China’s already ultra-competitive express delivery industry got a jolt early last year when newcomer J&T Express turned up the heat by igniting a major price war to announce its arrival. But the maverick was quickly reined in by regulators, who set the industry back on a more sustainable road that is now showing up in healthier financials for most players.
ZTO Express (Cayman) Inc. (ZTO.US; 2057.HK) has led the charge back to health, leveraging growing orders and prices, as well as effective cost control, to become the sector’s most profitable company. That prowess was evident in the company’s latest results issued last week, which showed its net profit margin reached 21.2% in this year’s third quarter, head and shoulders above the 2.8% and 7.2% for peers S.F. Holding (002352.SZ) and YTO Express (6123.HK; 600233.SH), respectively.
The results show ZTO’s revenue grew by 21% year-on-year to 8.95 billion yuan ($1.25 billion) during the quarter, even as its operation costs rose by a more modest 11.6%. That helped to fuel a 55.9% surge in its gross profit to 2.44 billion yuan, and an even stronger 65.1% rise in its net profit to nearly 1.9 billion yuan. The company said that orders in the first half of the fourth quarter held steady as e-commerce sellers rolled out promotions, despite some subsequent turmoil. That turmoil was reflected in this year’s “Single’s Day” shopping extravaganza on Nov. 11, which saw most e-commerce companies fail to disclose specific sales data, leading many to speculate that most or all posted no growth or even business declines on China’s biggest shopping day of the year.