Anti-involution continues to underpin express delivery industry profits, with leaders’ share advantages becoming more prominent

Overview

This report is Morgan Stanley’s preview of 2026 first-quarter results for China’s express delivery industry. The core view is that anti-involution policies and industry price discipline continue to support profitability for the parcel delivery players. Although prices weakened seasonally after the Spring Festival, they remained above pre-anti-involution levels in July 2025, and A-share parcel delivery players’ 1Q26 ASP was also above 4Q25. Industry volume and pricing conditions improved, but the benefits were uneven: leaders such as ZTO and YTO are more attractive due to share gains, better cost structures, and higher earnings visibility; Yunda continues to lose share and faces greater long-term pressure on unit costs and margins.

Core views

The report reiterates OW on ZTO and YTO, believing both have clearer market share momentum and continued support for earnings upgrades and valuation expansion. As the second-largest express delivery company, YTO shares a similar investment logic with ZTO and offers greater earnings elasticity due to its lower profit base. STO benefits from volume growth driven by Danniao consolidation and Taobao on-demand delivery, giving it strong earnings elasticity, but cost visibility, integration risk, net debt, and cash flow still constrain valuation. Although Yunda may benefit in the short term from industry price increases and achieve YoY profit growth, continued market share losses will weaken scale effects, raise unit costs, and pressure medium- to long-term margins.

Analysis framework

The report evaluates the risk-reward of major Chinese express delivery companies by combining a 1Q26 earnings preview, industry ASP trends, market share changes, unit profit, unit cost, valuation multiples, and probability-weighted DCF scenarios. The analysis focuses on whether the anti-involution price floor will continue, the extent of unit profit decline in the post-holiday off-season, share divergence between leaders and laggards, and the impact of costs and cash flow on target prices.

Methodology notes

• Earnings forecastUnit profit and market share framework

  Measures earnings elasticity of express delivery companies using profit per parcel, ASP, parcel volume growth, and market share changes.

  The report argues that express delivery company profits depend not only on pricing but also on scale effects. Share gains can bring stronger pricing power and lower unit costs, while share losses may lead to unit cost inflation and margin compression.

• Valuation methodsProbability-weighted DCF and P/E cross-check

  Bull, base, and bear scenarios are applied to YTO, STO, and Yunda respectively, with reference to 2026e P/E multiples.

  YTO’s target price implies about 15x 2026e P/E; STO’s target price also implies about 15x 2026e P/E; Yunda’s target price implies about 9x 2026e P/E, reflecting its share loss and weaker growth.

• Industry policyAnti-involution price discipline monitoring

  Judges support for profits from regulation and industry discipline by whether post-Spring-Festival ASP holds above the price floor.

  The report points out that industry pricing remained fairly resilient after the Spring Festival; despite seasonal pullback, it stayed above pre-anti-involution levels, indicating the price floor remains effective.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ZTO Express

  Core beneficiary leader, rated OW

  Strengths

  Market share gains, a more efficient cost structure, and a positive feedback loop between pricing power and unit earnings improvement.

  Weaknesses

  Current valuation reflects market concerns about the sustainability of profit growth.

  Comparison

  Compared with YTO, STO, and Yunda, ZTO has stronger scale and efficiency advantages.

  Risks

  Renewed industry competition, loosening price discipline, and weaker-than-expected earnings upgrades.

• YTO Express Group Co Ltd (600233.SS)

  Second-largest express delivery company, rated OW

  Strengths

  Share gains, high earnings elasticity, narrowing gap with ZTO, and a relatively small profit contribution from international and aviation businesses.

  Weaknesses

  International and aviation businesses may be affected by fuel prices, and Alibaba stake reduction may cause share price volatility.

  Comparison

  Investment logic is similar to ZTO, but with higher earnings elasticity due to a smaller profit base.

  Risks

  Price competition leading to weaker-than-expected profit per parcel, short-term pressure from Alibaba stake reduction, and widening losses in international and aviation businesses.

• STO Express Co Ltd (002468.SZ)

  Low-base high-elasticity name, rated EW

  Strengths

  Danniao consolidation and Taobao on-demand delivery drive volume growth, earnings elasticity is relatively high, and it has replaced Yunda as China’s third-largest express delivery company by parcel volume.

