ZTO Express (Cayman) Inc (ZTO) 2022 Q3 法說會逐字稿

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

美好的一天，歡迎來到中通快遞第三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 Sophie Li, Director of Capital Markets. Please go ahead.

我現在想把會議轉交給資本市場總監 Sophie Li。請繼續。

Thank you, operator. Hello, everyone, and thank you for joining us today. The company's results and the Investor Relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer; Ms. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, then Ms. Yan will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

謝謝你，運營商。大家好，感謝您今天加入我們。公司的業績和投資者關係介紹已於今天早些時候發布，可在公司的 IR 網站 ir.zto.com 上查閱。中通今天致電董事長兼首席執行官賴美松先生；嚴惠萍女士，首席財務官。賴先生將簡要介紹公司的業務運營和亮點，然後嚴女士將介紹財務和指導。在接下來的問答環節中，他們都可以回答您的問題。

I remind you that 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 expectations and current 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, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

我提醒您，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當前的預期以及當前的市場和運營狀況，並與涉及已知或未知的風險、不確定性和其他因素，所有這些都難以預測，其中許多因素超出了公司的控制範圍，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。

For further information regarding this and other risks, uncertainties and factors is 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.

有關此風險和其他風險、不確定性和因素的更多信息，請參閱公司向美國證券交易委員會提交的文件。公司不承擔因新信息、未來事件或其他原因而更新任何前瞻性陳述的任何義務，除非法律要求。

It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. (foreign language)

現在我很高興向大家介紹賴美松先生。在我翻譯成英文之前，賴先生會用中文完整地閱讀他準備好的發言稿。 （外語）

(foreign language)

（外語）

[Interpreted] Hello, everyone, and thank you for joining us today. For the third quarter of 2022, ZTO delivered a parcel volume of 6.37 billion, which increased 11.7% year-over-year, expanding our market share by 1.3 points to 22.1%. Our customer satisfaction scores hit a new record, and our end-to-end [time limits] and 72-hour time [definitiveness] continuing to rank top among the peers. Meanwhile, we achieved RMB 1.87 billion of adjusted net income, growing our bottom line by 63.1% year-over-year.

[翻譯] 大家好，感謝您今天加入我們。 2022年第三季度，中通快遞包裹量63.7億件，同比增長11.7%，市場份額擴大1.3個百分點至22.1%。客戶滿意度再創新高，端到端【時限】和72小時【確定性】繼續保持同行前列。同時，我們實現調整後淨利潤人民幣 18.7 億元，同比增長 63.1%。

In the third quarter, due to pandemic and other external factors, the overall growth rate of the Express industry decelerated. ZTO focused on being the [best we can] through wider implementation of KPI oriented and data-driven process management (inaudible). Not only did we enhance operational excellence, but also built revenues to realize opportunities as well as the systemic growth also. While ensuring the normalized pandemic preventions and controls, ZTO was able to win on both volume and price for the third consecutive quarter and further widened the lead over our peers in market share, service quality and profitability goals.

三季度，受疫情等外部因素影響，快遞行業整體增速放緩。 ZTO 專注於通過更廣泛地實施面向 KPI 和數據驅動的流程管理（聽不清）來做到 [盡我們所能]。我們不僅提高了卓越運營，而且還增加了收入以實現機會以及系統性增長。在確保常態化疫情防控的同時，中通實現了連續三個季度量價雙贏，在市場份額、服務質量和盈利目標上進一步擴大了對同業的領先優勢。

Over the past few quarters, we have achieved remarkable results in improving the operational excellence and earnings quality. First of all, by going through KA customer accounts and modifying corresponding network policy, we eliminated unnecessary loss-making contracts and at the same time, enhanced the competitiveness of our outlets. Second, with further refinement and a wider utilization of our daily volume, cost, profit dashboard tools, [bringing] the visibility at a parcel flow level, which allowed us to recalibrate cost of coverage and pricing implication, therefore, reduced (inaudible) . Third, with further standardization of operating protocols, refined KPIs and optimizing digitization capabilities, we can now track and analyze transit and sorting process by segments with improved accuracy, therefore improved effectiveness of workship and design, [thereby transit] more timely, increased utilization of labor, facilities and transportation resources, reduced trailer packages and improved end-to-end time limits .

