YTO Express 1Q26 unit profit improved quarter-on-quarter, earnings beat expectations

Overview

This report is Morgan Stanley's commentary on YTO Express's 1Q26 results. The report notes that the company achieved continued quarter-on-quarter improvement in unit profit during the off-season, with earnings performance exceeding the analyst's expectations. Management or the operating team reduced some loss-making reverse logistics parcels in March 2026, which may have led to slower year-on-year parcel volume growth and a milder ASP improvement, but helped lift unit profit.

Core views

The core view is that YTO Express's earnings quality improved, with 1Q26 net profit up 61% year-on-year and unit profit rising both quarter-on-quarter and year-on-year; market share also continued to edge higher; international and aviation businesses still dragged on profit but losses narrowed. Meanwhile, free cash flow remained negative in 2025 and 1Q26, capex stayed elevated, and price competition in the express delivery industry may still cap unit profit and valuation upside.

Analysis framework

The report combines company-disclosed data, Morgan Stanley ModelWare forecasts, result tables, and valuation models for analysis, focusing on comparisons between 1Q26 and 1Q25 and 4Q25 in revenue, costs, margins, parcel volume, unit revenue, unit cost, and unit profit, and derives the target price using probability-weighted DCF valuation scenarios.

Methodology notes

• Valuation methodsProbability-weighted DCF

  10% bull-case scenario, 80% base-case scenario, 10% bear-case scenario

  The target price is derived from probability-weighted DCF valuation scenarios, with key assumptions including 10.8% WACC, 1.0x beta, and a 2% terminal growth rate.

• Earnings analysisUnit economics model

  Unit revenue, unit cost, unit profit

  The report evaluates the earnings quality of the core express delivery business through unit revenue, unit cost, and unit profit, and believes that reducing loss-making reverse logistics parcels helps improve unit profit.

Asset mapping & comparison

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

• YTO Express Group Co Ltd (600233.SS)

  Research coverage target

  Strengths

  1Q26 unit profit improved quarter-on-quarter, net profit rose sharply year-on-year, market share edged higher, and losses in the international and aviation businesses narrowed.

  Weaknesses

  Free cash flow remained negative in 2025 and 1Q26, the dividend payout ratio declined, and some businesses still dragged on profit.

  Comparison

  1Q26 market share was 16.0%, above 15.9% in 4Q25 and 15.0% in 1Q25; unit profit was Rmb0.18, above Rmb0.17 in 4Q25 and Rmb0.12 in 1Q25.

  Risks

  Escalating price competition, market share loss, rising unit costs due to capex, and wider losses in the international and aviation businesses.

• Yunda Holding Co Ltd (002120.SZ)

  Peer comparison

  Strengths

  The report mentions that Yunda's 1Q26 ASP rose 9.8% year-on-year.

  Weaknesses

  The report does not elaborate on details of Yunda's earnings quality.

  Comparison

  YTO's 1Q26 ASP fell 1.5% year-on-year, below Yunda's +9.8%; Morgan Stanley believes this may be related to YTO cutting loss-making reverse logistics parcels.

  Risks

  Changes in peers' pricing and parcel volume strategies may affect the competitive landscape of the express delivery industry.

Key data

• 1Q26 net profitRmb1,378mn, up 60.8% year-on-yearEquivalent to about 23% of Morgan Stanley's full-year forecast.
• 1Q26 unit profitRmb0.18Higher than Rmb0.17 in 4Q25 and Rmb0.12 in 1Q25.
• 1Q26 revenueRmb18,769mn, up 10.0% year-on-yearFrom the result table.
• 1Q26 gross margin11.2%, up 2.6ppt year-on-year1Q25 was 8.5%.
• 1Q26 operating margin9.1%, up 2.9ppt year-on-year1Q25 was 6.2%.
• 1Q26 parcel volume7,643mn, up 12.7% year-on-year4Q25 parcel volume was 8,560mn.
• 1Q26 market share16.0%Higher than 15.9% in 4Q25 and 15.0% in 1Q25.
• 2025 net profitRmb4.3bn, up 8% year-on-yearIn line with Morgan Stanley's estimate.
• 2025 dividendRmb0.25/share, pre-tax yield about 1%The dividend payout ratio was 20%, below 31% in 2024.
• 2025 free cash flowNegative2025 operating cash flow was Rmb7.9bn and capex was Rmb8.6bn; 1Q26 operating cash flow was Rmb1.6bn and capex was Rmb2.0bn.

Impact & implications

The report's investment implication for YTO Express is positive overall: improving unit profit and rising market share support the Overweight rating and the target price increase to Rmb26.50; however, negative free cash flow, capex pressure, and industry price competition limit further re-rating potential.

Risks

• Intensifying price competition leading to lower-than-expected unit profit.
• Further loss of market share.
• Higher capex pushing up unit costs.
• Wider losses in the international and aviation businesses.
• Continued negative free cash flow may constrain dividends and valuation flexibility.

What to watch

• Whether unit profit can continue to hold up or improve in subsequent quarters.
• Parcel volume growth and ASP trends after reducing loss-making reverse logistics parcels.
• Whether market share can continue to rise without sacrificing unit profit.
• Whether losses in the international and aviation businesses continue to narrow.
• The pace of improvement in capex, operating cash flow, and free cash flow.
• Whether industry price competition eases.