ZTO Express 1Q26 core performance broadly met expectations, Goldman Sachs maintained its Buy rating
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ZTO Express 1Q26 core performance broadly met expectations, Goldman Sachs maintained its Buy rating
Excluding one-off items, ZTO Express's 1Q26 results were basically in line with expectations. Parcel volume, market share, KA revenue, and unit cost improvement supported Goldman Sachs's continued positive view on its industry consolidation capability.
- Adjusted net profit in 1Q26 was Rmb2.38bn, up 5.2% year over year. The reported profit growth was weaker than market expectations because of a high base from one-time other income in 1Q25.
- Parcel volume rose 13.2% year over year, 7.4 percentage points above the industry, lifting market share by 1.4 percentage points to 20.3%.
- Core express ASP increased by Rmb0.11 year over year to Rmb1.36, driven by reverse logistics and KA business growth.
- Combined transport and sorting unit costs fell 8.8% year over year, and the company expects room for another Rmb0.03 per parcel in cost reduction in FY26.
- AI adoption is accelerating: machine vision has been deployed across 25 sorting centers, mis-sorting rates have fallen by more than 60%, and intelligent customer service handles more than 70% of end-to-end work orders.
Report interpretation
Overview
This report is Goldman Sachs's company research note on ZTO Express (Cayman) Inc.'s 1Q26 earnings. The report argues that, excluding the impact of one-off items, 1Q26 results were broadly in line with expectations. Although the stock has reacted weakly in the short term, mainly due to concerns about a potential Alibaba stake reduction and distortions from a high base in reported profits, core express profitability, market share, cost optimization, and AI deployment continue to support the Buy view.
Core views
Goldman Sachs's core view is that ZTO still has a leading scale and service-quality advantage in China's express delivery industry. Anti-involution policies should help ASP recovery and reduce the share of low-priced parcels, while automation, network optimization, autonomous vehicles, and AI tools will continue to drive unit cost declines. The report maintains its view that FY26 parcel volume will grow 10%-13% year over year, and raises 2026-2027 revenue estimates by about 3% while increasing 2026-2028 adjusted net profit estimates by 0%-2%.
Analysis framework
The report analyzes 1Q26 results, pricing and cost trends, industry anti-involution policies, Alibaba-related equity uncertainty, 2Q26E and FY26E earnings forecasts, AI adoption progress, and valuation target price. Valuation uses 8x 2026E EBITDA plus a 1x logistics sector valuation premium to reflect ZTO's share gains and relatively stronger profit growth.
Methodology notes
8x 2026E EBITDA plus a 1x logistics sector valuation premium
Goldman Sachs maintained a 12-month target price of US$26/HK$203, based on 8x 2026E EBITDA and an additional 1x sector valuation premium for ZTO's scale, service quality, and profit growth advantages.
A percentile comparison of growth, financial returns, valuation multiples, and composite factors
GS Factor Profile is used to compare a stock's growth, financial returns, valuation multiples, and overall performance against the market and industry peers, providing a relative positioning reference for investment decisions.
M&A probability ranking
Goldman Sachs's disclosed M&A Rank is 3, indicating a low probability of becoming an acquisition target and typically not contributing to target price valuation.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- ZTO.US / 2057.HKcore coverage name
- Strengths
- Top-tier industry scale, 20.3% market share, leading service quality, continuous cost optimization, strong KA and reverse logistics growth, and accelerating AI deployment.
- Weaknesses
- Reported net profit is affected by a high base from one-off items, and the stock is sensitive to the risk of potential Alibaba stake reduction.
- Comparison
- Versus Chinese e-commerce and logistics peers, ZTO has stronger scale and earnings resilience; GS Factor Profile shows its financial returns are at a relatively high percentile within the industry.
- Risks
- Industry growth slower than expected, intensified competition, operational execution risks, and market sentiment pressure from potential Alibaba stake reduction.
- China express delivery and e-commerce logistics industryindustry backdrop and valuation reference
- Strengths
- Anti-involution policy enforcement is expanding, the share of low-priced parcels is declining, and ASP recovery together with better cost pass-through is improving industry profitability.
- Weaknesses
- Competition remains intense, regional enforcement may be uneven, and oil price volatility could affect near-term costs.
- Comparison
- ZTO's parcel volume growth was 7.4 percentage points above the industry, outperforming the industry average.
- Risks
- Policy enforcement may not be sustained, price competition could intensify again, and rising fuel costs may not be fully passed through.
Key data
- 1Q26 adjusted net profitRmb2.38bn, up 5.2% year over yearBelow the year-over-year growth expectations from GSe and Visible Alpha Consensus Data, mainly due to the high base from one-time other income in 1Q25.
- Parcel volume growth+13.2% yoy7.4 percentage points above the industry, driving market share gains.
- Market share20.3%, up 1.4 percentage points year over yearReflects ZTO's strengthening scale advantage in the express delivery industry.
- Core express ASPRmb1.36, up Rmb0.11 year over yearMainly driven by strong reverse logistics KA business and anti-involution policies.
- KA business revenue contribution33% of core express revenueUp from 21% in 1Q25, with KA revenue rising 92% year over year.
- Reverse logistics orders9.7mn per day in 1Q, currently above 10mn per dayPer-parcel profit contribution remains above the average level of standard e-commerce parcels.
- Transport and sorting costsCombined down 8.8% year over yearTransport cost per parcel declined by Rmb0.04 to Rmb0.37, and sorting cost per parcel fell by Rmb0.02 to Rmb0.25.
- FY26 capex targetRmb6bnThe company kept its capex target unchanged year over year.
- 2Q26E EBIT per parcelRmb0.30Goldman Sachs slightly adjusted 2Q26E EBIT per parcel to Rmb0.30.
- Target priceUS$26 / HK$203Represents the 12-month target price for ZTO ADR and 2057.HK.
Impact & implications
The report is positive for ZTO: near-term stock pressure is more likely driven by potential stake reduction concerns and one-off item distortions than by a deterioration in core operations. If anti-involution policies continue to be enforced, ASP recovery persists, and AI plus automation further reduce operating costs, ZTO could continue to expand market share and drive industry consolidation over the next few years.
Risks
- Industry growth slower than expected.
- The competitive landscape in express delivery could intensify.
- The company's operational execution risk.
- Potential Alibaba stake reduction could continue to weigh on market sentiment.
- Higher oil prices or other operating costs could weaken unit earnings improvement.
What to watch
- The sustainability of anti-involution policy enforcement in Guangdong, Zhejiang, and other provinces.
- Whether the decline in low-priced parcel share and ASP recovery continue through most of 2026.
- Whether Alibaba-related board changes and any subsequent stake changes occur after the termination of the investor rights agreement.
- Whether FY26 parcel volume can reach the 10%-13% year-over-year growth guidance.
- Whether per-parcel costs can continue to decline by Rmb0.03 in FY26 as planned.
- The rollout progress of machine vision, intelligent customer service, multi-agent architecture, and voice AI customer service at the branch level.