在過去的幾個季度中，我們在提高卓越運營和盈利質量方面取得了顯著成果。首先，我們通過打通KA客戶賬戶，修改相應的網絡政策，杜絕了不必要的虧損合同，同時提升了網點的競爭力。其次，隨著我們日常數量、成本、利潤儀表板工具的進一步完善和更廣泛的使用，[帶來]包裹流量級別的可見性，這使我們能夠重新校準覆蓋成本和定價影響，因此減少（聽不清）。第三，隨著操作規程的進一步標準化，KPI的細化和數字化能力的優化，我們現在可以更準確地跟踪和分析分段的中轉和分揀過程，從而提高工作和設計的有效性，[從而中轉]更及時，提高利用率勞動力、設施和運輸資源，減少拖車包裹並改進端到端時間限制。

The overall operational quality and efficiencies have risen. While optimizing our own operations, we continue to focus on empowering our network partners to improve their comprehensive parcel volume, thus stimulating market share gain. We have gradually extended our volume, cost, and profit (inaudible) network partners. We have used real-time data to always encourage and assisted them in to (inaudible) financial results. Stuck always with low and negative growth, for identifying and solving problems from bottom up and ultimately improve their market competitiveness.

整體運營質量和效率得到提升。在優化我們自身運營的同時，我們繼續專注於賦能我們的網絡合作夥伴以提高他們的綜合包裹量，從而刺激市場份額的增長。我們逐漸擴大了我們的數量、成本和利潤（聽不清）網絡合作夥伴。我們一直使用實時數據來鼓勵和幫助他們取得（聽不清）財務結果。始終堅持低增長和負增長，自下而上地發現和解決問題，最終提高市場競爭力。

We further simplified partner fee policies and made them more equitable, transparent and uniform, which have included incremental market share potential through interest alignment and resource sharing amongst pickup and delivery hours and effectively increase the customer acquisition and total profit at both marketing and fulfillment centers.

我們進一步簡化了合作夥伴費用政策，使其更加公平、透明和統一，其中包括通過取件和交付時間之間的利益協調和資源共享來增加市場份額潛力，並有效地增加營銷和履行中心的客戶獲取和總利潤。

Ensuring the service quality throughout all stages of pickup, rotation, transportation and delivery is a precondition for expanding market share and increasing profits. In the past few quarters, we have continuously refined KPIs and improved rewards and reprimand mechanism and tackled, of course, these problems in a timely manner with integrated efforts from all key segments of the entire network.

確保提貨、周轉、運輸、派送各環節的服務質量，是擴大市場份額、增加利潤的前提。過去幾個季度，我們不斷細化KPI，完善獎懲機制，當然也及時解決了這些問題，全網各重點環節齊心協力。

In the third quarter, our leading Cainiao Index scores widened among peers, which (inaudible). Fourth quarter, thus far, the external factors, including dynamic situation continues (inaudible) negative impact. Consumption level was lower than expectation, and Express industry's growth was under pressure. However, we have been continually focusing on following priorities around our primary goal of accelerating market share expansion supported by employing high-quality focus.

第三季度，我們領先的菜鳥指數得分在同行中擴大，這（聽不清）。第四季度，到目前為止，包括動態情況在內的外部因素仍在繼續（聽不清）負面影響。消費水平低於預期，快遞業增長承壓。然而，我們一直專注於圍繞我們的主要目標關注優先事項，即通過採用高質量的重點支持加速市場份額擴張。

First of all, strict accountability for operational safety, pandemic prevention and a console to ensure the smooth flow of packages. Second, enhancement of network infrastructure capabilities in an orderly manner, particularly having always to plan an evaluation hub and delivery stations, which are (inaudible) transit and sorting platform. Third, further implementation of network management tools, including those of last-mile policies, which without compromising the vested interest of the outlets owners ensures (inaudible) direct access to market pricing (inaudible) will hire new retail customers. Fourth, accelerated expansion of quality preference with diversified capabilities at these last mile posts. The goal will be on reducing the pickup and delivery costs and provide community services in addition to on-demand delivery to doors, therefore enrich last-mile consumer experience in store and home. Fifth designing and the promotion of eco-diversified products and services, which rely on our differentiated scale and quality advantage. For example, standard time-definite service to meet customized needs.

一是嚴把操作安全問責、防疫防控、控制台管控，確保包裹暢通無阻。二是有序提升網絡基礎設施能力，特別是要始終規劃評估樞紐和配送站，這是（聽不清）中轉和分揀平台。第三，進一步實施網絡管理工具，包括最後一英里政策，這不會損害網點所有者的既得利益，確保（聽不清）直接進入市場定價（聽不清）將僱用新的零售客戶。四是在最後一公里以多元化能力加速拓展品質偏好。目標將是降低取貨和送貨成本，除了按需送貨上門外，還提供社區服務，從而豐富最後一英里的消費者在商店和家中的體驗。五是依託我們差異化的規模和質量優勢，設計和推廣生態多元化的產品和服務。例如，滿足定制化需求的標準限時服務。

Looking ahead, the growth prospects of (inaudible) is positive. The divergence of key players have gradually become obvious and clear. For the past 20 years, ZTO has [filled] and relied on its shared-success culture, innovative DNA, its network with stability and its unsurpassed scale and efficiency to stand apart from the rest. Coupled with increasing effort on management upgrade and rigorous work ethics, management ethics, we are confident to achieve our primary goal of accelerated market share expansion with improving service quality and profitability while sharing daily parcel volume that will exceed 100 million.

