2022, the number of direct network partners of Zhongtong Express exceeded 5850.

-as of September 30, 2022, the number of trunk vehicles of Zhongtong Express is about 11000.

-of the approximately 11000 self-owned trucks, more than 9300 are high-capacity models 15 to 17 meters long, compared with more than 9250 as of June 30, 2022

-as of September 30, 2022, there were about 3750 trunk routes between the sorting centers of Zhongtong Express, compared with about 3700 as of June 30, 2022.

As of September 30, 2022, the number of sorting centers of Zhongtong Express is 97, of which 86 are operated by the company itself and 11 by the company's network partners.

Financial analysis: revenue:

Revenue of Zhongtong Express in the third quarter was 8.9449 billion yuan ($1.2575 billion), up 21.0% from 7.3907 billion yuan in the same period last year. Revenue from core express services rose 22.7 per cent in the second quarter from a year earlier, a combination of an 11.7 per cent increase in parcel delivery and a 9.9 per cent rise in single ticket prices. Revenue from freight forwarding services fell 13.7 per cent in the third quarter from a year earlier, as cross-border e-commerce demand and pricing fell due to a weak economy and COVID-19 's expected relapse. Zhongtong Express's revenue from accessories sales, mainly from thermal paper used for digital waybill printing, rose 14.3% in the third quarter. Other revenue of Zhongtong Express mainly comes from the financial loan business.

Revenue cost:

Zhongtong Express's total revenue cost in the third quarter was 6.5005 billion yuan ($913.8 million), up 11.6 percent from 5.8224 billion yuan in the same period last year.

The cost of trunk transportation of Zhongtong Express in the third quarter was 3.1019 billion yuan ($436.1 million), up 9.2% from 2.8398 billion yuan in the same period last year. The 2.2% reduction in unit transport cost is due to the increase in the use of high-capacity tractors and the improvement in route planning, resulting in a continuous increase in transport efficiency brought about by the increase in loading rate, offsetting the rise in diesel prices. Compared with the same period last year, the number of high-capacity vehicles of Zhongtong Express increased by about 850.

The operating cost of the sorting center for Zhongtong Express in the third quarter was 1.9341 billion yuan ($271.9 million), up 18.2 percent from 1.6358 billion yuan in the same period last year. The increase is mainly due to: (1) an increase of 147 million yuan ($20.7 million) in labor-related costs, this is the combined result of wage increases partially offset by improved efficiency driven by automation; and (2) depreciation and amortization costs increased by 68.8 million yuan ($9.7 million) due to the number of automatic sorting equipment installed and the increase in sites. As of September 30, 2022, 441 automated sorting equipment had been put into use, compared with 370 as of September 30, 2021.

The cost of accessories for Zhongtong Express in the third quarter was 112.8 million yuan ($15.9 million), up 22.9 percent from 91.8 million yuan in the same period last year.

Other costs of Zhongtong Express in the third quarter were 1.0679 billion yuan ($150.1 million), up 12.0% from 953.9 million yuan in the same period last year. This is mainly due to: (1) an increase of 104 million yuan ($14.6 million) in the cost of expanding terminal business; and (2) an increase of 3230 yuan ($4.5 million) in information technology-related costs.

Gross profit:

The gross profit of Zhongtong Express in the third quarter was 2.4444 billion yuan ($343.6 million), an increase of 55.9% compared with 1.5683 billion yuan in the same period last year. This is the combined result of an increase in business volume, single ticket revenue and a stable cost structure. Zhongtong Express had a gross profit margin of 27.3% in the third quarter, compared with 21.2% in the same period last year.

Operating expenses:

Total operating expenses of Zhongtong Express in the third quarter were 269.6 million yuan ($37.9 million), compared with 207.8 million yuan in the same period last year.

Sales, general affairs and management expenses of Zhongtong Express in the third quarter were 441.4 million yuan ($62.1 million), up 13.4% from 389.4 million yuan in the same period last year, mainly due to an increase in employees' salaries and benefits.

Net income from other operations of Zhongtong Express in the third quarter was 171.8 million yuan ($24.2 million), compared with 181.6 million yuan in the same period last year. Other operating net income of Zhongtong Express in the third quarter mainly includes: (1) government subsidies and tax rebates of 111.5 million yuan ($15.7 million); and (2) value-added tax deduction of 48.2 million yuan ($6.8 million).

Operating profit:

Operating profit of Zhongtong Express in the third quarter was 2.1748 billion yuan ($305.7 million), up 59.9% from 1.3605 billion yuan in the same period last year. Zhongtong Express's operating profit margin rose to 24.3% in the third quarter from 18.4% in the same period last year.

Interest income:

Zhongtong Express earned 162.4 million yuan ($22.8 million) in interest in the third quarter, compared with 91.8 million yuan in the same period last year.

Interest expense:

Zhongtong Express paid 31.6 million yuan ($4.4 million) in interest in the third quarter, compared with 52.3 million yuan in the same period last year.

Fair value change loss of financial instruments:

The fair value change loss of financial instruments in the third quarter of Zhongtong Express was 22.8 million yuan ($3.2 million), compared with 5.1 million yuan in the same period last year. This change reflects the fair value change of financial instruments (using the redemption price estimated by the selling bank based on market conditions).

Zhongtong Express earned 60.5 million yuan ($8.5 million) from the sale of equity investments and subsidiaries in the third quarter, mainly including the sale of its shares to Jinhua Zhonghui Freight forwarding Co., Ltd for 291.4 million yuan ($41 million) in cash. There was no similar sale of equity investments and subsidiaries in the same period last year.

