ZTO Express (Cayman) Inc (ZTO) 2022 Q1 法說會逐字稿

Good day, and welcome to the ZTO Express First Quarter Financial Results Conference Call. (Operator Instructions) Please note this event is being recorded.

美好的一天，歡迎參加中通快遞第一季度財務業績電話會議。 （操作員說明）請注意正在記錄此事件。

I would now like to turn the conference over to Huiping Yan, Chief Financial Officer. Please go ahead.

我現在想將會議轉交給首席財務官閆慧萍。請繼續。

Thank you, operator, and hello, everyone. Thank you for joining us today. The company's results and an Investor Relations presentation were released earlier today and are available on the company's website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer; and I, Huiping Yan, Chief Financial Officer. Mr. Lai will go through his prepared remarks, highlighting business operations, and I will then go through the financials and guidance. We will both be available to answer your questions during the Q&A session that follows.

謝謝接線員，大家好。感謝您今天加入我們。該公司的業績和投資者關係報告於今天早些時候發布，可在公司網站 ir.zto.com 上查閱。中通今天接電話的是董事長兼首席執行官賴梅松先生；我，首席財務官閆慧萍。賴先生將介紹他準備好的講話，重點介紹業務運營，然後我將介紹財務和指導。在隨後的問答環節中，我們都可以回答您的問題。

As a reminder, this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current view and expectations of the market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, and may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

提醒一下，本次電話會議可能包含根據 1995 年《私人證券訴訟改革法案》的安全港條款作出的前瞻性陳述。此類陳述基於管理層對市場和經營狀況的當前觀點和預期，並與涉及的事件有關已知或未知的風險、不確定性和其他因素，所有這些都難以預測，其中許多超出了公司的控制範圍，並可能導致公司的實際結果、業績或成就與前瞻性陳述中的存在重大差異。

Further information regarding these and other risks, uncertainties and factors are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law.

有關這些和其他風險、不確定性和因素的更多信息包含在公司提交給美國證券交易委員會的文件中。除非法律要求，否則公司不承擔因新信息、未來事件或其他原因更新任何前瞻性陳述的義務。

It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will go through his prepared remarks in its entirety in Chinese before I translate for him into English. Mr. Lai, please go ahead.

現在很高興介紹賴美松先生。在我為他翻譯成英文之前，賴先生將用中文完整地閱讀他準備好的發言。賴先生，請繼續。

(foreign language)

（外語）

Thank you, Chairman.

謝謝主席。

[Interpreted] Hello, everyone, and thank you for joining us today. In the first quarter of 2022, ZTO delivered a parcel volume of 5.2 billion, which increased 16.8%, expanding our market share by 1.2 points to 21.6%. Adjusted net income grew 34.9% to CNY 1.1 billion.

[翻譯]大家好，感謝大家今天加入我們。 2022年一季度，中通快遞包裹量52億件，同比增長16.8%，市場份額提升1.2個百分點至21.6%。調整後淨利潤增長 34.9% 至 11 億元人民幣。

Starting in early March, Omicron infections that erupted and spread across the country disrupted the industry's growth momentum, causing delays and stoppage in express delivery industry. Quarterly parcel volume level was below expectations. During this extraordinary time, ZTO headquarter and our provincial operations coordinated action plans and efforts, tightened prevention measures and maintained continued operations wherever possible. We carried out stringent safety protocols while continuing to focus on achieving goals and objectives that we set forth in the beginning of the year.

從3月初開始，在全國范圍內爆發並蔓延的Omicron感染擾亂了行業的增長勢頭，導致快遞行業出現延誤和停工。季度包裹量水平低於預期。在這個非常時期，中通總部和我省業務協調行動計劃和努力，加強預防措施，盡可能保持持續運營。我們執行了嚴格的安全協議，同時繼續專注於實現我們在年初制定的目標。

First, we prioritized on protecting the rights and interests of the grassroots and insisted on passing through the increase in delivery fee in its entirety into the hands of delivery outlets and couriers. Through supportive measures such as detailed standardized pickup and delivery fee schedule and equitable reallocation procedures, added landing for designated prevention use, renewal of couriers' accidental group insurance and special care funds, we strengthened the network foundation that -- ensuring its resilience and vitality.

一是把保障基層權益放在首位，堅持將上調的快遞費全部轉入快遞網點和快遞員手中。通過細化規範的取件和派送費用表、公平的重新分配程序、增加定點預防使用、續保快遞意外團險和特護基金等配套措施，夯實了網絡基礎——確保其韌性和活力。

Second, we raised bars for comprehensive outlet management on an outlet-by-outlet basis from establishing direct routes to and from sorting centers to improving timeliness of parcel bound for urban and rural areas to enhancement of managerial effectiveness. We are fine-tuning the matrix model of management for Tier 1 partner outlets. As a result, more appropriate policies and performance measures are put in place so that our network of outlets can become more stable, profitable and sustainable.