展望未來，（聽不清）的增長前景是積極的。主要參與者的分歧逐漸變得明顯和清晰。 20年來，中通憑藉共享成功的文化、創新的DNA、穩定的網絡、無與倫比的規模和效率，脫穎而出。加上不斷加大管理升級力度和嚴格的職業道德、管理道德，我們有信心實現我們的主要目標，即通過提高服務質量和盈利能力來加速擴大市場份額，同時共享日包裹量將超過 1 億件。

Now let's have our CFO, Ms. Yan, to take us through our financial results.

現在讓我們的首席財務官嚴女士向我們介紹我們的財務業績。

Thank you, Chairman Lai, and hello to everyone on the call. As I go through our 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 go through some of the highlights here.

謝謝你，賴主席，並在電話會議上向大家問好。在我查看我們的財務數據時，請注意，除非特別說明，所有引用的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、單位經濟效益和現金流量的詳細分析已發佈在我們的網站上，我將在這裡介紹一些重點。

In the third quarter, despite the recurrence of pandemic shutdowns or restrictions and a weaker-than-expected economic outcome, ZTO delivered strong performances in both market share gain and profit expansion, both supported by improving quality of services.

第三季度，儘管大流行停工或限制措施再次出現，經濟結果弱於預期，但在提高服務質量的支持下，中通在市場份額增長和利潤增長方面均取得了強勁表現。

Parcel volume increased 11.7%, which helped to expand our market share by 1.3 points to 22.1%, and adjusted net income grew 63.1% to RMB 1.9 billion. Total revenue increased by 21% to RMB 8.9 billion. ASP for the core express delivery business increased 9.9% or RMB 0.12.

包裹量增長 11.7%，這有助於我們的市場份額擴大 1.3 個百分點至 22.1%，調整後的淨收入增長 63.1% 至人民幣 19 億元。總收入增長 21% 至人民幣 89 億元。核心快遞業務的平均售價增長 9.9% 或 0.12 元人民幣。

While pricing became more stabilized, we continue to optimize our policy effectiveness by enhancing volume mix as well as helping our network partners and outlets to strengthen their competitiveness and profitability. Total cost of revenue was RMB 6.5 billion, which increased 11.6%. Overall unit cost of revenue for the core express delivery business increased 12.6% or RMB 0.01. More specifically, line-haul transportation costs per parcel decreased 2.2% to RMB 0.49, where rising fuel costs were offset by cost efficiency gain from increased use of high-capacity trailer trucks, improved roadway and better route planning. Unit sorting costs increased 5.8% to RMB 0.30, driven by increased labor costs and higher depreciation and amortization charges.

在定價變得更加穩定的同時，我們通過提高數量組合以及幫助我們的網絡合作夥伴和網點增強競爭力和盈利能力，繼續優化我們的政策有效性。總收入成本為人民幣65億元，增長11.6%。核心快遞業務的整體單位收入成本增長 12.6% 或人民幣 0.01 元。更具體地說，每個包裹的長途運輸成本下降 2.2% 至 0.49 元人民幣，其中燃料成本的上漲被大容量拖車的使用增加、道路改善和路線規劃改善所帶來的成本效益收益所抵消。單位分揀成本增加 5.8% 至 0.30 元人民幣，這是由於勞動力成本增加以及折舊和攤銷費用增加所致。

We continue to raise our level of automation in response to increasing human resource costs. Gross profit increased 55.9% to RMB 2.4 billion, benefited from both volume and ASP increases on top of meaningful cost efficiency despite lower-than-expected volume. Gross profit margin rate increased 6.1 points to 27.3%. SG&A expenses as a percentage of revenue dropped 0.3 points to 4.9%, demonstrating continued scale leverage by our corporate cost structure.

我們繼續提高自動化水平以應對不斷增加的人力資源成本。儘管銷量低於預期，但毛利增長 55.9% 至人民幣 24 億元，這得益於銷量和平均售價的雙雙增長以及顯著的成本效益。毛利率上升6.1個百分點至27.3%。 SG&A 費用佔收入的百分比下降 0.3 個百分點至 4.9%，表明我們的企業成本結構持續發揮規模槓桿作用。

Income from operations increased 59.9% to RMB 2.2 billion, and associated margin rate grew 5.9 points to 24.3%. Operating cash flow grew 58% to RMB 2.8 billion. Our capital expenditure totaled RMB 2.1 billion.

