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

According to news in the morning of March 16, Beijing time, NYSE:ZTO today released its unaudited financial results for the fourth quarter and full year of fiscal year 2022 ended December 31. According to the report, revenue of Zhongtong Express in the fourth quarter was 9.8713 billion yuan ($1.4312 billion), up 7.1% from 9.2175 billion yuan in the same period last year, and net profit was 2.1293 billion yuan ($3.087 billion). An increase of 21.8% compared with the net profit of 17.477 billion yuan in the same period last year.

On average, four Wall Street analysts had expected diluted earnings per American depositary share (ADS) of Zhongtong Express to reach 38 cents in the fourth quarter, according to data compiled by Yahoo Finance. According to the financial report, the diluted earnings per American depositary share adjusted by Zhongtong Express was 2.60 yuan ($0.37) in the fourth quarter, which did not meet analysts' expectations, not in accordance with US general accounting principles (excluding items such as equity incentive expenses).

In addition, on average, five Wall Street analysts had expected Zhongtong Express's fourth-quarter revenue to reach $1.47 billion. Zhongtong Express had revenue of 9.8713 billion yuan ($1.4312 billion) in the fourth quarter, falling short of analysts' expectations.

On average, 17 Wall Street analysts had expected diluted earnings per American depositary share of Zhongtong Express to reach $1.22 in fiscal 2022, according to data compiled by Yahoo Finance. Excluding general US accounting principles (excluding items such as equity incentive expenses), Zhongtong Express's adjusted diluted earnings per American depositary share in fiscal 2022 was Rmb8.54 ($1.23), beating analysts' expectations, according to the financial report.

In addition, 23 Wall Street analysts had on average expected Zhongtong Express to generate $5.21 billion in revenue in fiscal 2022. Zhongtong Express had revenue of 35.377 billion yuan ($5.1292 billion) in fiscal 2022, falling short of analysts' expectations, according to the financial report.

Financial highlights for the fourth quarter:

Revenue of Zhongtong Express in the fourth quarter was 9.8713 billion yuan ($1.4312 billion), an increase of 7.1% compared with 9.2175 billion yuan in the same period last year.

The gross profit of Zhongtong Express in the fourth quarter was 2.7726 billion yuan ($402 million), an increase of 23.2% compared with 2.2509 billion yuan in the same period last year.

The net profit of Zhongtong Express in the fourth quarter was 2.1293 billion yuan ($308.7 million), an increase of 21.8% compared with 1.7477 billion yuan in the same period last year.

Not in accordance with US general accounting standards (excluding items such as equity incentive expenses), Zhongtong Express's adjusted EBITDA (defined as net profit excluding discount, amortization, interest expenses and income tax expenses) was 3.3975 billion yuan ($492.6 million) in the fourth quarter, an increase of 24.0% compared with 2.7392 billion yuan in the same period last year.

Not in accordance with US general accounting standards (excluding items such as equity incentive expenses), Zhongtong Express's adjusted net profit in the fourth quarter was 2.1202 billion yuan ($307.4 million), an increase of 21.5% compared with 1.7453 billion yuan in the same period last year.

The basic and diluted earnings per American depositary share of Zhongtong Express in the fourth quarter were 2.67 yuan ($0.39) and 2.61 yuan ($0.38), respectively. In the same period last year, the basic and diluted earnings per American depositary share were 2.18 yuan, up 22.5% and 19.7% respectively over the same period last year.

Not in accordance with American general accounting standards (excluding items such as equity incentive expenses), the adjusted basic and diluted earnings per American depositary share of Zhongtong Express in the fourth quarter were 2.66 yuan ($0.39) and 2.60 yuan ($0.37), respectively, compared with 2.18 yuan per American depositary share adjusted for the same period last year. An increase of 22.0% and 19.3% respectively over the same period last year.