二是提高網點綜合管理門檻，從建立直通分揀中心路線到提高包裹進出城鄉時效、提升管理效能等方面。我們正在微調一級合作夥伴網點的管理矩陣模型。因此，我們制定了更適當的政策和績效措施，使我們的網點網絡變得更加穩定、盈利和可持續。

Third, we accelerated the digitization initiatives to streamline end-to-end process, allowing close monitoring and coordination of all critical stages of operations to drive effectiveness and efficiencies. Technology solutioning was there to provide more scientific approach to maximize resource utilization, productivity gains and safe operations. Development of an operating system from all its perspective has transformed previous toolkit applications into an integrated process-driven task management framework.

第三，我們加快了數字化舉措，以簡化端到端流程，允許對運營的所有關鍵階段進行密切監控和協調，以提高有效性和效率。技術解決方案旨在提供更科學的方法來最大限度地利用資源、提高生產力和安全運營。從各個角度來看，操作系統的開發已經將以前的工具包應用程序轉變為一個集成的流程驅動的任務管理框架。

Fourth, we improved the performance evaluation and associated reward and reprimand mechanisms. During the COVID disruption, more user-friendly scorecards were set up to ease burden and boost confidence for our network partners.

四是完善績效考核和獎懲機制。在 COVID 中斷期間，我們設置了更多用戶友好的記分卡，以減輕負擔並增強我們網絡合作夥伴的信心。

Fifth, we designed diversified products and services to meet varying customer demand. Our presence among mainstream e-commerce volume continued to increase as we introduce more time-definite products such as premium and standard as part of the effort for product enrichment. The higher-end service that was nicknamed as (inaudible) and other expanded cross-border capabilities are all being developed and tested.

第五，我們設計了多樣化的產品和服務，以滿足不同的客戶需求。隨著我們推出更多限時產品，例如優質和標準產品，作為豐富產品的一部分，我們在主流電子商務中的佔有率繼續增加。被稱為（聽不清）的高端服務和其他擴展的跨境能力都在開發和測試中。

Recently, sorting centers and service outlets in the affected areas have been gradually resuming operations, while outbreaks across the nation become more and more under control. Contrast to a year-on-year decline of nearly 12% in April, express parcel volume recorded a 2.3% increase during the May holiday break for the industry.

近期，受災地區的分揀中心和服務網點逐步恢復運營，全國疫情也越來越得到控制。與 4 月份同比下降近 12% 相比，行業在五一假期期間快遞包裹量錄得 2.3% 的增長。

Government agencies have been paying close attention to logistic industries and proactively working with companies on their day-to-day challenges by coordinating policies from different governing bodies, sorting through conflicts and blockages. ZTO Shanghai was among the first few logistic companies to restart operation in early May. Volume and timeliness are gradually trending normal. Before the goal of dynamic zeroing is achieved, we expect prevention procedures will become part of the daily norm.

政府機構一直密切關注物流行業，並通過協調不同管理機構的政策、梳理衝突和障礙，積極與企業合作應對日常挑戰。中通上海是最早在5月初恢復運營的物流公司之一。量和時效逐漸趨於正常。在實現動態歸零的目標之前，我們預計預防程序將成為日常規範的一部分。

The central government has established clear directives that the epidemic must be contained, the economy must be stabilized, and growth must be safe. Express delivery companies will continue to play an active role in ensuring smooth and safe logistic operations, which will support the economic growth.

中央明確提出要控制住疫情、穩住經濟、穩增長。快遞企業將繼續發揮積極作用，保障物流順暢、安全，為經濟增長提供支撐。

We anticipate that the consumer demand will remain strong. We believe in our competitive advantages with scale and efficiency, and we are confident in our entire network's ability to endure hardship and overcome challenges. Looking ahead, routines need to be established for prevention on one hand, while we firmly implement our strategic goals through data-driven management, precise policy design and timely adjustments to enhance productivity and profitability. We aim to seize rebound opportunities and reestablish momentum so as to accelerate our market share gain and earnings growth.

我們預計消費者需求將保持強勁。我們相信我們在規模和效率方面的競爭優勢，我們對整個網絡的吃苦耐勞和挑戰的能力充滿信心。展望未來，一方面要建立常規預防，另一方面要通過數據驅動管理、精準政策設計和及時調整來堅定執行我們的戰略目標，以提高生產力和盈利能力。我們的目標是抓住反彈機會，重新建立動力，以加快我們的市場份額和盈利增長。

May 8 marked ZTO's 20th anniversary. In the 20 yesteryears against all odds, we went from keeping up to catching up to taking the lead, achieving all records we set for ourselves in both quality and quantity. All of our past success came not only from the hard work of our people but also from the support of the time and history and the entire society. We do not take for granted of what we have, and we'll journey forward with gratitude.