經營收入增長 59.9% 至人民幣 22 億元，相關利潤率增長 5.9 個百分點至 24.3%。經營現金流增長 58% 至人民幣 28 億元。我們的資本支出總額為人民幣 21 億元。

We are hopeful that COVID restrictions would gradually eat off and macroeconomic condition would improve in 2023. We believe that China's express delivery industry has great potential to grow for the longer term, and ZTO would remain a strategic focus on market share gain upon achievement of targeted profit level. All of these will be made possible through continued effort on standardization and digitization where data analytics and process improvements will lead to further upgrade of our leading operating efficiency and quality of earnings.

我們希望 COVID 限制將在 2023 年逐漸消退，宏觀經濟狀況將有所改善。我們相信中國快遞行業的長期增長潛力巨大，中通仍將在實現目標後將戰略重點放在增加市場份額上利潤水平。所有這些都將通過在標準化和數字化方面的持續努力而成為可能，其中數據分析和流程改進將進一步提升我們領先的運營效率和盈利質量。

Taking into account the current market condition, the company revises its previously stated annual guidance. Parcel volume for 2022 is expected to be in the range of 24.3 billion to 24.7 billion, representing a 9% to 11% increase year-over-year. Meanwhile, the company remains confident in achieving no less than 1 percentage point increase in its market share for the entire year of 2022. These estimates represent our current view, which are subject to change.

考慮到當前的市場狀況，公司修改了之前公佈的年度指引。預計 2022 年的包裹量將在 243 億至 247 億件之間，同比增長 9% 至 11%。同時，公司仍有信心在 2022 年全年實現不低於 1 個百分點的市場份額增長。這些估計代表我們目前的觀點，可能會發生變化。

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

現在我們準備好的發言到此結束。接線員，請打開電話提問。謝謝你。

(Operator Instructions) Our first question will come from Ronald Keung with Goldman Sachs.

（操作員說明）我們的第一個問題將來自高盛的 Ronald Keung。

(foreign language) I have 2 questions. One is want to hear about how the recent COVID new cases, how has that disrupted our business? And how are we ensuring the growth and also good service quality in the times of slight disruptions in outlets and some of our operations.

（外語）我有兩個問題。一是想了解最近的 COVID 新病例如何擾亂我們的業務？在網點和我們的一些業務出現輕微中斷的情況下，我們如何確保增長和良好的服務質量。

And second, I'd like to hear management's view on how the next year 2023 will play out because the -- on both possible in growth and also pricing and knowing that the price hike for the industry side in September last year, and the whole industry has gone through a very healthy uplift in profitability. And so as we lapse the price hike around 3 to 4 quarters now, how are we thinking about pricing into next year?

其次，我想听聽管理層對明年 2023 年將如何發展的看法，因為——關於增長和定價的可能性，並且知道去年 9 月行業方面的價格上漲，以及整個行業在盈利能力方面經歷了非常健康的提升。因此，當我們現在將價格上漲推遲 3 到 4 個季度左右時，我們如何考慮明年的定價？

(foreign language)

（外語）

[Interpreted] Thank you, Ronald, for your question. Let me translate for the Chairman. First of all, the impact of the pandemic and specifically those prevention and restriction measurements, certainly has a negative impact on our business. So we, on one hand, are focused on the prevention, and on the other hand, continued our growth focus.

[翻譯] 羅納德，謝謝你的問題。讓我為主席翻譯。首先，大流行的影響，特別是那些預防和限制措施，肯定會對我們的業務產生負面影響。因此，我們一方面專注於預防，另一方面繼續關注增長。

We believe that after the major congress meetings, policies will gradual. Even though it is gradual, but we'll certainly come about to stimulate the economy and continue to raise consumers' confidence in supply chain, resuming its efficiency as well as logistic businesses, particularly Express businesses.

我們相信，在重大的人大會議之後，政策會逐步的。儘管它是漸進的，但我們一定會來刺激經濟並繼續提高消費者對供應鏈的信心，恢復其效率以及物流業務，特別是快遞業務。

For next year, we are looking at a low comp, and we are hoping -- we are hopeful that the business will continue to focus on quality of growth, and the economic rebound will again provide greater opportunities for us. So for 2023, we're seeing the likelihood of previously experienced fierce competition is low as everyone's starting to focus more gradually on quality of operations. And as well as what we have seen, the government's conviction in regulating competitive environment, ensuring healthy competitive dynamics taking place.