  Weaknesses

  Insufficient cost visibility, uncertainty around Danniao integration, and tight net debt and cash flow.

  Comparison

  Higher growth elasticity than the leaders, but risk-reward is already fairly balanced.

  Risks

  New business expansion depressing margins, integration costs exceeding expectations, and continued pressure on cash flow.

• YUNDA Holding Co Ltd (002120.SZ)

  Short-term earnings beneficiary but under long-term pressure, rated UW

  Strengths

  Industry price increases and anti-involution can deliver short-term YoY earnings growth.

  Weaknesses

  Continued market share losses, weakening scale effects, possible YoY increase in unit costs, and pressure on long-term margins.

  Comparison

  Valuation is close to ZTO, YTO, and STO, but growth prospects are weaker, making risk-reward unattractive.

  Risks

  Further share decline, weaker-than-expected ASP and volume performance, and cost inflation causing margin dilution.

Key data

• 1Q26 unit profit QoQ changeRmb-0.01 to -0.02/parcelA-share parcel delivery players are expected to see a slight QoQ decline in the off-season, but still improve by about Rmb0.03/parcel YoY.
• 1Q26 net profit YoY growthYTO +43%; STO +86%; Yunda +42%; ZTO +4%ZTO’s lower YoY growth is mainly due to a high base from one-off gains in 1Q25.
• Combined market share change of ZTO and YTO+1.8 percentage points YoYBenefiting from improved industry volume mix and strategic adjustments by smaller players.
• Yunda market share change-1.6 percentage points YoYContinued share loss may weaken scale effects and push up unit costs.
• A-share parcel delivery EPS revision2025e/2026e/2027e average raised by 4%/36%/30%Mainly reflects earnings improvement from continued anti-involution.
• YTO target priceRmb26.50, raised by 23%Implies about 15x 2026e P/E.
• STO target priceRmb19.40, raised by 28%Implies about 15x 2026e P/E.
• Yunda target priceRmb5.50, unchangedImplies about 9x 2026e P/E, below the global peer average, reflecting a weaker growth outlook.
• YTO scenario valuation assumptionsWACC 10.8%, terminal growth rate 2%Based on probability-weighted DCF scenarios.
• STO scenario valuation assumptionsWACC 10.8%, terminal growth rate 2%Bull, base, and bear case weights are 15%/70%/15%, respectively.
• Yunda scenario valuation assumptionsWACC 11.3%, terminal growth rate 2%A higher weight is assigned to the bear case because ASP and volume performance may disappoint.

Impact & implications

The investment implication is that anti-involution is not an equal positive for the whole industry, but is more favorable for leaders with expanding share, stable networks, and higher cost efficiency. If price discipline continues, ZTO and YTO may benefit from both earnings upgrades and valuation expansion; STO has strong short-term growth elasticity but needs verification on post-Danniao-integration costs and cash flow; if Yunda cannot reverse its share decline, it may face long-term margin and valuation discounts even if short-term earnings grow.

Risks

• Weaker anti-involution regulation or failure of the price floor, leading to renewed industry price competition.
• A larger-than-expected decline in post-Spring-Festival off-season demand and ASP, compressing unit profit.
• Leaders’ market share gains falling short of expectations, weakening the earnings upgrade thesis.
• Unit costs rising faster than expected for share-losing companies such as Yunda, dragging on margins.
• STO’s consolidation of Danniao and expansion into new businesses such as on-demand delivery bringing cost, cash flow, and integration uncertainties.
• Widening losses in YTO’s international and aviation businesses, or further Alibaba stake reductions triggering short-term share price volatility.
• Changes in fuel prices, air freight rates, macro consumption, and e-commerce parcel demand affecting earnings.

What to watch

• Differences between actual 1Q26 profit per parcel for each company and the report’s expectations.
• Whether post-Spring-Festival ASP remains above pre-anti-involution levels and whether the price floor stays stable.
• Monthly parcel volumes and market share changes of ZTO, YTO, STO, and Yunda.
• Whether Yunda’s unit costs rise YoY as expected.
• STO’s costs, margins, net debt, and operating cash flow after integrating Danniao.
• Changes in losses from YTO’s international and aviation businesses, and the extent to which rising Southeast Asia air freight rates offset cost pressure.
• Whether subsequent EPS upgrades, target price revisions, and valuation multiple expansion continue.