ZTO Express (Cayman) Q4 FY25 earnings call ZTO

The express delivery industry is undergoing a significant transformation, moving from a volume-driven model to one focused on high-quality development. This shift is supported by government agencies advocating against 'involution' (irrational competition) and promoting the protection of grassroots interests. ZTO has actively responded to this call, leading in maintaining a healthy industry order, which has resulted in overall pricing stabilization and recovery. The company's strategy is well-aligned with these efforts, prioritizing service quality and a balanced development approach.

ZTO remains committed to its high-quality development strategy, continuously enhancing differentiated product offerings and service capabilities. This includes optimizing its product mix, with annual retail parcel volume growing 46% year-over-year and daily retail volume approaching 10 million parcels in Q4. The company also focuses on cost reduction and operational efficiency, achieving a RMB 0.06 decrease in combined unit cost for transportation and sorting for the full year, driven by economies of scale and productivity initiatives. Network policies are being optimized to ensure fairness and transparency for partners and couriers.

The company's board approved a semi-annual cash dividend of USD 0.39 per ADS, consistent with a 40% payout ratio. Additionally, a new 24-month $1.5 billion share buyback program was authorized, effective through March 2028, following the substantial completion of the previous $2 billion program. ZTO also announced an enhanced shareholder return program, targeting an aggregate annual return ratio of no less than 50% of the previous fiscal year's adjusted income, comprising both cash dividends and share buybacks, to optimize capital allocation and deliver long-term value.

ZTO is deeply integrating AI technology across its express delivery chain to drive cost reduction and efficiency. Key applications include 3D digital twins and computer vision in 25 super sorting centers, reducing missorting rates by over 60% and lowering labor costs. An AI-powered customer service system handles over 70% of end-to-end work orders. For last-mile dispatching, AI-driven route planning and order allocation have reduced short-haul transportation costs by over 20% for large-scale outlets. The company is also leveraging large models for deep business analysis and high-precision forecasting.

The industry is expected to see a gradual deceleration of growth, with the Postal Bureau estimating 8% growth for 2026, while ZTO targets 10-13%. The competitive landscape is becoming more rational, with market share expected to concentrate among leading enterprises that prioritize service and operational efficiencies. This trend, driven by policy guidance and self-regulation, is fostering a healthier and more orderly environment, shifting competition from price-driven to quality-driven.