ZTO Express (Cayman) Inc (ZTO) 2024 Q2 法說會逐字稿

Good day, and welcome to the ZTO Express to announce second-quarter and half year 2024 financial results conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Songfei Li, Corporate Secretary and Director of Capital Markets. Please go ahead.

大家好，歡迎參加中通快遞公佈 2024 年第二季及半年度財務業績電話會議。 （操作員說明）請注意，正在記錄此事件。我現在將會議交給公司秘書兼資本市場總監李松飛。請繼續。

Thank you, May. 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; and Ms. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Ms. Yan, who will go through the financials and guidance.

謝謝你，五月。大家好，感謝您今天加入我們。該公司的業績和投資者關係簡報已於今天稍早發布，並可在該公司的投資者關係網站 ir.zto.com 上查閱。今天，中通通訊董事長兼執行長賴梅松先生接聽了電話；顏慧萍女士，財務長。賴先生將簡要概述公司的業務運作和亮點，隨後嚴女士將介紹財務狀況和指導意見。

They will both be available to answer your questions during Q&A session that follows. 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 investing lens 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. 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.

他們都將在接下來的問答環節回答您的問題。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》的安全港條款做出的前瞻性陳述。涉及已知投資領域的投資鏡頭相關。與前瞻性陳述中的結果有重大差異。有關此風險以及其他風險、不確定性和因素的更多資​​訊包含在該公司向美國證券交易委員會提交的文件中。

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. 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.

除法律要求外，本公司不承擔因新資訊、未來事件或其他原因而更新任何前瞻性聲明的義務。現在我很高興向大家介紹賴梅松先生。賴先生將用中文完整地閱讀他準備好的發言稿，然後我為他翻譯成英文。

(spoken in foreign language)

（用外語說）

Okay. Let me translate for Chairman first. Hello, everyone. Thank you for attending today's conference call. In the second quarter of 2024, ZTO maintained industry-leading service quality management, and with our parcel volume growth at 10% year-over-year that reached RMB8.45 billion, we achieved adjusted net income of RMB2.81 billion, which increased 11% over last year, demonstrating continued strong profitability.

好的。我先給主席翻譯一下。大家好。感謝您參加今天的電話會議。 2024年第二季度，中通持續維持業界領先的服務品質管理，包裹量年增10%，達到人民幣84.5億元，實現調整後淨利 28.1億元，較上年同期成長10%。成長11%，顯示持續強勁的獲利能力。

In the second quarter, despite macroeconomic softness, driven by booming development of e-commerce promotions online consumption maintains relatively high growth. China's express delivery industry increased 21.3%, exceeding expectations. However, the proportion of low-priced e-commerce parcels continue to trend up and price competition further intensified, while prioritizing service quality. This deal continues to among service quality to process and the scale to drive sustainable and healthy development of the entire network.

二季度，儘管宏觀經濟疲軟，但在電子商務蓬勃發展的推動下，網路消費仍保持較高成長。中國快遞業成長21.3%，超出預期。但低價電商包裹佔比持續上升，價格競爭進一步加劇，同時優先考慮服務品質。本次交易持續提升服務品質、流程與規模，帶動整個網路持續健康發展。

During the second quarter, upon further elimination of unprofitable volumes, our market share contracted by 2 percentage points compared to the same period last year. At the beginning of this year, across all three of our major metrics, we put greater expertise and quality while maintaining a scale advantage towards level and appropriate level of profit. We directed attention and resources towards upgrading the customer mix, refining differentiated products and services and incoming brand awareness and customer satisfaction. Our last-mile development, we implemented NPM initiatives to explore opportunities to reduce last month delivery costs and improve the profitability for all is and careers.

第二季度，在進一步剔除無利可圖的業務後，我們的市佔率較去年同期下降了2個百分點。今年年初，在我們的所有三個主要指標中，我們投入了更多的專業知識和質量，同時保持規模優勢，以達到水平和適當的利潤水平。我們將注意力和資源用於升級客戶結構、完善差異化產品和服務以及提高品牌知名度和客戶滿意度。在最後一英里的發展中，我們實施了 NPM 舉措，以探索降低上個月交付成本並提高所有行業和職業盈利能力的機會。

In the second quarter, ZTO's end-to-end delivery time rep top among Tongda peers and the customer complaint rate continued to decrease. Meanwhile, with the improved response time and on-demand service capability, the ratio of retail parcels was further extended. As the optimization of revenue structure partially alleviated unit price pressure, driven by price competition, our ASP was flat. Combined with the cost efficiency gain and a reasonable SG&A structure, both the unit profit and the total profitability remained industry leading.

