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Investing.com - Morgan Stanley (NYSE:MS) lowered its price target on ZTO Express (NYSE:ZTO) to $23.80 from $24.60 while maintaining an Overweight rating. According to InvestingPro data, ZTO currently trades at a P/E ratio of 11.8x, significantly below the industry average, suggesting potential undervaluation.
The firm trimmed earnings forecasts by 1%, 2%, and 2% for 2025, 2026, and 2027 respectively, citing slower parcel volume growth expected in the second half of 2025.
Morgan Stanley also factored higher average selling prices amid "anti-involution" measures in the Chinese delivery market, along with other one-off items affecting the company’s outlook.
The new price target represents a 3% reduction from the previous target and implies a price-to-earnings multiple of 15x for 2025 estimates, which falls below the domestic peer average of 18x.
The firm noted its valuation now rolls forward to end-2026 from mid-2026, with bull, base, and bear case values dropping by 3%, 3%, and 4% respectively, following a 2% EBITDA reduction and lower operating cash flow due to higher working capital requirements from increased reverse logistics business.
In other recent news, ZTO Express reported its second-quarter financial results, revealing a decline in earnings compared to expectations. The company posted an adjusted net profit of RMB2.03 billion, marking a 28% year-over-year decrease. This result was 10% below BofA Securities’ estimate and 13% below consensus expectations. Additionally, ZTO Express reported adjusted earnings per ADS of RMB2.48 ($0.35), which fell short of the analyst estimate of RMB2.89. Revenue for the quarter rose by 10.3% year-over-year to RMB11.83 billion ($1.65 billion), but this also missed the consensus estimate of RMB12.28 billion. Despite these challenges, the company experienced strong parcel volume growth, which offset some margin pressure. In light of these developments, BofA Securities has raised its price target for ZTO Express from $19.00 to $22.00 while maintaining a Neutral rating. These recent updates provide investors with insights into the company’s current financial performance and market position.
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