Net cash provided by Zhongtong Express's operating activities in the fourth quarter was 3.7698 billion yuan ($546.6 million), compared with 3.0238 billion yuan in the same period last year.

Financial points for fiscal year 2022:

The revenue of Zhongtong Express in fiscal 2022 was 35.377 billion yuan ($5.1292 billion), an increase of 16.3% compared with 30.4058 billion yuan in fiscal year 2021.

The gross profit of Zhongtong Express in fiscal year 2022 was 9.0393 billion yuan ($1.3106 billion), an increase of 37.2% compared with 6.5894 billion yuan in fiscal year 2021.

The net profit of Zhongtong Express in fiscal 2022 was 6.659 billion yuan ($965.5 million), an increase of 41.6% compared with 4.7013 billion yuan in fiscal year 2021.

Not in accordance with US general accounting principles (excluding items such as equity incentive expenses), Zhongtong Express's adjusted EBITDA (defined as net profit excluding discount, amortization, interest expenses and income tax expenses) in fiscal year 2022 was 11.2891 billion yuan (about $1.6368 billion), an increase of 36.0% compared with 8.3007 billion yuan in fiscal year 2021.

Not in accordance with US general accounting standards (excluding items such as equity incentive expenses), Zhongtong Express's adjusted net profit in fiscal year 2022 was 6.806 billion yuan ($986.8 million), an increase of 37.6% compared with 4.947 billion yuan in fiscal year 2021.

The basic and diluted earnings per American depositary share of Zhongtong Express in fiscal year 2022 were 8.41 yuan ($1.22) and 8.36 yuan ($1.21) respectively, compared with 5.80 yuan per American depositary share in the same period last year, up 45.0% and 44.1% respectively over the same period last year.

Not in accordance with American general accounting standards (excluding items such as equity incentive expenses), the adjusted basic and diluted earnings per American depositary share of Zhongtong Express in fiscal year 2022 were RMB8.59 ($1.25) and RMB8.54 ($1.23), respectively, and the adjusted basic and diluted earnings per American depositary share in fiscal year 2021 were RMB6.10. An increase of 40.8% and 40.0% respectively over the same period last year.

The net cash provided by Zhongtong Express's operating activities was 11.4793 billion yuan ($1.6643 billion) in fiscal year 2022 and 7.2202 billion yuan in fiscal year 2021.

Operational points for the fourth quarter:

The parcel delivery volume of Zhongtong Express in the fourth quarter was 6.593 billion, an increase of 3.9% compared with 6.343 billion in the same period last year.

As of December 31, 2022, the total number of receiving / delivery points of Zhongtong Express exceeded 31000.

As of December 31, 2022, the number of direct network partners of Zhongtong Express is about 5900.

As of December 31, 2022, the number of trunk vehicles of Zhongtong Express exceeded 11000, all of which were self-owned vehicles.

Of the more than 11000 self-owned trucks mentioned above, about 9700 are high-capacity models with a length of 15 to 17 meters, with more than 9300 as of September 30, 2022.

As of December 31, 2022, there were more than 3750 trunk routes between the sorting centers of Zhongtong Express, and about 3750 as of September 30, 2022.

As of December 31, 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.

Fourth quarter Financial Analysis:

Revenue from Zhongtong Express in the fourth quarter was 9.8713 billion yuan ($1.4312 billion), up 7.1% from 9.2175 billion yuan a year earlier. Revenue from the core express business increased by 8.8% compared with the same period in 2021, which is the result of a 3.9% increase in parcel volume and a 4.7% increase in parcel unit price. Revenue from freight forwarding services fell 32.8% year-on-year, as cross-border e-commerce demand and pricing gradually returned to normal during the post-novel coronavirus epidemic recovery. Revenue from accessories sales, which is mainly made up of thermal paper used for digital waybill printing, increased by 14.8%. Other revenue mainly comes from financing services and advertising services.