5月8日是中通成立20週年。過去的20年裡，我們從跟上到赶超，再到領先，在質量和數量上都創造了我們為自己創造的所有記錄。我們過去的一切成功，不僅來自於廣大人民群眾的辛勤付出，也來自於時代、歷史和全社會的支持。我們不會認為我們擁有的一切是理所當然的，我們會懷著感恩的心前行。

Today, riding the rising tide, we are determined to buckle details and enforce execution. Tomorrow, we will hang tight to our aspiration and belief, secure our core competencies and enhance quality, develop comprehensive might that extend to equal advantages, which will enable us to bring happiness to more people through our services.

今天，乘勢而上，我們決心扣細節，強執行力。明天，我們將堅守初心和信念，鞏固核心競爭力，提升品質，發展綜合實力，延伸至平等優勢，讓我們的服務帶給更多人幸福。

Now allow me to take us through the financial results. As I go through financials, please note that unless specifically mentioned, all numbers quoted are in RMB, and percentage changes refer to year-over-year comparisons. Detailed analysis of our financial performance, unit economics and cash flow are posted on our website, and I'll only go through some of the highlights here.

現在請允許我帶我們了解財務結果。在我瀏覽財務數據時，請注意，除非特別提及，否則引用的所有數字均以人民幣為單位，百分比變化指的是同比比較。我們的財務業績、單位經濟和現金流的詳細分析已發佈在我們的網站上，我將在這裡僅介紹其中的一些亮點。

In the first quarter, ZTO maintained the momentum of profitable growth. Our parcel volume grew 16.8% to 5.2 billion, expanding the quarterly market share by 1.2 points to a record 21.6%. With steady execution of our strategy, the income from operations robustly increased 76.4% to CNY 1.4 billion, and associated margin grew 4.3 points to 14.1%.

一季度，中通保持盈利增長勢頭。我們的包裹量增長 16.8% 至 52 億件，季度市場份額擴大 1.2 個百分點至創紀錄的 21.6%。隨著我們戰略的穩步執行，經營收入強勁增長 76.4% 至 14 億元人民幣，相關利潤率增長 4.3 個百分點至 14.1%。

Total revenue increased 22.1% to CNY 7.9 billion. ASP for the core express delivery business increased 8.5% or CNY 0.11, thanks to healthier competitive dynamics. There is an average of CNY 0.15 to CNY 0.20 per package delivery fee increase since fourth quarter last year.

總收入增長 22.1% 至 79 億元人民幣。得益於更健康的競爭態勢，核心快遞業務的平均售價增長了 8.5% 或 0.11 元人民幣。自去年第四季度以來，每件包裹的運費平均上漲 0.15 至 0.20 元。

Total cost of revenue was CNY 6.3 billion, which increased 16.9%. Overall unit cost of revenue for the core express delivery business increased 3.6% or CNY 0.04. More specifically, line-haul transportation cost per parcel decreased 0.2% to CNY 0.57 as a combined result of surging fuel cost, offset by cost efficiency gains from increased use of high-capacity trailer trucks, improved load rate and better route planning.

總收入成本63億元，增長16.9%。核心快遞業務的整體單位收入成本增加 3.6% 或 0.04 元。更具體地說，由於燃料成本的飆升，每個包裹的長途運輸成本下降了 0.2% 至 0.57 元人民幣，但被增加使用大容量拖車、提高裝載率和更好的路線規劃所帶來的成本效率收益所抵消。

Unit sorting cost increased 6.5% to CNY 0.36, driven by increased labor rates and higher depreciation and amortization charges not entirely absorbed by increased level of automation. Lower-than-expected volume dampened our scale advantage for the quarter. And as we look forward to volume returning to normal, our cost advantage and scale efficiencies will continue to demonstrate.

單位分揀成本增加 6.5% 至 0.36 元人民幣，這是由於人工費率增加以及更高的折舊和攤銷費用並未完全被自動化水平的提高所吸收。低於預期的銷量削弱了我們本季度的規模優勢。隨著我們期待銷量恢復正常，我們的成本優勢和規模效率將繼續顯現。

Gross profit increased 47.7% to CNY 1.6 billion as a result of increased volume and ASP. Gross margin rate increased 3.6 points to 20.5%. SG&A expense, excluding share-based compensation, as a percentage of revenue dropped 0.2 points to 5.6%, demonstrating a stable and sound corporate cost structure.

