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ZTO’s April parcel volume market share gained 1.9ppt over C1Q20 to 21.1%. However, the same is true for all T&D companies. YUNDA, YTO and STO gained 2.4ppt, 1.2ppt and 1.5ppt, respectively. As expected, SFE lost (4.3)ppt in April over C1Q20, despite growing 88% YoY, due to price cuts and Vipshop’s outsourced orders, but without Chinese New Year and pandemic effects (Exhibit 7). Industry has become more concentrated with or without ZTO From 1Q17 to 4Q19, parcel market shares held by Others, namely companies outside of the top six (ZTO, YUNDA, YTO, BEST, STO and SFE), declined from 35% to 18% (Exhibit 8). However, ZTO was only responsible for 3.4ppt of this share decline. YUNDA, BEST, YTO and STO were responsible for 5.1, 4.6, 2.2 and 2.1ppt, respectively. SFE is the only company losing shares but its share gained sharply in C1Q20. On an YoY basis, SFE gained 2.8ppt market share in April. Further game change may require a few assumptions We put ZTO’s 2030 parcel market share target at 33% and incorporated ZTO’s LTL (Less-than-Truck-Load) business and SE Asia expansion into our DCF (Exhibit 9). We expect ZTO’s domestic LTL and SE Asia express delivery market shares to reach 2.7% and 12.3% in 2030, given LTL is a very fragmented market. Further market share gains will require the assumption of consolidation. Possible routes are: (1) Cainiao acquiring BEST and STO, leading to their share losses, (2) SFE poaching BEST franchisees, leading to its share loss; (3) Alibaba taking control of YTO, leading to its share loss. In other words, we expect ZTO to benefit from industry turmoil. But if there is no turmoil, share gain will also be small. |