Zhongtong Express's total revenue cost in the fourth quarter was 7.0988 billion yuan ($1.0292 billion), up 1.9% from 6.9666 billion yuan a year earlier. Where:

-the cost of trunk transportation of Zhongtong Express in the fourth quarter was 3.3943 billion yuan ($492.1 million), up 1.3 percent from 3.3508 billion yuan in the same period last year. The trunk transport cost per package fell by 2.5%, mainly due to the increase in the use of high-capacity tractors in the company's fleet and the continued improvement in transport efficiency brought about by improved route planning, offsetting the rise in diesel prices. Compared with the same period last year, the number of self-owned and high-capacity vehicles in operation increased by about 700.

The operating cost of the sorting center for Zhongtong Express in the fourth quarter was 2.1396 billion yuan ($310.2 million), up 6.2 per cent from 2.0148 billion yuan in the same period last year. This increase mainly includes: (1) an increase in depreciation and amortization costs of automatic sorting equipment and sites by 67.7 million yuan ($9.8 million); and (2) wage increases are partially offset by increased automation benefits. labor costs increased by 28.5 million yuan ($4.1 million). As of December 31, 2022, 458 sets of automatic sorting equipment had been put into use, and as of December 31, 2021, there were 385 sets of automatic sorting equipment.

The cost of accessories for Zhongtong Express in the fourth quarter was 147.8 million yuan ($21.4 million), up 73.7 percent from 85.1 million yuan in the same period last year.

Other costs of Zhongtong Express were 1.1785 billion yuan ($170.9 million) in the fourth quarter, down 1.2% from 1.1931 billion yuan a year earlier. This decline is mainly due to delivery costs of 116.1 million yuan ($16.8 million) from service enterprise customers, offset by (1) an increase of 82 million yuan ($11.9 million) in the cost of construction at the end of the expansion, and (2) an increase of 44 million yuan ($6.4 million) in information technology-related costs.

Zhongtong Express's fourth-quarter gross profit was 2.7726 billion yuan ($402 million), up 23.2% from 2.2509 billion yuan in the same period last year, a combination of increased business volume, single ticket prices and improved cost-effectiveness. The gross profit margin of Zhongtong Express in the fourth quarter was 28.1%, compared with 24.4% in the same period last year, up from a year earlier.

Total operating expenses of Zhongtong Express in the fourth quarter were 312.7 million yuan ($45.3 million), compared with 196.9 million yuan a year earlier. Where:

-sales, general affairs and management expenses of Zhongtong Express in the fourth quarter were 560.9 million yuan ($81.3 million), an increase of 18.8 percent compared with 472.3 million yuan in the same period last year, mainly due to an increase in employee compensation and benefits.

-net income from other operations of Zhongtong Express was 248.1 million yuan ($36 million) in the fourth quarter, compared with 275.4 million yuan a year earlier. Other net operating income mainly includes: (1) VAT plus deduction of RMB 100.3 million (US $14.5 million), (2) return of American depositary share fees of RMB 59.9 million (US $8.7 million), and (3) government subsidy and tax refund of RMB 38.9 million (about US $5.6 million).

Zhongtong Express's fourth-quarter operating profit was 2.4598 billion yuan ($356.6 million), up 19.8% from 2.054 billion yuan a year earlier. Zhongtong Express's operating profit margin was 24.9% in the fourth quarter, compared with 22.3% in the same period last year, up from a year earlier.

Interest income from Zhongtong Express in the fourth quarter was 111.8 million yuan ($16.2 million), compared with 94.2 million yuan a year earlier.

Zhongtong Express paid 76.1 million yuan ($11 million) in interest in the fourth quarter, compared with 24.9 million yuan a year earlier.

Zhongtong Express earned 83.5 million yuan ($12.1 million) from changes in the fair value of financial instruments in the fourth quarter, compared with a loss of 300000 yuan in the same period last year.