由於銷量和平均售價增加，毛利潤增長 47.7% 至 16 億元人民幣。毛利率上升 3.6 個百分點至 20.5%。 SG&A 費用（不包括股權薪酬）佔收入的百分比下降 0.2 個百分點至 5.6%，表明公司成本結構穩定且穩健。

Adjusted net income increased 34.9% to CNY 1.1 billion, and associated margin grew 1.2 points to 13.3%. Our operating cash flow grew 131.8% to CNY 1.1 billion. Capital expenditure totaled CNY 1.8 billion, which is at a lower level as planned.

調整後淨利潤增長 34.9% 至 11 億元人民幣，相關利潤率增長 1.2 個百分點至 13.3%。我們的經營現金流增長 131.8% 至 11 億元人民幣。資本性支出18億元，按計劃處於較低水平。

Now let's talk about the guidance. The spread of Omicron caused the derail of the entire industry's growth momentum starting in March, and we are slowly but surely coming out of it. The industry declined 11.9% year-over-year for the month of April. But the good news is that in May, we saw daily volume reached over 300 million, especially during and after the 3- to 4-day May holiday break. Volume growth has come back to positive.

現在讓我們談談指導。 Omicron 的蔓延導致整個行業從 3 月開始的增長勢頭脫軌，我們正在緩慢但肯定地走出困境。 4 月份該行業同比下降 11.9%。但好消息是，在 5 月份，我們看到日交易量超過 3 億，尤其是在 3 至 4 天的五一假期期間和之後。銷量增長已恢復正數。

Given our visibility into the month of May, we estimated the cumulative volume increase for the first half of the year to be around 4.5% to 5% for the industry and around 9% to 11% for ZTO. There is a fair chance that an orderly recovery will take place, and the economy would resume growth. Accordingly, the express delivery industry could also continue its current trajectory and get back to a healthy [click] of around 10% to 13% of growth for the second half, which means the industry for the whole year could grow between 7.5% to 10%.

鑑於我們對 5 月份的可見性，我們估計今年上半年行業的累計銷量增長約為 4.5% 至 5%，中通通訊約為 9% 至 11%。有序復甦、經濟恢復增長的可能性很大。因此，快遞行業也可以延續目前的軌跡，下半年恢復到 10% 到 13% 左右的健康增長，這意味著該行業全年的增長率可能在 7.5% 到 10% 之間。 %。

Now taking into these considerations as well as the current market condition plus the COVID uncertainties that still remain, the company revised its annual parcel volume projection to be in the range of 24.96 billion to 25.86 billion, representing a 12% to 16% increase year-over-year. Relative to the entire industry performance, the company is confident to achieve 1 percentage point or more increase in its market share gain for the entire year. These estimates represent management's current and preliminary view, which are subject to change.

現在考慮到這些因素以及當前的市場狀況以及仍然存在的 COVID 不確定性，該公司將其年度包裹量預測修正為 249.6 億至 258.6 億，同比增長 12% 至 16%-超過一年。相對於整個行業表現，公司有信心實現全年市場份額增長1個百分點以上。這些估計代表管理層的當前和初步觀點，可能會發生變化。

Now this concludes our prepared remarks. Operator, please open the call for questions. Thank you.

現在到此結束我們準備好的評論。接線員，請打開電話提問。謝謝你。

(Operator Instructions) Our first question will come from Thomas Chong with Jefferies.

（操作員說明）我們的第一個問題將來自 Jefferies 的 Thomas Chong。

(foreign language) I have a question regarding the situation of the pandemic and the monthly parcel volume trend. Given we have seen positive parcel volume growth in the first few days of May, how should we think about for the full month as well as thoughts about the June performance? And a follow-up on that, that is relating to [a couple] confirmed, the first half, the growth is around 4.5%. And how should we think about the growth momentum in Q3 and Q4?

（外語）我有一個關於大流行情況和每月包裹量趨勢的問題。鑑於我們在 5 月的前幾天看到了積極的包裹量增長，我們應該如何看待整個月以及對 6 月表現的看法？與 [一對] 相關的後續行動證實，上半年增長率約為 4.5%。我們應該如何看待第三季度和第四季度的增長勢頭？

Thank you, Mr. Chong, for your question. Let me answer this. I'll give you a little bit more breakdown. Yes, indeed, in the month of May, we saw a recovery, especially during the May holiday. And on a cumulative basis, including the first 5 months of the year, we are looking at around 3%, 3.5% at most of cumulative growth because the, really, first 2 months of the growth is fairly strong for the industry.

謝謝莊先生的提問。讓我回答這個問題。我會給你更多的細分。是的，確實，在五月份，我們看到了復甦，尤其是在五一假期期間。在累計基礎上，包括今年前 5 個月，我們看到的累計增長約為 3%，最多為 3.5%，因為實際上，前 2 個月的增長對該行業來說相當強勁。

The industry, specifically for the month of May, we think it's probably just coming out of the negative and into the positive territory. And then for the month of June, with the consideration of the shopping gala of 6/18, we think it could have a good possibility of reaching the high single digits of growth year-over-year. Now with these together, it gives us a rough estimate of the first half of the year for the industry to be around 4.5%.

