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

According to news in the morning of August 18, Beijing time, Zhongtong Express today released the company's unaudited financial results for the second quarter of fiscal year 2022 ended June 30. Revenue of Zhongtong Express in the second quarter was 8.6567 billion yuan ($1.2924 billion), up 18.2% from 7.3251 billion yuan in the same period last year, and net profit was 1.7587 billion yuan ($2.626 billion), according to the report. an increase of 38.2% compared with the net profit of 12.722 billion yuan in the same period last year.

According to data provided by Yahoo Finance Channel, four Wall Street analysts had expected revenue of Zhongtong Express to reach 1.16 billion yuan in the second quarter. Revenue of Zhongtong Express in the second quarter was 8.6567 billion yuan ($1.2924 billion), exceeding analysts' expectations, according to the results.

Financial points:-Zhongtong Express had revenue of 8.6567 billion yuan ($1.2924 billion) in the second quarter, up 18.2% from 7.3251 billion yuan in the same period last year.

-Zhongtong Express posted a gross profit of 2.2028 billion yuan ($328.9 million) in the second quarter, up 31.6 percent from 1.6736 billion yuan in the same period last year.

-the net profit of Zhongtong Express in the second quarter was 1.7587 billion yuan ($262.6 million), an increase of 38.2% compared with the net profit of 1.2722 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 2.892 billion yuan (about $431.8 million) in the second quarter, an increase of 36.0% compared with 2.1257 billion yuan in the same period last year.

-excluding US general accounting standards (excluding equity incentive expenses and income regarded as income from investments under the stock law), Zhongtong Express's adjusted net profit in the second quarter was 1.7587 billion yuan ($262.6 million). An increase of 38.2% compared with 1.2722 billion yuan in the same period last year

-the basic and diluted earnings of American depositary receipts per share belonging to common shareholders in the second quarter of Zhongtong Express were both 2.23 yuan ($0.33), an increase of 42.9 percent compared with 1.56 yuan in the same period last year.

-not in accordance with American general accounting standards (excluding equity incentive expenses and income regarded as income from investments under the stock law), the adjusted basic and diluted earnings of American depositary receipts per share belonging to common shareholders in the second quarter were both 2.23 yuan ($0.33), an increase of 42.9 percent compared with 1.56 yuan in the same period last year.

-the net cash provided by Zhongtong Express's operating activities in the second quarter was 3.7808 billion yuan ($564.5 million), compared with 1.9324 billion yuan in the same period last year.

Operation points:-Zhongtong Express delivered 6.203 billion parcels in the second quarter, an increase of 7.5% compared with 5.772 billion in the same period last year.

-as of June 30, 2022, the total number of receiving / delivery points of Zhongtong Express exceeded 30900.

-as of June 30, 2022, the total number of direct network partners of Zhongtong Express exceeded 5800.

-as of June 30, 2022, the number of vehicles on Zhongtong Express's own trunk line was about 11000.

-of the approximately 11000 vehicles owned by Zhongtong Express, more than 9250 trucks were high capacity models with a length of 15 to 17 meters as of June 30, 2022, compared with about 9200 as of March 31, 2022.

-as of June 30, 2022, there were about 3700 trunk routes between the sorting centers of Zhongtong Express, compared with more than 3650 as of March 31, 2022.

As of June 30, 2022, the number of sorting centers of Zhongtong Express is 98, of which 87 are operated by the company itself and 11 by the company's network partners.

Mr. Lai Meisong, founder, Chairman and CEO of Zhongtong Express Group, said, "despite repeated outbreaks and macroeconomic uncertainties in the first half of the year, Zhongtong's business volume and profits are still growing strongly. The package volume reached 6.2 billion pieces, and the market share increased by 2.0 points to 23.0%. While maintaining excellent service quality and customer satisfaction, the adjusted net profit increased by 38.2% to 1.8 billion yuan. As the first batch of express delivery enterprises to resume work and production, Zhongtong fully grasps the growth momentum and accelerates the growth of business volume by making use of its strong infrastructure and capacity advantages. Our cost reduction measures continue to achieve results, standardized operations and digital intelligence control enable us to continuously optimize the economic benefits of the entire link. "

Mr. Lai added, "although there are still challenges in the market in the short term, the characteristics of the express industry with great potential and resilience have not changed. With the normalization of epidemic prevention and control, we will continue to give full play to our core competitive advantages while paying attention to business quality and profitability. Our past achievements are due to the good link between the center and the center. in the future, we will gradually reduce the number of express distribution, accelerate terminal construction to reduce operating costs, improve services, and further enhance customer stickiness. We will continue to expand our market share leadership and improve the operational efficiency of the transshipment platform, which is essential for us to achieve sustainable profitability and growth. "