Zhongtong Express earned 9.1 million yuan ($1.3 million) from the sale of equity investments and subsidiaries in the fourth quarter, compared with 2.4 million yuan in the same period last year.

Zhongtong Express spent 500.5 million yuan ($72.6 million) on income tax in the fourth quarter, compared with 371.4 million yuan in the same period last year. The overall income tax rate increased by 1.6 percentage points over the same period last year, mainly due to an increase in the proportion of tax commitments of local operators with an applicable tax rate of 25%, while headquarters operators enjoy a 15% preferential tax rate applicable to the qualification of high-tech enterprises.

Zhongtong Express's fourth-quarter net profit was 2.1293 billion yuan ($308.7 million), up 21.8% from 1.7477 billion yuan a year earlier.

Basic and diluted earnings per American depositary share of Zhongtong Express in the fourth quarter were 2.67 yuan ($0.39) and 2.61 yuan ($0.38), respectively, compared with 2.18 yuan per American depositary share in the same period last year.

Not in accordance with American general accounting standards (excluding items such as equity incentive expenses), the basic and diluted earnings per American depositary share adjusted by Zhongtong Express in fiscal year 2022 were RMB8.59 ($1.25) and RMB8.54 ($1.23), respectively, and the adjusted basic and diluted earnings per American depositary share in fiscal year 2021 were both RMB6.10.

Excluding general US accounting principles (excluding items such as equity incentive expenses), Zhongtong Express's adjusted net profit in the fourth quarter was 2.1202 billion yuan ($307.4 million), compared with 1.7453 billion yuan a year earlier.

The EBITDA of Zhongtong Express in the fourth quarter was 3.4065 billion yuan ($493.9 million), compared with 2.7416 billion yuan a year earlier.

Zhongtong Express's adjusted EBITDA was 3.3975 billion yuan ($492.6 million) in the fourth quarter, compared with 2.7392 billion yuan a year earlier.

Net cash provided by Zhongtong Express's operating activities in the fourth quarter was 3.7698 billion yuan ($546.6 million), compared with 3.0238 billion yuan in the same period last year.

Financial analysis for fiscal year 2022:

Zhongtong Express had revenue of 35.377 billion yuan ($5.1292 billion) in fiscal 2022, up 16.3% from 30.4058 billion yuan in fiscal 2021. Revenue from the core express business increased by 18.3%, which was the result of a 9.4% increase in parcel volume and a 8.1% loss per package unit price. Revenue from the freight forwarding business fell 20.7% in 2022 compared with the same period last year, as cross-border e-commerce demand and pricing gradually returned to normal during the post-novel coronavirus epidemic recovery. Revenue from accessories sales (mainly including sales of thermal paper for digital waybill printing) grew by 12.5% in 2022. Other revenue mainly comes from financing services and advertising services.

The total revenue cost of Zhongtong Express in fiscal 2022 was 26.3377 billion yuan ($3.8186 billion), an increase of 10.6% compared with 23.8165 billion yuan in fiscal year 2021, while business volume increased by 9.4% year-on-year. Where:

-the cost of trunk transportation of Zhongtong Express in fiscal year 2022 was 12.4802 billion yuan ($1.8095 billion), an increase of 8.6 percent compared with 11.4878 billion yuan in fiscal year 2021. The transportation cost of single-ticket trunk lines was 0.51 yuan, down 1.0 points from last year, mainly due to increased utilization of high-capacity vehicles and operational efficiency improvements brought about by route planning optimization partially offset the increase in diesel prices.

-the operating cost of the sorting center for Zhongtong Express in fiscal year 2022 was 7.8455 billion yuan ($1.1375 billion), an increase of 15.8% compared with 6.7746 billion yuan in fiscal year 2021. The increase is mainly due to: (1) an increase in sorting labor costs of RMB 537.9 million (US $78 million) due to an increase in the number of employees and wages; and (II) an increase of RMB 344.1 million (US $49.9 million) in depreciation and amortization costs due to the increase in the number and location of automatic sorting equipment.