該行業，特別是 5 月份，我們認為它可能剛剛走出消極並進入積極領域。然後在 6 月份，考慮到 6/18 的購物晚會，我們認為它很有可能達到同比高個位數的增長。現在把這些加在一起，它給了我們一個粗略的估計，今年上半年該行業在 4.5% 左右。

Now going into the third and the fourth quarter, we referenced to what happened in the first outbreak of COVID-19 in late 2019 into 2020. The rebound was healthy. And with that into consideration and also referencing to the projection that was given by the State Post Bureau in the beginning of the year, which says the industry is capable of growing at least 13%, we estimated the third quarter and the fourth quarter, for the second half of the year, to grow at around 10% to 13%. So specifically, perhaps 12% to 14% or 10% to 12%, respectively, for the third and the fourth quarter. That gives us for the entire year around 7.5% to 10% growth for the industry.

現在進入第三和第四季度，我們參考了 2019 年底到 2020 年首次爆發 COVID-19 時發生的情況。反彈是健康的。考慮到這一點，並參考國家郵政局年初的預測，該行業至少有 13% 的增長能力，我們估計第三季度和第四季度為下半年，將增長10%至13%左右。具體來說，第三季度和第四季度可能分別為 12% 到 14% 或 10% 到 12%。這使我們全年行業增長約 7.5% 至 10%。

I hope that is detailed enough. However, I want to ensure that you understand there are still lots of uncertainties in the outcome of the recovery, what might take place in terms of the pace. For sure, it's going to recover. It's a matter of how long it will take. And as we go deeper into the second half of the year, then we will have a better view. Thank you.

我希望這足夠詳細。但是，我想確保您了解復甦的結果仍然存在很多不確定性，就步伐而言可能會發生什麼。當然，它會恢復。這是需要多長時間的問題。隨著我們深入到下半年，我們會有更好的視野。謝謝你。

Our next question will come from Tian Hou with TH Capital.

我們的下一個問題將來自天侯與泰合資本。

(foreign language) The first one is the difference between the 1P business and the franchise model, what is Mr. Lai's view on that? What does 3PL -- how this is going to strengthen its own competitive advantage? The second is regarding the end user behavior change from long haul to short distance from e-commerce to foods and grocery delivers. So in that front, does ZTO have any plan? (foreign language)

（外語）第一個是1P業務和特許經營模式的區別，賴先生對此有何看法？ 3PL 是什麼——這將如何增強其自身的競爭優勢？第二個是關於最終用戶行為從遠程到短距離的變化，從電子商務到食品和雜貨配送。那麼在這方面，中通有什麼計劃嗎？ （外語）

(foreign language)

（外語）

Thank you, Tian, for your question. I'll translate for Mr. Lai and also supplement where needed.

謝謝你，田，你的問題。我會為賴先生翻譯，並在需要的地方進行補充。

[Interpreted] First of all, the -- whether a directly operated, vertically owned model or a franchise model is better is really a discussion we had for years. And it's not about one better versus the other, but each has its own advantages or disadvantages. We look back in the history, the speed of expansion, the way that we are able to motivate thousands of entrepreneurs to be part of the tremendous growth supported with economic growth, all these shown that the express delivery in a franchise model is not necessarily providing any quality of services inferior to the directly operated model.

[解讀]首先，直營、垂直擁有模式還是特許經營模式更好，這確實是我們多年來的討論。這不是關於一個比另一個更好，而是每個都有自己的優點或缺點。我們回顧歷史，擴張的速度，我們能夠激勵成千上萬的企業家參與經濟增長所支持的巨大增長的方式，所有這些都表明，特許經營模式中的快遞並不一定能提供任何低於直營模式的服務質量。

The important part is it is a crucial element in terms of how we are able to ensure the investment and the reward of our franchise network is fair and equitable. And our initiatives throughout our 20 years demonstrates that commitment and also result of success in allowing the express market share gain -- efficiency gain as well as servicing the customer needs.

重要的是，它是我們如何確保特許經營網絡的投資和回報公平公正的關鍵因素。我們 20 年來的舉措表明了這一承諾，也是在提高快遞市場份額方面取得的成功——提高效率以及滿足客戶需求的結果。

You specifically talked about during the pandemic or hard times what happens to some of the more vertically operated business. Our view is that the time as this are extremely fortunate but rare. The entire growth of the industry hinged upon economic growth is -- has been intact and then also will be intact going forward, and a franchise model will continue to demonstrate its foundational design, which is to, again, motivate with self-propelled intention to grow in quality as well as quantity.

