Guotai Haitong: Upgrade ZTO EXPRESS-W (02057) to "buy" rating, building a shared network with franchisees.

Guotai Haitong has released a research report stating that ZTO EXPRESS-W (02057) has been given a "hold" rating with a target price of HK$195.99. ZTO Express's "Co-Building and Sharing" concept has laid a solid foundation for the stability of the franchisee network. The company's solid profitability and efficient cost control level will help it consolidate its industry-leading position. Guotai Haitong's main points are as follows: "Co-Building and Sharing" concept creates a stable franchisee network ZTO Express proposed the "Co-Building and Sharing" concept in 2010 and completed the conversion of some major franchisees to shareholder employees in 2015. ZTO is the first and only company in the Tongda system to convert major franchisees to company shareholders. The "Co-Building and Sharing" concept achieves mutual benefit, establishes trust, lays a solid foundation for network stability, and helps the company become an industry leader. Early focus on core capital investment From 2013 to the present, benefiting from early investment in sorting equipment and effective network management capabilities, ZTO Express's market share has steadily increased, and it achieved overtaking on the curve in 2016 with a market share of 14.4%. Since then, ZTO has continuously increased investment in core assets (land + factories + vehicles + sorting equipment) and maintained efficient network management level, continuously occupying the industry's top position in market share. Balanced development of "volume, cost, and profit" While pursuing business volume and market share growth, the company still pays attention to its own profit level and controls costs. After the improvement of the industry structure, the company achieved growth in business volume and single-ticket profit. Profit forecast and investment advice The bank predicts that from 2025 to 2027, ZTO Express's operating income will be 47.107/51.685/57.706 billion yuan respectively, with year-on-year growth of +6%/10%/12%; net profit attributable to shareholders will be 9.565/10.633/11.929 billion yuan respectively, with year-on-year growth of +8%/11%/12%, corresponding to EPS of 11.89/13.22/14.83 yuan. The bank cautiously selects the results of the PE valuation method, predicts a Hong Kong dollar/Renminbi exchange rate of 0.91, gives the company a target price of HK$195.99, corresponding to a 15x P/E in 2025, and gives a "hold" rating. Risk warning Price wars reemerge, business volume growth is lower than expected, significant increase in labor costs, oil price fluctuations.