第二季度，中通端對端配送時效名列通達同業前列，客戶投訴率持續下降。同時，隨著回應時間和按需服務能力的提升，零售包裹比例進一步擴大。由於收入結構的最佳化部分緩解了價格競爭帶來的單價壓力，我們的平均售價持平。結合成本效率提升和合理的SG&A結構，單位利潤和總盈利能力均保持行業領先。

Entering into the second half of the year, the industry volume kept a strong growth momentum. Meanwhile, despite the intense price competition in the production regions, we observed a limited room for further price cuts given the typical cost-plus pricing model. It's time for the entire express industry shift from high-quantity to high-quality development, bringing to fulfill social viability and serve capital objectives. ZTO's leadership action to transform from high quantity to high quality stems from our long-lasting focus on the best weekend and achieve balanced among quality, profitability and scale.

進入下半年，產業體量持續保持強勁成長動能。同時，儘管產區價格競爭激烈，但考慮到典型的成本加成定價模式，我們觀察到進一步降價的空間有限。整個快遞業已經從高數量轉向高品質發展，實現社會活力、服務資本目標。中通從高數量轉型為高品質的領先之舉，源自於我們對最佳週末的長期關注，實現品質、獲利和規模的平衡。

Considering the market conditions, we work more effort on company brand awareness and recognition on the premise of achieving scale advantage to volume loops. In addition, we are committed to actively address the interest and needs of the network partners and peers, specific actions under implementation in some. First, we will revamp and improve network policies to ensure performance relevancy, transparency and fairness with clear rewards or recommend effectiveness. Second, we will continuously enhance service quality with refined indicators closely tied to performance evaluation. Our tailor-made support and for underperforming ours to drive high quality as well as differentiated services.

考慮到市場情況，我們在實現規模優勢到銷售循環的前提下，更加重視公司品牌知名度和認可度。此外，我們致力於積極解決網路合作夥伴和同行的利益和需求，具體行動正在實施中。首先，我們將修改和完善網路政策，以確保績效相關性、透明度和公平性，並具有明確的獎勵或推薦有效性。二是不斷提升服務質量，細化指標，與績效考核緊密結合。我們為表現不佳的客戶提供量身定制的支持，以推動高品質和差異化的服務。

Third, we will firmly advance the last-mile profit allocation strategy promote courier's proactiveness to increase the retail post ratio and achieve more income. Fourth, we will accelerate the expansion of last-mile coverage, larger outlook to invest in equipment, establish direct linkage to a last mile proposed, reducing delivery costs and the free delivery personnel concentrate on service last-mile customers. Through consolidation of resources, we intend to provide solutions that alleviate delivery cost pressure for the whole industry. Fifth, we will further enhance our products and increase the penetration of high-end products, strengthened collaboration with online platform and leverage ZTO's logistic ecological resources to expand capability of comprehensive supply chain, improving brand awareness and the customer appreciation.

第三是堅定推動最後一公里利潤分配策略，調動快遞員主動性，提高零售郵比，實現增收。四是加速擴大最後一公里覆蓋範圍，加大設備投入，建立最後一公里直達連動，降低配送成本，免費派送人員集中服務最後一公里客戶。我們希望透過整合資源，為整個產業提供緩解交付成本壓力的解決方案。五是進一步提升產品質量，提高高端產品滲透率，加強與線上平台的合作，利用中通物流生態資源，拓展綜合供應鏈能力，提升品牌知名度與顧客滿意度。

Sixth, be vigilant and maintain the sense of prices facing market uncertainties and fluctuations. We will increase effectiveness of communication with our network partners, unifying and reinforcing confidence and advocate that balance between long-term and short-term future, gaining network stability. Despite uncertainties in the macro environment, the express delivery industry has demonstrated resilience across economic cycles by offering robust support for the advancement of digital economy and improving circulation efficiencies. We will seize opportunities in front of challenges, including intensified industry competition.