您特別談到了在大流行或困難時期，一些更垂直運營的業務會發生什麼。我們的觀點是，這樣的時刻非常幸運，但很少見。取決於經濟增長的整個行業的增長是 - 已經完好無損，然後也將完好無損，特許經營模式將繼續展示其基本設計，即再次以自我驅動的意圖激勵在質量和數量上增長。

That leads to the second part of the question. The express delivery industry is a long journey. We do know that the first part of the year, the Omicron impact was quite devastating. However, despite such, we saw the rebound in the month of May, and we're expecting the demand remains intact. Volume or not, distance short or long, we think the critical consideration is whether efficiencies is there.

這就引出了問題的第二部分。快遞行業是一段漫長的旅程。我們確實知道，今年上半年，Omicron 的影響是相當毀滅性的。然而，儘管如此，我們在 5 月份看到了反彈，我們預計需求將保持不變。成交量與否，距離短或長，我們認為關鍵的考慮因素是效率是否存在。

For example, as we grow into more of the rural area, going into the farm, going into the factories, the goal is to spend less but achieve more, either for manufacturers, for merchants or for consumers. The efficiency and the scale achieved by the express delivery industry has been an enabler for the past growth. And then also, we expect it to continue to be the case in the future.

例如，隨著我們進入更多的農村地區，進入農場，進入工廠，我們的目標是花費更少，但為製造商、商家或消費者帶來更多收益。快遞業所取得的效率和規模是過去增長的推動力。此外，我們預計未來將繼續如此。

The example Mr. Lai gave us is that when we have products in the eastern part of the country or north part of the country, as it's being shipped, the produces or goods or daily necessities, the cost of going into all these directions across the nation are very much similar with very little differences. And that is because of the efficiencies of the entire network, the high efficient operations and the people and, of course, the network partners that made it all possible.

賴先生給我們舉的例子是，當我們在東部或北部有產品時，在運輸過程中，產品或商品或日常用品，通過這些方向進入所有這些方向的成本。民族非常相似，差異很小。那是因為整個網絡的效率、高效的運營和人員，當然還有使這一切成為可能的網絡合作夥伴。

So going into the future, certainly, we will expand our capabilities into diversified products and services, serving different needs, different distances or different type of goods and different consumer groups. But that doesn't change our overall goal to continue to seize the opportunity that is presented to us in the Chinese economic growth and the industry growth. I hope that answered your question.

所以展望未來，我們當然會擴展我們的能力到多元化的產品和服務，服務於不同的需求、不同的距離或不同類型的商品和不同的消費群體。但這並沒有改變我們的總體目標，即繼續抓住中國經濟增長和行業增長給我們帶來的機遇。我希望這回答了你的問題。

Our next question will come from [Frank Duo] with Daiwa Capital Markets.

我們的下一個問題將來自大和資本市場的 [Frank Duo]。

(foreign language) So I got 2 questions. First, related to the market competition landscape. And so how is the view for the industry ASP both for this year? And do you see any changes for the market competition after the recent outbreak, pandemic outbreak? And the second question is what is the financial impact of the express services VAT waiver?

（外語）所以我有2個問題。一是與市場競爭格局有關。那麼今年的行業平均售價如何？在最近的爆發、大流行之後，您看到市場競爭有什麼變化嗎？第二個問題是快遞服務增值稅豁免的財務影響是什麼？

(foreign language)

（外語）

Let me first translate for Chairman for the first question, and then I'll take your second question.

我先替主席翻譯第一個問題，然後再回答你的第二個問題。

[Interpreted] It doesn't matter what the external changes are. There are a few critical internal considerations, especially our capacity, our efficiency gain. It's because the overall growth trajectory of the economy of China is still on an upward trend, and the express delivery industry has been a catalyst or as well as a beneficiary of that growth. So I -- we think that industry dynamics will continue to shift towards more concentrated players taking greater share of the market, and the stronger ones are becoming even more strong -- become stronger.

[解釋] 外部變化是什麼並不重要。有一些關鍵的內部考慮，尤其是我們的能力，我們的效率增益。這是因為中國經濟的整體增長軌跡仍處於上升趨勢，而快遞行業一直是這種增長的催化劑或受益者。所以我 - 我們認為行業動態將繼續轉向更集中的參與者佔據更大的市場份額，而更強大的參與者正在變得更加強大 - 變得更強大。

In terms of the pricing, we think the Omicron or the pandemic is going to become a thing of the past even though it might continue to be part of our norm as prevention measures are becoming our day-to-day norm. Yet the competition since the month of September last year has becoming -- has become more stabilized and sensible because everyone has realized and experienced the past pain. And market share gain is -- could be a short stint, but it's not sustainable for the long run. Quality and efficiency is still what consumers or our customers demand.