Ms. Yan Huiping, chief financial officer of Zhongtong Express Group, said, "as price competition slows, the single ticket price of our core express business has increased by 10.5%, or 13 points, compared with the same period last year. We continue to give full play to operational benefits and weaken the negative impact of rising labor costs and fuel prices. The company continues to maintain an efficient and healthy cost structure, with administrative expenses falling 0.1 points to 5.3% of revenue compared with the same period last year. Operating cash flow increased by 95.7% to 3.8 billion yuan. With a capital expenditure of $1.5 billion, we will adjust our investment plan and pace according to demand. "

Ms. Yan added, "over the years, the size of the industry has grown dramatically, but it has also experienced a long period of price decline." ZTO further reversed this trend this quarter. The growth rate of business volume is 9 points higher than that of the industry, and the growth rate of net profit of 38.2% is four times faster than that of business volume. Next, we will focus on ourselves, continue to expand market share and improve profitability, while supporting and empowering network partners to improve their profitability, which will fundamentally ensure the sustainable development of our network for many years to come. "

Financial analysis: revenue: Zhongtong Express had revenue of 8.6567 billion yuan ($1.2924 billion) in the second quarter, up 18.2% from 7.3251 billion yuan in the same period last year. Revenue from core express services rose 18.8 per cent in the second quarter from a year earlier, a combination of 7.5 per cent increase in parcel delivery and 10.5 per cent increase in unit price per package. Zhongtong Express's revenue from freight forwarding services rose 5.2 per cent in the second quarter compared with the same period a year earlier, as cross-border ecommerce demand and pricing became more normal during the post-COVID-19 recovery. Zhongtong Express's material sales revenue rose 11.3% in the second quarter from a year earlier, which mainly includes sales of thermal paper used for digital waybill printing. Other revenue of Zhongtong Express mainly comes from the financial loan business.

Revenue cost: Zhongtong Express's total revenue cost in the second quarter was 6.4539 billion yuan ($963.5 million), up 14.2% from 5.6514 billion yuan in the same period last year.

The cost of trunk transportation of Zhongtong Express in the second quarter was 3.0299 billion yuan ($452.4 million), up 9.6 percent from 2.7633 billion yuan in the same period last year. The unit transportation cost of Zhongtong Express increased by 2.0% in the second quarter compared with the same period last year. This is due to the soaring diesel price and the decrease in package volume during the re-outbreak of COVID-19, which offset the increase in the use of high-capacity tractors and the improvement of route planning, resulting in the continuous improvement of transport efficiency brought about by the increase in loading rate. Compared with the same period last year, the number of high-capacity vehicles operated by Zhongtong Express has increased by about 1100.

The operating cost of the sorting center for Zhongtong Express in the second quarter was 1.8914 billion yuan ($282.4 million), up 17.3% from 1.6127 billion yuan in the same period last year. This increase mainly includes: (1) an increase in labor-related costs of RMB 140.2 million (US $20.9 million) due to wage increases, partially offset by an increase in employee productivity driven by automation; and (II) an increase of RMB 105.5 million (US $15.8 million) in depreciation and amortization costs arising from the company's installation of automation equipment and facility construction. As of June 30, 2022, 431 sets of automated sorting equipment had been put into use, compared with 361 as of June 30, 2021.

The cost of materials sold by Zhongtong Express in the second quarter was 119.9 million yuan ($17.9 million), up 22.2% from 98.1 million yuan in the same period last year. This growth includes the cost of unifying clothes to enhance the brand image.

Other costs of Zhongtong Express in the second quarter were 1.1056 billion yuan ($165.1 million), up 21.4% from 911.1 million yuan in the same period last year. This increase mainly includes: (1) an increase of 62.8 million yuan ($9.4 million) in the cost of expanding the end business; (2) an increase of 51.8 million yuan ($7.7 million) in information technology-related costs; and (3) an increase of 44.5 million yuan ($6.6 million) in the cost of serving corporate customers.

Gross profit: the gross profit of Zhongtong Express in the second quarter was 2.2028 billion yuan ($328.9 million), an increase of 31.6% compared with 1.6736 billion yuan in the same period last year, which is the result of the increase in business volume and single ticket price, coupled with a sound cost structure. Zhongtong Express had a gross profit margin of 25.4% in the second quarter, compared with 22.8% in the same period last year.

Operating expenses: total operating expenses of Zhongtong Express were 217.3 million yuan ($32.4 million) in the second quarter, compared with 218 million yuan in the same period last year.

Sales, general affairs and management expenses of Zhongtong Express in the second quarter were 456.9 million yuan ($68.2 million), compared with 394 million yuan in the same period last year, an increase of 16.0% year-on-year, mainly due to salary and benefits growth.

Net income from other operations of Zhongtong Express was 239.6 million yuan ($35.8 million) in the second quarter, compared with 176 million yuan in the same period last year. Other operating income mainly includes: (1) 145.8 million yuan ($21.8 million) in government subsidies and tax rebates; and (2) 56.6 million yuan ($8.4 million) in value-added tax deductions.