對於明年，我們正在尋找一個低收入，我們希望 - 我們希望業務將繼續關注增長質量，經濟反彈將再次為我們提供更大的機會。因此，到 2023 年，我們看到之前經歷過激烈競爭的可能性很低，因為每個人都開始逐漸關注運營質量。除了我們所看到的，政府對規範競爭環境、確保健康的競爭動態發生的信念。

And the industry growth has slowed down, yet the increase in volume in next year will be the target of everybody's focus in terms of growth because the installed base is there. So what we are doing, and again, is what we have been doing is laying the foundation of operational efficiency as well as quality of earnings, not only to ourselves but to our network partners in that extent that they are ready and they are prepared as well in seizing the opportunity that will arise.

而且行業增長已經放緩，但明年的銷量增長將成為大家關注的增長目標，因為安裝基礎在那裡。因此，我們正在做的，再一次，我們一直在做的是為運營效率和盈利質量奠定基礎，這不僅是為了我們自己，也是為了我們的網絡合作夥伴，因為他們已經做好準備，並且準備好善於抓住即將出現的機會。

Overall view is that in general, as the policy continue to ease and relax, the economic operations will begin to tend to normal. In that sense, then our focus will continue to highlight our strength, focusing on quality of services. And as we reach our profit target, we will further our primary goal of expanding market share.

總體來看，總體來看，隨著政策的不斷放鬆和放鬆，經濟運行將開始趨於正常。從這個意義上講，那麼我們的重點將繼續突出我們的實力，專注於服務質量。當我們達到利潤目標時，我們將進一步實現擴大市場份額的主要目標。

What we have seen in the past, the divergence of the marketplace is clear. The stronger will become stronger, and the profitability will provide even further support for accelerated growth. It will eventually be -- the winner will eventually be those who are well prepared, who has the capability of being their best, and time will tell. Time will certainly support our longer-term view that the industry growth has its potential, and the winners will take what it deserves.

我們過去所看到的，市場的分歧是顯而易見的。強者愈強，盈利能力將進一步為加速增長提供支撐。最終將是——勝利者最終將是那些準備充分、有能力做到最好的人，時間會證明一切。時間肯定會支持我們的長期觀點，即行業增長有其潛力，贏家將得到應有的回報。

Our next question will come from Lu Xu with Citi.

我們的下一個問題將來自Lu Xu with Citi。

(foreign language) So we noticed the RMB 0.01 lower on the unit transportation costs despite the higher fuel costs, but the unit sorting cost has increased year-on-year, and we like -- could the management share more on the unit cost reduction going forward? And where would the major cost reduction come from? And what would be the potential -- the cost reduction potential if we have any guidance? Or could you give us any color on that? And how should the capacity expansion plan should be in the future to -- more tailored to better optimize the utilization rate?

（外語）所以我們注意到，儘管燃料成本較高，但單位運輸成本降低了 0.01 元人民幣，但單位分揀成本同比增加，我們喜歡 - 管理層能否在單位成本降低方面分享更多往前走？主要的成本降低從何而來？如果我們有任何指導，成本降低的潛力是什麼？或者你能給我們任何顏色嗎？以及未來的產能擴張計劃應該如何——更有針對性地更好地優化利用率？

(foreign language)

（外語）

[Interpreted] So let me help translate. The hike, the oil price hike in the third quarter, the impact on our total cost per parcel is about RMB 0.03. As we all know that the domestic oil price increased by about 30%, and the global price is somewhere around 25% to 30%. So we have still a RMB 0.01 improvement on the per parcel transportation costs. It means that we have received benefit from the efficiency of transportation operations with a larger capacity, trailer trucks, as well planning and improvement of the low rate.

[翻譯] 所以讓我幫忙翻譯。加息，第三季度油價上漲，對我們每個包裹的總成本影響大約是0.03元人民幣。眾所周知，國內油價漲幅在30%左右，國際油價漲幅在25%到30%左右。所以我們在每個包裹的運輸成本上還有 0.01 元的改善。這意味著我們已經從更大容量、拖車的運輸運營效率以及低費率的規劃和改善中獲益。

Now on the sorting cost per parcel, it increased RMB 0.01 year-over-year. We have seen lower-than-expected volume as we have a proportionately higher fixed cost. Specifically, we have our own personnel in the sorting facility. So the scale leverage is diminished in that sense when volume is lower than expectation.

現在單件分揀成本同比增加0.01元。我們看到銷量低於預期，因為我們的固定成本比例較高。具體來說，我們在分揀設施中有自己的人員。因此，當交易量低於預期時，從這個意義上講，規模槓桿會降低。

And another factor impacting the sortation cost per parcel is the increased depreciation and amortization from new hubs and new equipment installation into putting in operation. Going forward, in the near term, what we will and we have seen and we will continue to benefit from our digitization and operational excellence improvement.