六是面對市場不確定性與波動，保持警覺、保持價格理智。我們將提高與網路合作夥伴的溝通有效性，團結和增強信心，倡導長期與短期未來的平衡，獲得網路的穩定。儘管宏觀環境存在不確定性，快遞產業展現了跨經濟週期的韌性，為數位經濟發展、提升流通效率提供了有力支撐。面對挑戰，包括產業競爭的加劇，我們將抓住機會。

ZTO will focus on service quality, further last-mile strategic objective and enhanced profitability for all as well as couriers by establishing unique competitive advantages so as to gradually and satisfactorily differentiate ourselves from the rest of Tongda in brand recognition and customer satisfaction, providing more choices for customers for consumers and customers. We're aiming to create value for the country, society as well as employees and shareholders. Now let's hear from Huiping Yan about our financial results and targets.

中通將聚焦於服務質量，進一步實現最後一公里的戰略目標，透過建立獨特的競爭優勢，為所有人和快遞公司提高盈利能力，逐步在品牌認知度和客戶滿意度方面與通達其他公司形成良好的差異化，為客戶提供更多的選擇為客戶 為消費者和客戶。我們的目標是為國家、社會、員工和股東創造價值。現在讓我們聽聽顏惠平介紹我們的財務表現和目標。

Thank you. Thank you, Chairman Lai and Sophie. 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 an changes refer to the year-over-year comparisons. Detailed financial performances unit economics and cash flow information are posted on our website, and I'll only go through some of the highlights here. In the second quarter, we adhered to the principle of profitable growth and achieved a 10.9% increase in adjusted net income to reach RMB2.8 billion while continuing to improve the quality of services and brand value.

謝謝。謝謝賴主席和蘇菲。大家好。當我查看我們的財務數據時，請注意，除非特別提及，否則所有引用的數字均以人民幣為單位，變化是指同比比較。詳細的財務表現、單位經濟效益和現金流資訊發佈在我們的網站上，我在這裡僅介紹一些重點內容。第二季度，我們堅持獲利成長原則，在持續提升服務品質和品牌價值的同時，實現調整後淨利成長10.9%，達到人民幣28億元。

Our parcel volume grew 10.1% to $8.5 billion. We continue to fine-tune resource allocation to achieve optimal balance between volume and profit in the second quarter. ASP for our core express delivery business stayed flat at RMB 1.24 as the impact of decline in the average weight per parcel, an increase in incremental volume incentives were offset by the positive impact of the volume increase in non-e-commerce parcels. Our total revenue increased 10.1% to $10.7 billion. The cost of revenue was RMB0.1 billion, which increased 10.4%. Overall unit cost for the core express delivery business increased 0.7% or RMB0.01.

我們的包裹量增加了 10.1%，達到 85 億美元。我們持續微調資源配置，以實現第二季量利的最佳平衡。我們核心快遞業務的平均售價持平於 1.24 元，原因是每件包裹平均重量下降、增量激勵措施增加的影響被非電商包裹數量增加的正面影響所抵消。我們的總收入成長了 10.1%，達到 107 億美元。收入成本為人民幣1億元，成長10.4%。核心快遞業務整體單位成本成長 0.7%，即 0.01 元。

Specifically, line haul transportation costs per parcel decreased 6.8% to RMB0.39, driven by improvements in fleet operations with better resource utilization. Unit sorting costs increased 4.6% to RMB0.26 due to increased D&A cost on new equipment and facilities. Unit KA costs or increased RMB0.04 in line with KA revenue increase. Gross profit increased 9.6% to RMB3.6 billion, and gross profit margin rate decreased 0.1 points to 33.8%. Consistent with gross profit, income from operations increased 11.7% to RMB3.2 billion and associated margin rate grew 0.4 points to 30%.