Operating profit: Zhongtong Express made an operating profit of 1.9855 billion yuan ($296.4 million) in the second quarter, up 36.4% from 1.4557 billion yuan in the same period last year. Zhongtong Express's operating margin rose to 22.9% in the second quarter, compared with 19.9% in the same period last year.

Interest income: Zhongtong Express earned 118.5 million yuan ($17.7 million) in the second quarter, compared with 102.4 million yuan in the same period last year.

Interest expense: Zhongtong Express paid 23.1 million yuan ($3.4 million) in the second quarter, compared with 33.8 million yuan in the same period last year.

Fair value change income of financial instruments: the fair value change loss of financial instruments in the second quarter of Zhongtong Express was 13.6 million yuan ($2 million), compared with 32.3 million yuan in the same period last year, which reflects the fair value change of financial instruments (using the redemption price estimated by the selling bank based on market conditions).

Income tax expenses: Zhongtong Express paid 438.2 million yuan ($65.4 million) in income tax in the second quarter, compared with 254.9 million yuan in the same period last year. The overall income tax rate increased by 3.4 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 made a net profit of 1.7587 billion yuan ($262.6 million) in the second quarter, up 38.2% from 1.2722 billion yuan in the same period last year.

Basic and diluted earnings per share of American depositary receipts: basic and diluted earnings per American depositary receipts per share belonging to common shareholders of Zhongtong Express were both 2.23 yuan ($0.33) in the second quarter, an increase of 42.9 percent compared with 1.56 yuan in the same period last year.

Adjusted American depositary receipts per share basic and diluted earnings: not in accordance with American general accounting standards (excluding equity incentive expenses and income regarded as income from the disposal of stock law investments), the adjusted basic and diluted earnings per American depositary receipt per share belonging to common shareholders in the second quarter of Zhongtong Express were both 2.23 yuan (about $0.33). An increase of 42.9% compared with 1.56 yuan in the same period last year.

Adjusted net profit: excluding US general accounting standards (excluding equity incentive expenses and income regarded as income from investments in the stock law), Zhongtong Express's adjusted net profit in the second quarter was 1.7587 billion yuan ($262.6 million). An increase of 38.2% compared with 1.2722 billion yuan in the same period last year.

EBITDA and adjusted EBITDA: EBITDA of Zhongtong Express was 2.892 billion yuan ($431.8 million) in the second quarter, compared with 2.1257 billion yuan in the same period last year.

Excluding general US accounting principles (excluding equity incentive expenses and income deemed to be 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 2.892 billion yuan ($431.8 million) in the second quarter, compared with 2.1257 billion yuan in the same period last year.

Operating cash flow: the net cash provided by Zhongtong Express's operating activities in the second quarter was 3.7808 billion yuan ($564.5 million), compared with 1.9324 billion yuan in the same period last year.

Business outlook: based on current market conditions and current business operations, Zhongtong Express maintains its previous annual performance guidance and expects parcel delivery to reach 24.96 billion to 25.86 billion in fiscal year 2022, an increase of 12% to 16% compared with the same period last year. This expectation represents the current and preliminary views of the management of the company, which may change in the future.

Share buybacks: on November 14, 2018, Zhongtong Express announced a share buyback program that authorized the company to buy back its Class A common shares in the form of American depositary shares over the next 18 months, with a total value of up to $500 million. On March 13, 2021, the board of directors of Zhongtong Express approved the extension of the ongoing stock repurchase program to June 30, 2021. On March 31, 2021, the company's board of directors approved changes to the share buyback program, increasing the total value of shares that may be repurchased from $500 million to $1 billion and extending the validity period for two years until June 30, 2023. As of June 30, 2022, Zhongtong Express had repurchased a total of 36074242 American depositary shares at an average price of $25.21 per American depositary share (including repurchase commission).

Note: the exchange rate of RMB to US dollar in this financial report is 6.6981.

Conference call: after the announcement, the ZTO express management team will hold a conference call on August 17 at 08:30 EDT (08:30 Beijing time on August 18) to interpret the main points of the results and answer questions from investors and analysts. The number to listen to the conference call is as follows:

United States: 1,888,317-6003

Hong Kong, China: 852-5808-1995

Mainland China: 4001-206115

International: 1,412,317-6061

Password: 1962226

Before August 24, 2022, you can repeat it by dialing the following numbers:

United States: 1-877-344-7529

International: 1,412,317-0088

Password: 4858141

In addition, Zhongtong Express website http://zto.investorroom.com will broadcast the teleconference live and provide audio recordings.

Share price reaction: on the day, Zhongtong Express shares fell 32 cents, or 1.19 percent, to $26.53 in regular trading on the New York Stock Exchange. In after-hours trading as of 07:08 EDT on the 17th (07:08 Beijing time on the 18th), Zhongtong Express shares rose 97 cents, or 3.66 percent, to $27.50. In the past 25 weeks, the highest price for Zhongtong Express is $34.82 and the lowest price is $19.72.

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