The cost of accessories for Zhongtong Express in fiscal year 2022 was 463.4 million yuan ($67.2 million), up 32.5% from 349.6 million yuan in fiscal year 2021.

-other costs of Zhongtong Express in fiscal year 2022 were 4.4115 billion yuan ($639.6 million), an increase of 13.8% compared with 3.8779 billion yuan in fiscal year 2021. This is mainly due to: (1) an increase of 260.8 million yuan ($37.8 million) in the cost of expanding terminal business; and (2) an increase of 1.756 yuan ($2550) in information technology-related costs.

The gross profit of Zhongtong Express in fiscal year 2022 was 9.0393 billion yuan (US $1.3106 billion), an increase of 37.2% compared with 6.5894 billion yuan in fiscal year 2021. The gross profit margin of Zhongtong Express in fiscal year 2022 was 25.6%. The gross profit in fiscal year 2021 was 21.7%, up from the same period last year.

Total operating expenses of Zhongtong Express were 1.3028 billion yuan ($188.9 million) in fiscal year 2022 and 1.0864 billion yuan in fiscal year 2021. Where:

-sales, general affairs and management expenses of Zhongtong Express in fiscal 2022 were 2.0774 billion yuan ($301.2 million), an increase of 10.7 percent compared with 1.8759 billion yuan in fiscal year 2021. The increase was mainly due to an increase of 145.7 million yuan ($21.1 million) in salary and welfare spending.

-net income from other operations of Zhongtong Express in fiscal 2022 was 774.6 million yuan ($112.3 million), compared with 789.5 million yuan in the same period last year. Other net operating income mainly includes: (1) government subsidy and tax refund of RMB 346.1 million (US $50.2 million); (2) VAT plus deduction of RMB 273.4 million (US $39.6 million); and (3) rental income of self-owned facilities of RMB 95.2 million (US $1380).

Zhongtong Express made an operating profit of 7.7365 billion yuan ($1.1217 billion) in fiscal 2022, up 40.6 percent from 5.503 billion yuan in fiscal 2021. Zhongtong Express's operating profit margin rose to 21.9% in fiscal 2022 from 18.1% in 2021.

Zhongtong Express earned 503.7 million yuan ($73 million) in fiscal year 2022 and 363.9 million yuan in fiscal year 2021.

Interest expenses of Zhongtong Express were 190.5 million yuan ($27.6 million) in fiscal year 2022 and 126.5 million yuan in fiscal year 2021.

Zhongtong Express earned 46.2 million yuan ($6.7 million) from changes in the fair value of financial instruments in fiscal year 2022 and 52.9 million yuan in fiscal year 2021.

Zhongtong Express earned 69.6 million yuan ($10.1 million) from the sale of equity investments and subsidiaries in fiscal year 2022, mainly including the sale of shares in Jinhua Zhonghui Freight forwarding Co., Ltd for 291.4 million yuan ($42.2 million) in cash.

The impairment of Zhongtong Express's equity investment in fiscal 2022 was 26.3 million yuan ($3.8 million), mainly related to the company's Globaltime. Inc., a Chinese merchandise marketing and shopping guide platform, has set aside 21.8 million yuan ($3.2 million) for impairment losses on its investment. There was no impairment of similar equity investments last year.

Zhongtong Express posted a pre-tax exchange gain of 147.3 million yuan ($21.4 million) in fiscal 2022, mainly due to the appreciation of onshore dollar-denominated bank deposits against the yuan.

Zhongtong Express spent 1.6333 billion yuan ($236.8 million) on income tax in fiscal 2022, compared with 1.0055 billion yuan a year earlier.

Zhongtong Express posted a net profit of 6.659 billion yuan ($965.5 million) in fiscal 2022, up 41.6 percent from 4.7013 billion yuan in fiscal 2021. The net profit margin of Zhongtong Express was 18.8% in fiscal year 2022 and 15.5% in fiscal year 2021.