具體而言，由於車隊營運改善以及資源利用率提高，每個包裹的長途運輸成本下降 6.8% 至 0.39 元。由於新設備和設施的研發成本增加，單位分類成本增加 4.6% 至 0.26 元。隨著 KA 收入的增加，單位 KA 成本或增加人民幣 0.04 元。毛利成長9.6%至人民幣36億元，毛利率下降0.1個百分點至33.8%。與毛利一致，營業收入成長 11.7% 至 32 億元，相關利潤率成長 0.4 個百分點至 30%。

SG&A expenses, excluding SBC, as a percentage of revenue grew 0.3 points to 5.5%. Corporate cost efficiencies remained intact. Operating cash flow was RMB3.5 billion, which decreased 7.5%, mainly due to dividend tax and increase in financing or loans to our network partners. Adjusted EBITDA was RMB4.3 billion, an increase of 11.7%. Capital expenditure totaled RMB1.3 billion for Q2 or RMB2.9 billion for the first half of the year. With that, we anticipate annual CapEx in 2024 to come in below RMB6 billion, as previously planned.

SG&A 費用（不包括 SBC）佔收入的百分比增加了 0.3 個百分點，達到 5.5%。企業成本效率維持不變。營運現金流為人民幣35億元，下降7.5%，主要是由於股息稅以及對網路合作夥伴的融資或貸款增加所致。調整後EBITDA為人民幣43億元，成長11.7%。第二季資本支出總額為 13 億元，上半年資本支出為 29 億元人民幣。因此，我們預計 2024 年的年度資本支出將低於先前計劃的 60 億元。

The company has announced an interim cash dividend of USD35 per ADS and ordinary share for the six months ended June 30, 2024, which is a 40% payout ratio, to holders of its ordinary shares and ADS as of the close of business on September 10, 2024. Now, moving on to our guidance, we stay committed to our balanced approach to sustainable and profitable growth, prioritizing improvements in quality of services and development of differentiated products and services to enhance brand recognition and value. We are reiterating our 2024 volume growth guidance of 15% to 18%. These estimates represent management's current and preliminary view, which are subject to change. This concludes our prepared remarks. Let's please open the line for questions. Thank you.

該公司宣布，截至2024 年6 月30 日止六個月，向截至9 月10 日收盤時的普通股和美國存託股持有人派發每股美國存託股和普通股35 美元的中期現金股息，派息率為40% ，2024年。認知度和價值。我們重申 2024 年銷售成長指引為 15% 至 18%。這些估計代表了管理層當前和初步的觀點，可能會發生變化。我們準備好的演講到此結束。讓我們打開提問熱線。謝謝。

(Operator Instructions) Ronald Keung, Goldman Sachs.

（操作員指令）Ronald Keung，高盛。

(spoken in foreign language) Thank you, management. First is, about as volume of 10% and slower than the industry. So as we talked about in the announcement as well, volume is not an important as it brings scale leverage. So I want to hear your guidance to be implied second half.

（用外語發言）謝謝領導。首先，銷量約為 10%，低於行業水平。正如我們在公告中談到的，成交量並不重要，因為它帶來了規模槓桿。所以我想聽聽你對下半年的指導。

So will we expect some fine-tuning of our strategy to maximize the scale, part of volume and profitability? And second is, for the unit profit, we see mostly stable. That implies the underlying unit cost actually has been quite stable as well. Is there further room to improve on operating efficiencies? Or have we maxed out all of the efficiencies that were done in the past? What further could we do to improve the operating leverage of the business?

那麼，我們是否會期望對我們的策略進行一些微調，以最大化規模、部分銷售和獲利能力？其次，對於單位利潤，我們認為基本上穩定。這意味著基本單位成本實際上也相當穩定。營運效率還有進一步提升的空間嗎？或者我們已經最大化了過去所做的所有效率？我們還可以採取哪些措施來提高業務的營運槓桿？

(spoken in foreign language)

（用外語說）

Thank you, Ron, for your question. So let me translate for the Chairman. First question, indeed, the parcel volume for the total industry has grown, and it exceeded our expectations. In the second half of the year, we do have the following plan. Our market share decreased 2%, the main reason being that, first, there are a lot more price competition or price competition intensified.