影響每個包裹分揀成本的另一個因素是新樞紐和新設備安裝投入運營的折舊和攤銷增加。展望未來，在短期內，我們將和我們所看到的，我們將繼續受益於我們的數字化和卓越運營改進。

Route planning, shift designing, total end-to-end coordination, all these will help us reduce per unit cost. In the longer term, as we have mentioned in the past, as we achieve our goal of expanding market share, more volume coming into our network, then we are able to realize even further cost productivity and efficiencies as our routes become more direct, as our number of sortation comes down. In other words, more and more of the parcel, greater portion of our parcel will only go through sorting 1 or even 0 sorting. And that will significantly reduce the per unit cost even further. So I hope this answers your question.

路線規劃、班次設計、全程端到端協調，所有這些都將幫助我們降低單位成本。從長遠來看，正如我們過去提到的那樣，隨著我們實現擴大市場份額的目標，更多的流量進入我們的網絡，然後我們能夠實現進一步的成本生產率和效率，因為我們的路線變得更加直接，因為我們的分類數量下降了。換句話說，越來越多的包裹，越來越多的包裹只會經過分揀1甚至0分揀。這將進一步顯著降低單位成本。所以我希望這能回答你的問題。

(foreign language)

（外語）

(foreign language)

（外語）

[Interpreted] As far as capital investment, we will continue to monitor macroeconomic conditions and we will continue to recalibrate our plan of investment. Although we do believe that the peak investment periods have been in the past, we've already gone past that because majority of our sorting hub and super sorting hubs have been established, and the ongoing CapEx expenditures, with a bigger portion of that would go towards some of those upgrades. Most of our infrastructure construction is already in place. So we do believe that the CapEx spending will be tapered off or held steady.

[解讀]在資本投資方面，我們將繼續監測宏觀經濟狀況，並繼續重新調整我們的投資計劃。雖然我們確實相信投資高峰期已經過去，但我們已經過去了，因為我們的大部分分揀中心和超級分揀中心已經建立，並且正在進行的資本支出支出，其中很大一部分將用於對其中一些升級。我們的大部分基礎設施建設已經到位。因此，我們確實相信資本支出將逐漸減少或保持穩定。

Next question will come from Frank Yip with Daiwa Capital Markets.

下一個問題將來自 Daiwa Capital Markets 的 Frank Yip。

(foreign language) So let me translate. So my question is, I got 2 questions, first related to the pandemic outbreak. Is it that given the year-to-date (inaudible) (40:31)Q3 parcel volume growth, is this mainly coming from the pandemic disruption? Or is it mainly related to the weak consumer expenditure? So if we are excluding for those pandemic disruption for the next year, so what kind of growth rate that we are targeting for?

（外語）所以讓我翻譯。所以我的問題是，我有兩個問題，第一個與大流行病爆發有關。考慮到今年迄今（聽不清）(40:31) 第三季度包裹量的增長，這是否主要來自大流行病的破壞？還是主要與消費支出疲軟有關？因此，如果我們排除明年的那些大流行中斷，那麼我們的目標增長率是多少？

And my second question is regarding to the divergence profitability amongst peers. So what is the key reason or the key factors that we have a better performance than the others?

我的第二個問題是關於同行之間的差異盈利能力。那麼我們比其他人表現更好的關鍵原因或關鍵因素是什麼？

(foreign language)

（外語）

[Interpreted] To your first question, the majority of the slowdown comes from the pandemic associated either prevention or restrictions or disruption on the supply chain. The consumers' spending is impacted by the larger environment of the overall logistics, the overall sentiment and certainly, the pandemic impact has a more significant negative impact.

[解釋]對於你的第一個問題，大部分放緩來自與預防或限製或供應鏈中斷相關的大流行。消費者的消費受到整體物流大環境、整體情緒的影響，當然，疫情的負面影響更為顯著。

The likelihood for next year, we believe the industry, it has an opportunity to reach a double-digit growth. But the reason is that we think, first of all, it has a low base. And then two, as we are seeing the country is becoming more and more capable of addressing sporadic outbreaks and becomes more responsive in addressing localized outbreaks. So we do think that the government -- the central government will gradually ease off some of the restrictions so that the economy will return to normal gradually.

我們相信該行業明年的可能性有機會達到兩位數的增長。但原因是我們認為，首先，它的基數較低。其次，正如我們所看到的，該國越來越有能力應對零星疫情，並在應對局部疫情方面變得更加敏感。所以我們確實認為政府 - 中央政府將逐步放鬆一些限制，以便經濟逐漸恢復正常。

So for our profitability better than our peers, we think that there are some of the -- perhaps 3 reasons. One is, for sure, our quality of services. We've often talked about the price premium that ZTO enjoys. And we have consistently focus on quality of services, differentiated quality of services, not only at the transit part by ensuring our network partners at the pickup and delivery are also up to par. And that really helped us maintain a level of price premium in the marketplace. On the other hand, also bringing in more customers who focus more on quality versus price.