The impairment of Zhongtong Express's equity investment in the third quarter was 26.3 million yuan ($3.7 million), mainly related to the company's Globaltime. Inc . A provision of 21.8 million yuan ($3.1 million) for impairment losses on investment (a commodity marketing and shopping guide platform in China). There was no impairment of similar equity investments in the same period last year.

Income tax expenditure:

Zhongtong Express spent 439.4 million yuan ($61.8 million) on income tax in the third quarter, compared with 229.5 million yuan in the same period last year. The overall income tax rate increased by 2.3 percentage points over the same period last year, mainly due to the increase in the proportion of tax commitments of local operators with an applicable tax rate of 25% compared with those of headquarters operators who apply a 15% preferential tax rate for high-tech enterprises.

Net profit:

Zhongtong Express posted a net profit of 1.8955 billion yuan ($266.5 million) in the third quarter, up 65.1 percent from 1.1479 billion yuan in the same period last year.

Basic and diluted earnings per American depositary share:

Basic and diluted earnings per American depositary share belonging to common shareholders in the third quarter of Zhongtong Express were 2.39 yuan ($0.34) and 2.37 yuan ($0.33), respectively, compared with 1.43 yuan per American depositary share in the same period last year, up 67.1% and 65.7% respectively from a year earlier.

Adjusted basic and diluted earnings per American depositary share:

Basic and diluted earnings per American depositary share belonging to common shareholders in the third quarter of Zhongtong Express were 2.39 yuan ($0.34) and 2.37 yuan ($0.33), respectively, compared with 1.43 yuan per American depositary share in the same period last year, up 67.1% and 65.7% respectively from a year earlier.

Adjusted net profit:

Not in accordance with US general accounting standards (excluding equity incentive expenses and income regarded as income from investment in the stock law), Zhongtong Express's adjusted net profit in the third quarter was 1.8726 billion yuan ($263.2 million). An increase of 63.1 per cent compared with 1.1479 billion yuan in the same period last year

EBITDA and adjusted EBITDA:

The EBITDA of Zhongtong Express in the third quarter was 3.0318 billion yuan ($426.2 million), compared with 1.9677 billion yuan in the same period last year.

Not in accordance with US general accounting principles (excluding equity incentive expenses and income regarded as income from investments under the stock law), Zhongtong Express's adjusted EBITDA (defined as net profit excluding discount, amortization, interest expenses and income tax expenses) was 2.9976 billion yuan ($421.4 million) in the third quarter, up 52.3 per cent from 1.9677 billion yuan in the same period last year.

Operating cash flow:

The net cash provided by Zhongtong Express's operating activities in the third quarter was 2.8233 billion yuan ($396.9 million), compared with 1.7871 billion yuan in the same period last year.

Financing cash flow:

The net cash provided by Zhongtong Express's financing activities in the third quarter was 6.3418 billion yuan ($891.5 million), compared with 2.167 billion yuan in the same period last year. In August 2022, Zhongtong Express issued $1 billion of convertible preferred notes (hereinafter referred to as "notes"). The note will mature on September 1, 2027 and will bear interest at an annual interest rate of 1.5%. Notes can be converted into American depositary shares at an initial conversion rate of 31.6296 American depositary shares for every $1000 of the principal amount of the note (equivalent to the initial conversion price of $31.62 per American depositary share).

Business Outlook:

Based on current market conditions and uncertainties related to the macroeconomic and COVID-19 epidemic, Zhongtong Express revised its previous annual outlook: parcel delivery is expected to reach between 24.3 billion and 24.74 billion in fiscal year 2022, an increase of 9 to 11 per cent year-on-year. Compared with the overall performance of the industry, Zhongtong Express is confident to achieve the goal of increasing its market share by at least 1 percentage point for the whole year. This expectation represents the current and preliminary views of the management of the company, which may change in the future.

Share buyback:

On November 14, 2018, Zhongtong Express announced a share buyback plan. Under the plan, Zhongtong Express is authorized to buy back its own Class A common shares in the form of American depositary shares within the next 18 months, with a total value of up to $500m. On March 13, 2021, the company's board of directors approved the extension of the active share repurchase program to June 30, 2022. On March 31, 2021, the Board approved changes to the share buyback program, increasing the total value of redeemable shares from $500 million to $1 billion and extending the effective time for two years until June 30, 2023. On November 17, 2022, the board of directors of Zhongtong Express approved changes to the share buyback plan, increasing the total value of redeemable shares from US $1 billion to US $1.5 billion and extending the validity period for one year until June 30, 2024. Zhongtong Express is expected to fund buybacks from the existing cash balance. As of September 30, 2022, Zhongtong Express had repurchased a total of 36074242 American depositary shares at an average repurchase price of $25.21, including repurchase commission.

Note: the exchange rate of RMB to US dollar in this financial report is 7.1135.

Share price reaction: on the same day, Zhongtong Express shares fell 38 U.S. dollars, or 1.74 percent, to close at 21.52 U.S. dollars in regular trading on the New York Stock Exchange. In after-hours trading as of 05:16 EDT on the 21st (06:16 Beijing time on the 22nd), Zhongtong Express shares rose $1.18, or 5.48 per cent, to $22.70. In the past 25 weeks, the highest price for Zhongtong Express is $32.87 and the lowest price is $16.27.

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