ZTO Express (Cayman) Inc’s (NYSE: ZTO) unit cost declined by 6.7% year-on-year in the third quarter, despite oil and labor inflation, according to BofA Securities.
The ZTO Express Analyst: Fan Tso upgraded the rating for ZTO Express from Neutral to Buy while raising the price target from $31 to $36.
The ZTO Express Thesis: The company is likely to generate earnings growth of 33% in fiscal 2022 and of 24% in fiscal 2023, Tso said in the upgrade note.
“It is now our base case that the government’s scrutiny over the industry price war will remain in place next year as the country heads into the twice-a-decade party congress in 2022, suggesting that the recent industry price discipline will likely hold,” the analyst wrote.
“Policy aside, we think the recent M&A between two major peers in the eComm express delivery sector could result in a more stable competitive landscape, where the top-four names would focus more on service quality to drive profit rather than cut-throat price competition to gain share,” he added.
ZTO Price Action: Shares of ZTO Express were trading 10.17% higher at $31.77 late Thursday morning.
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