因此，對於我們比同行更好的盈利能力，我們認為有一些 - 可能是 3 個原因。其中之一當然是我們的服務質量。我們經常談到中通享有的價格溢價。我們一直專注於服務質量、差異化服務質量，不僅在運輸部分，還確保我們的網絡合作夥伴在取貨和送貨方面也達到標準。這確實幫助我們在市場上保持一定的溢價水平。另一方面，也帶來了更多更注重質量而不是價格的客戶。

Second, our own initiatives, our own focus on end-to-end operational efficiencies also helped greatly ensuring our profitability, and certainly, we enjoyed better scale leverage than anyone else.

其次，我們自己的舉措，我們自己對端到端運營效率的關注也極大地幫助確保了我們的盈利能力，當然，我們享有比其他任何人都更好的規模槓桿。

Third, which is more important in overarching because it is our primary focus on balancing all 3 priorities: volume increase, market share gain, profit expansion, quality of services. And then further, we are exercising efforts and discipline not only to balance all 3 for ourselves, we are helping our network partners because then they are able to invest alongside of us further their sustainable growth -- so we do believe going into a time of rebound and recovery, we're in a much greater position to maintain our lead and then further expand our market presence.

第三，這在總體上更為重要，因為我們主要關注平衡所有 3 個優先事項：銷量增加、市場份額增加、利潤擴大、服務質量。此外，我們正在努力和遵守紀律，不僅為我們自己平衡這三個方面，我們還在幫助我們的網絡合作夥伴，因為這樣他們就能夠與我們一起投資，進一步促進他們的可持續增長——所以我們相信進入一個反彈和復蘇，我們處於更大的位置來保持我們的領先地位，然後進一步擴大我們的市場佔有率。

(foreign language) So my follow-up question is can you give some of the colors regarding our time (inaudible). So what exactly is the [concept of] contribution or development contribution right now?

（外語）所以我的後續問題是你能給我們的時代一些顏色嗎（聽不清）。那麼現在貢獻或發展貢獻的[概念]到底是什麼？

(foreign language)

（外語）

[Interpreted] Indeed, to diversify our product is one of our initiatives, and we have officially launched the standard express product, (foreign language), in 2021, which both differentiated services in terms of predelivery phone call and guaranteed timeliness and precision commitments in last-mile customer delivery. It has currently covered most of our major cities, perfect level cities in China, around over 300-plus cities, and their predelivery call notification is over 99%.

[解讀]的確，產品多元化是我們的舉措之一，我們在2021年正式推出了標準快遞產品（外文），既在派送前電話呼叫方面提供差異化服務，又保證了時效和精準承諾最後一英里客戶交付。目前已經覆蓋了我們大部分的主要城市，國內完善等級城市，大約300多個城市，送貨前電話通知率超過99%。

It has -- we have plugged into the mainstream ordering platform in the marketplace, and we are also ramping up the on-site delivery rate through strategic technology adjustment. Our daily volume for this particular product is over 400,000 packages to be and the customers are all enjoying this product. We have been successfully expanding this protocol or this -- yes, this protocol, and we are committed to expand the services further across the nation.

它已經——我們已經接入了市場上的主流訂購平台，我們也在通過戰略技術調整來提高現場交付率。我們這款特定產品的日銷量超過 400,000 包，客戶都喜歡這款產品。我們已經成功地擴展了這個協議或者這個——是的，這個協議，我們致力於在全國范圍內進一步擴展服務。

Our next question will come from Thomas Chong with Jefferies.

我們的下一個問題將來自 Jefferies 的 Thomas Chong。

(foreign language) My first question is about the e-commerce landscape. Given that we have been seeing short-form video, it is ramping up very quickly, may I ask management about our parcel volume mix among different platforms?

（外語）我的第一個問題是關於電子商務的前景。鑑於我們一直在看短視頻，它的增長非常快，請問管理層我們不同平台之間的包裹量混合情況如何？

And my second question is about our investment strategies. Given that we have been seeing our peers also investing in overseas and local on demand, I just want to get some color from the management with regard to our investment spend over the next couple of years, given that our profitability is very good.

我的第二個問題是關於我們的投資策略。鑑於我們一直看到我們的同行也在按需投資海外和本地，鑑於我們的盈利能力非常好，我只想從管理層了解未來幾年我們的投資支出。

Thank you for your question. I'll take these 2 questions. We have been -- ZTO is an open platform. We serve all types of e-commerce or forms of those. You're right that the video streaming, such as Douyin and Kuaishou, so and so on and so forth, they are all becoming more and more of the mainstream players, in addition to what we have previously seen the Tmall and Taobao. So as an open platform, we do serve all. In other words, the development of their growth, of their volume increases is consistent with our volume mix in serving these up and coming and new form of commerce.