在定價方面，我們認為 Omicron 或大流行將成為過去，儘管它可能繼續成為我們常態的一部分，因為預防措施正在成為我們的日常常態。然而，從去年9月開始的競爭已經變得——變得更加穩定和理智，因為每個人都意識到並經歷了過去的痛苦。市場份額的增長——可能是短暫的，但從長遠來看是不可持續的。質量和效率仍然是消費者或我們客戶的要求。

So pricing going forward, we think, will continue to remain stable. Here and there, in certain regions, depending on the capacity and the demand, there will be reasonable changes. But that is all part of the normal competition, and we think that's not going to become as an unreasonable and out of economic basis.

因此，我們認為未來的定價將繼續保持穩定。在這里和那裡，在某些地區，根據產能和需求，會有合理的變化。但這都是正常競爭的一部分，我們認為這不會成為不合理和不經濟的基礎。

The second part of the question, yes, the government has given VAT waivers for services related to the prevention, related to goods that are for prevention. So what happened to our business is the impact might come with the rate differential. In other words, because we pay VAT for the entire receipt, which includes the delivery fee, and the delivery fee element is enjoying the VAT waiver as they go into the hands of our network partners who deliver those packages. And of course, the delivery network will issue receipts to us. Some of those network partners are able to enjoy 0 VAT rate. And as we report the entire receipts with our 6% because we don't differentiate in our receipts whether it's 0 or 6% taxed, so there is a rate differential that we are required to take the burden of. Does that answer your question?

問題的第二部分，是的，政府已經對與預防相關的服務、與用於預防的商品相關的服務給予增值稅豁免。因此，我們的業務發生的情況是利率差異可能帶來的影響。換句話說，因為我們為整個收據支付增值稅，其中包括送貨費，而送貨費部分在交付這些包裹的網絡合作夥伴手中時享受增值稅減免。當然，送貨網絡會向我們開具收據。其中一些網絡合作夥伴可以享受 0 增值稅稅率。由於我們以 6% 的稅率報告整個收據，因為我們不區分收據是 0% 還是 6%，因此我們需要承擔稅率差異。這是否回答你的問題？

(foreign language)

（外語）

Our next question will come from Parash Jain with HC (sic) [HSBC] Hong Kong.

我們的下一個問題將來自 HC (sic) [HSBC] Hong Kong 的 Parash Jain。

If I may ask 2 questions. First of all, when I look at your Slide 9, and for whatever it's worth, when we look at your next 5 years of e-commerce sales forecast versus the parcel volume growth, parcel volume growth is trailing by about 3.5%. Shall we think more as the differential is more of an inflation? Or are we seeing a trend where customers are -- again start to consolidate the volume before they place an order?

如果我可以問2個問題。首先，當我查看您的幻燈片 9 時，無論它的價值如何，當我們查看您未來 5 年的電子商務銷售預測與包裹量增長時，包裹量增長落後約 3.5%。我們是否應該考慮更多，因為差異更多的是通貨膨脹？或者我們是否看到了客戶在下訂單之前再次開始整合數量的趨勢？

And secondly, given the inflationary environment, I really appreciate if you can talk about a bit of sensitivity to some of your key cost items, specifically related to fuel and labor, and your operating leverage opportunity, i.e., M&A. You have done a tremendous job in the first quarter. But how shall we think about every additional 10% of volume that you handle? How shall we see the change in cost, i.e., what is -- what shall we think as more fixed versus variable? Hello?

其次，鑑於通脹環境，如果您能談談對一些關鍵成本項目（特別是與燃料和勞動力相關）以及您的經營槓桿機會（即併購）的敏感性，我真的很感激。你在第一季度做得非常出色。但是，我們應該如何考慮您處理的每增加 10% 的交易量？我們將如何看待成本的變化，即，什麼是——我們認為什麼是更固定的而不是可變的？你好？

Yes. Thank you for your question. On Slide 9, we talked about -- hello?

是的。謝謝你的問題。在幻燈片 9 上，我們談到了——你好？

Yes. I can hear you.

是的。我可以聽見你。

Yes. On Slide 9, we talked about -- the volume growth in China, I think the volume growth has started to exhibit a -- hold on one second. On Page 9, for the market growth, the express delivery, let me just give you an overview. I'm looking at the Page 9. It's a percentage of market share by various different players. Is that correct?

是的。在幻燈片 9 上，我們談到了——中國的銷量增長，我認為銷量增長已經開始表現出——保持一秒鐘。在第9頁，對於市場增長，快遞，讓我給你一個概述。我在看第 9 頁。它是各種不同參與者所佔市場份額的百分比。那是對的嗎？

I was more referring to expectation is that the volume growth will be 8.5% driven by 12% growth in online retail sales. So the volume growth is trailing the retail sales. Is it because the ticket size is increasing? And is it largely inflation? Or you think that we will continue to see the volume growth will trail the online retail sales as consumers start to consolidate the volumes before they place an order?