Basic and diluted earnings per American depositary share of Zhongtong Express in fiscal 2022 were 8.41 yuan ($1.22) and 8.36 yuan ($1.21), respectively, compared with 5.80 yuan in fiscal year 2021.

Not in accordance with American general accounting standards (excluding items such as equity incentive expenses), basic and diluted earnings per American depositary share adjusted for Zhongtong Express in fiscal year 2022 were RMB8.59 ($1.25) and RMB8.54 ($1.23), respectively, compared with RMB6.10 in fiscal year 2021.

Not in accordance with US general accounting standards (excluding items such as equity incentive expenses), Zhongtong Express's adjusted net profit was 6.806 billion yuan ($986.8 million) in fiscal 2022 and 4.947 billion yuan in fiscal year 2021.

The EBITDA of Zhongtong Express was 11.1534 billion yuan ($1.6171 billion) in fiscal year 2022 and 8.055 billion yuan in fiscal year 2021.

The adjusted EBITDA of Zhongtong Express was 11.2891 billion yuan ($1.6368 billion) in fiscal year 2022 and 8.3007 billion yuan in fiscal year 2021.

The net cash provided by the operating activities of Zhongtong Express in fiscal year 2022 was 11.4793 billion yuan ($1.6643 billion), an increase of 59.0% compared with 7.2202 billion yuan in fiscal year 2021.

The net cash flow generated by Zhongtong Express's financing activities in fiscal year 2022 was 7.0582 billion yuan (about 1.0233 billion yuan), compared with 2.904 billion yuan in fiscal year 2021. 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 an initial conversion price of $31.62 per American depositary share).

Special dividend:

The board of directors of Zhongtong Express has approved a special dividend of US $0.37 per American depositary share and per common share for 2022 to be paid to registered shareholders before the close of business on April 6, 2023. This special dividend is expected to be paid to holders of Class A common shares on April 21, 2023 and to holders of American depositary shares on April 28, 2023.

Share buyback:

Zhongtong Express announced a share buyback program on November 14, 2018. Under the plan, the company has been authorized to buy back Class A common shares in the form of American depositary shares, with a total value of up to $500 million over the next 18 months. On March 13, 2021, the board of directors of Zhongtong Express approved the extension of the ongoing share repurchase program to June 30, 2021. On March 31, 2021, the company's board of directors approved changes to the share buyback plan, increasing the total value of redeemable shares from $500 million to $1 billion and extending the validity period for two years until June 30, 2023. On November 17, 2022, the company's board of directors approved further changes to the share buyback program, increasing the total value of redeemable shares from $1 billion to $1.5 billion and extending the validity period for one year until June 30, 2024. Zhongtong Express expects the repurchase funds to come from its existing cash balance. As of December 31, 2022, the Company has purchased a total of 36560249 American depositary shares at an average purchase price of $25.20 (including repurchase commission).

Performance outlook:

Based on the current market conditions and current operating conditions, Zhongtong Express expects the package volume to be between 28.78 billion and 29.75 billion in 2023, an increase of 18% to 22% compared with the same period last year. Based on the overall market performance, Zhongtong Express is confident to achieve the target of increasing its market share by at least 1.5 percentage points for the whole year. This forecast represents the current and preliminary views of the company's management and is likely to change in the future.

Note: the exchange rate of RMB to US dollar in this financial report is 6.8972.

Stock price response:

On the same day, Zhongtong Express shares fell 33 cents, or 1.26 percent, to $25.94 in regular trading on the New York Stock Exchange. In after-hours trading as of 05:50 EDT on the 15th (05:50 Beijing time on the 16th), Zhongtong Express shares rose 41 cents, or 1.58 per cent, to $26.35. In the past 25 weeks, the highest price for Zhongtong Express is $29.79 and the lowest price is $16.27.

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