謝謝你的問題。我會回答這兩個問題。我們一直——中通是一個開放平台。我們為所有類型的電子商務或其中的各種形式提供服務。沒錯，抖音、快手等等，除了我們之前看到的天貓、淘寶之外，都越來越成為主流了。所以作為一個開放平台，我們確實服務於所有人。換句話說，他們的增長，他們的數量增長的發展與我們為這些新興的商業形式提供服務的數量組合是一致的。

And the second question, investment strategy overseas. Since in the early years, about 10 years ago, we have started looking into Southeast Asia regions investment. However, we have come away with the experience that, first of all, those markets are small, much smaller. If you put some of the country together, they are probably equal to only 1 of our provinces domestically. So our resource disbursement, our resource allocation is according to the size. And certainly, there are certain countries in the Southeast Asia, their opportunity is similar to perhaps China about 10, 15 years ago. Their e-commerce development is also enjoying great upside and room for growth. So, yet, we have to be very careful because we know network operations. We know the partner model. Yet you have probably observed, there are more quality demand, quality of services becomes available only when directly vertically operated model when that is more efficient.

第二個問題，海外投資策略。早年，大約10年前，我們就開始關注東南亞地區的投資。然而，我們的經驗是，首先，這些市場很小，小得多。如果把全國的一些放在一起，大概只相當於我們國內的1個省份。所以我們的資源支出，我們的資源分配是根據規模。當然，東南亞有某些國家，他們的機會可能與大約 10 年、15 年前的中國相似。他們的電子商務發展也有很大的上升空間和增長空間。因此，我們必須非常小心，因為我們了解網絡操作。我們知道合作夥伴模型。然而你可能已經觀察到，有更多的質量需求，只有當直接垂直運營的模式更有效率時，服務質量才會變得可用。

So what we have done is, as we put our footprint overseas in Southeast Asia, in that sense, we also expanded resource secure procurement in Europe, in Africa, yet the expansion investment for overseas has to be careful. It has to be systemic.

所以我們所做的是，隨著我們在東南亞的海外佈局，從這個意義上說，我們也在歐洲，非洲擴大了資源安全採購，但海外擴張投資必須謹慎。它必須是系統性的。

What we have also observed recently, the price has been really -- the pricing capability has been really weak in the international arena. Part of it is, of course, the global pandemic impact. Another part of it is the whole industry is going through recalibration. [Han Yao] being one of the key players, who have shifted most of its volume to its own invested companies. And the pricing, in a way, is volatile. And so we are observing, we are watching. And on a greater sense, ZTO has always been prudent in its own investment strategy. So I can't tell you recently of certainty that we are going into international investment, but we are watching, we are observing and finding the right opportunity becomes important for us to allocate our rich resources.

我們最近也觀察到，價格真的 - 國際舞台上的定價能力真的很弱。當然，部分原因是全球大流行的影響。另一部分是整個行業正在經歷重新校準。 [Han Yao] 是關鍵參與者之一，他們已將大部分交易量轉移到自己投資的公司。在某種程度上，定價是不穩定的。所以我們在觀察，我們在觀察。而在更大意義上，中通在自身的投資策略上一直是審慎的。所以我最近不能肯定地告訴你我們正在進行國際投資，但我們正在觀察，我們正在觀察，找到合適的機會對我們分配豐富的資源變得很重要。

Last question will come from [Frank Yulais] with (inaudible).

最後一個問題將來自 [Frank Yulais]（聽不清）。

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

我們的問答環節到此結束。我想將會議轉回給閆慧萍，聽取任何閉幕詞。

Once again, thank you, everybody, for participating on our call. The company is in a great shape. We are taking the opportunity to better ourselves while the external macro environment continued to improve, and we are hopeful the rebound will certainly arrive in due time.

再次感謝大家參與我們的電話會議。公司狀況良好。外部宏觀環境持續向好，我們正趁機做大做強，相信反彈一定會如期而至。

Another thing I want to report to you or point out to you that the Board has recently approved an additional RMB 500 million buyback plan for us to ensure our return on interest, our return on our shareholders.

還有一件事我想向您報告或向您指出，董事會最近批准了一項額外的 5 億元人民幣回購計劃，以確保我們的利息回報，我們對股東的回報。

So I look forward to speaking with you all in the future. Thanks again for joining us today.

所以我期待著在未來與大家交談。再次感謝您今天加入我們。

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.]

[此記錄中標記為 [已翻譯] 的部分由現場通話中的口譯員說出。]