我更多指的是預期銷量增長將達到 8.5%，受在線零售額增長 12% 的推動。因此，銷量增長落後於零售額。是因為票的大小在增加嗎？主要是通貨膨脹嗎？或者您認為隨著消費者在下訂單之前開始整合銷量，我們將繼續看到銷量增長將落後於在線零售銷售？

I think the interpretation when you look at the online retail growth, the online physical goods growth and the entire economic growth, we believe the e-commerce growth is at a faster pace. And it's still being -- growing at a faster pace because more and more of the people are going online and become web shoppers. Then the parcel in itself, we do believe they are becoming more scarce or more of a sporadic order placing versus concentrated as in before during the shopping gala of November 11. So day-to-day goods are being also placed -- orders are also being placed online instead of going to the grocery stores. So that is the trend.

我認為從在線零售增長、在線實物商品增長和整個經濟增長來看，我們認為電子商務的增長速度更快。而且它仍在以更快的速度增長，因為越來越多的人上網並成為網絡購物者。然後包裹本身，我們確實相信它們變得更加稀缺或更多是零星的訂單，而不是像以前那樣集中在 11 月 11 日的購物盛會上。因此，日常商品也在下訂單 - 訂單也在被放在網上而不是去雜貨店。所以這就是趨勢。

And in that, also another factor to consider is we are going into the -- other than consumer logistics, we are also going into the rural areas, going into the farm, going into the factories and bringing in service to those needs and those demand. The produce, which is of recent years development, more and more people are developing the habit of buying their perishables even online.

在這方面，另一個需要考慮的因素是，除了消費者物流，我們還將進入農村地區，進入農場，進入工廠，並為這些需求和需求提供服務.近年來發展起來的農產品，越來越多的人養成了在網上甚至在網上購買易腐爛食品的習慣。

And then there's the second part of -- yes, the second part of the question relates to our cost element. Overall, I think the industry is, in a way, a brick-and-mortar. So we do have facility cost. We have the depreciation and amortization of our invested assets, hard assets. The machinery, the trailer trucks that we have mentioned, those are also all part of our cost. The labor cost is what we are keeping watchful eyes on because that's still a large portion of our total cost.

然後是第二部分——是的，問題的第二部分與我們的成本要素有關。總的來說，我認為這個行業在某種程度上是一個實體。所以我們確實有設施成本。我們有我們的投資資產，硬資產的折舊和攤銷。機器，我們提到的拖車，這些也是我們成本的一部分。勞動力成本是我們一直密切關注的，因為這仍然是我們總成本的很大一部分。

The leverage is on gradually introducing a replacement of these labor costs with machinery. Automation and then also the digitization investment into our IT technology is also part of our effort to continue to address the cost increases in the labor. The network framework of how we are developing more direct routes will also reduce the number of sortation, hence, reducing the sorting cost and transportation cost. And then that's also part of the structure of the cost that we are able to find opportunities to further enhance efficiencies.

槓桿作用是逐步引入用機器替代這些勞動力成本。自動化以及對我們 IT 技術的數字化投資也是我們繼續解決勞動力成本增加的努力的一部分。我們如何開發更直接的路線的網絡框架也將減少分揀次數，從而降低分揀成本和運輸成本。這也是成本結構的一部分，我們能夠找到進一步提高效率的機會。

This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Yan for any closing remarks.

我們的問答環節到此結束。我想把會議轉回給閆女士做任何閉幕詞。

Thank you, everyone, for your interest and continued support of our business. But the fact that the Omicron disrupts the business process is, I think, largely behind us, and we are optimistic about the growth prospect of the Chinese economy as well as the express delivery industry. With our advantages clearly distinguished from the rest and our capacity and efficiency gains that are still underway with the benefit of digitized approach in proper and more detailed management in finding productivity as well as efficiency. So we are confident in the growth of our business in terms of volume as well as our ability to deliver even faster growth in our profitability.

感謝大家對我們業務的關注和持續支持。但我認為 Omicron 擾亂業務流程的事實在很大程度上已經落後，我們對中國經濟以及快遞行業的增長前景持樂觀態度。我們的優勢明顯區別於其他優勢，我們的能力和效率提升仍在進行中，數字化方法的好處是在尋找生產力和效率方面進行適當和更詳細的管理。因此，我們對業務量的增長以及我們實現更快盈利增長的能力充滿信心。

So with that, again, thank you, everyone, for joining today's call. We look forward to speaking with you individually soon. Thank you.

因此，再次感謝大家加入今天的電話會議。我們期待很快與您單獨交談。謝謝你。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連接。

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[此成績單中標記為 [已翻譯] 的部分由現場通話中的口譯員朗讀。]