ZTO Express: China Delivery Adds Drones

11/01/2017 5:00 am EST

Focus: GLOBAL

David Fried

Editor, The Buyback Letter

David Fried, focuses exclusively on stocks that are undergoing significant buying back or repurchase programs. Since its start in August 2000, his portfolio has beaten the S&P 500 by more than 109%. Here's the latest new idea from The Buyback Letter.

ZTO Express Inc. (ZTO) is a leading express delivery company in China, and one of the largest express delivery companies globally, in terms of total parcel volume. Its shares outstanding have been reduced by 15.052% in the last 12 months.

The company has 75 sorting hubs and a fleet of more than 4,200 trucks to serve its network that covers more than 96% of China’s cities and counties.

In China, an average of more than 70 million packages was delivered every day in the first half of 2016. The express delivery industry has enabled a boom in e-commerce in China.

In September, ZTO Express opened a new sorting hub in Western China that will allow it to sort more than 5 million parcels per day.

This launch was part of the company’s prep work for a large surge in orders expected to happen during the 11/11 shopping festival in November – the most important day in China’s e-commerce market.  

ZTO began offering fresh produce delivery services in 2016, and recently expanded it by adding two high-speed rail links, which extends their current network to eight high-speed rail links.


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Second quarter results were (expressed in U.S. dollars): revenues $438.3 million, an increase of 30% from the same period of 2016; gross profit $165.8 million, an increase of 36%; net income $105.8 million, an increase of 68%; and basic and diluted earnings per ADS $0.15, an increase of 66%. Parcel volume in the quarter increased 37%.

The company also completed their first trial delivery using a drone in July, which the CEO said demonstrated they can shave 60% of traditional delivery time.

The drone eliminated traffic conditions, gate checks and wait times for elevators, and got the package there in 20 minutes instead of 50. He sees a big future for drones in rural areas.

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