謝謝你，羅恩，你的問題。那我來為主席翻譯吧。第一個問題，確實，整個產業的包裹量有所成長，超出了我們的預期。下半年我們確實有以下方案。我們的市佔率下降了2%，主要原因是，一是價格競爭增加或價格競爭加劇。

There are a lot more ineffective, or we call it, ineffective indeed, it is just below the cost, it's priced below the cost. So the overall proportion of nonprofitable volume has increased. So what we do is we very effectively controlled such volume coming into our network because we adhered to our strategy that's set out in the beginning of the year to focus more on quality of services, and with that, to achieve appropriate level of profit, and in turn, market share. If we look at it in an overall perspective, our capacity and the volume are in tune.

還有很多無效的，或者我們稱之為無效的，它只是低於成本，它的定價低於成本。因此，非盈利交易量的整體比例有所增加。因此，我們所做的是非常有效地控制了進入我們網路的流量，因為我們堅持了年初制定的策略，更多地關注服務質量，從而實現適當的利潤水平，並且反過來，市場份額。如果從整體來看，我們的容量和數量是一致的。

They are reasonably matched. In the first half of the year, the results that we achieved is out of the range of our 15% to 18% guidance for the whole year, which means that in the second half of the year, we should at least to achieve 18% of growth in order to come into the range of our previous guidance. And based on the current conditions and current view of our businesses, we have a high confidence of achieving such target. So more from a theoretical perspective, if we want more volume, we can simply reduce the price.

他們的搭配還算合理。上半年我們取得的成績超出了我們全年15%到18%的指導範圍，也就是說下半年我們至少要達到18%增長以進入我們之前的指導範圍。基於目前的情況和我們業務的當前看法，我們對實現這一目標充滿信心。所以更多從理論上來說，如果我們想要更多的銷量，我們可以簡單地降低價格。

But we didn't choose to do that, again, because we wanted to focus on profitable growth while achieving reasonable match between the capacity and our market share volume gain, we should be able to achieve healthy growth on both. Second half of the year, again, we will continue to focus on improving quality of services, developing differentiated products to achieve a reasonable level of profit and volume balance. Second part of the question, indeed, for the entire industry through all these years of fine-tuning of operations and investment of automation and so on and so forth, the unit cost productivity gain has been declining. For us, however, in the first half of the year, we exceeded our goal for cost productivity gain for the year.

但我們沒有選擇這樣做，因為我們希望專注於獲利成長，同時實現產能和市場份額成長之間的合理匹配，我​​們應該能夠在兩者上實現健康成長。下半年，我們將持續專注於提升服務質量，開發差異化產品，實現利潤與銷售的合理平衡。問題的第二部分，確實，對於整個行業來說，透過這些年來對營運的微調和自動化的投資等等，單位成本生產率的增益一直在下降。然而，對我們來說，今年上半年，我們超越了全年成本生產力提高的目標。

We have invested for over 26 super sorting centers. There are reserves, ample reserves for capacity release in the future. We do believe that the capacity installed, as well as its flexibility in meeting as up to 50% of volume demand, we are still well on track to consistently and gradually release meaningful cost efficiency going forward. Then for the unit profitability, based on the overall capacity as well as the reserve, we think that the strategy being consistently carried out, there will be stability in our profit growth on a total level as well as unit level.

我們投資了超過26個超級分類中心。儲備是有的，未來產能釋放的儲備充足。我們確實相信，憑藉已安裝的容量以及滿足高達 50% 的容量需求的靈活性，我們仍然有望持續並逐步釋放有意義的成本效率。然後對於單位獲利能力，基於整體產能和儲備，我們認為只要策略持續執行，我們的利潤成長在整體水準和單位層面都會保持穩定。

Qianlei Fan, Morgan Stanley.

範錢雷，摩根士丹利。

(spoken in foreign language) Let me translate to myself. Congratulations on the very resilient profit growth in the same quarter. I have two questions: the first question is about the retail process. In announcement, company mentioned that we are on track to double our retail parcel volume.

（用外語發言）我自己翻譯。恭喜同一季度非常有彈性的利潤成長。我有兩個問題：第一個問題是關於零售流程的。在公告中，公司提到我們的零售包裹量預計將增加一倍。

And would you please remind us our current daily retail parcel volume, the percentage in operating volume in our total volume, our target for this year and probably the target to achieve for the next few years? The second question is about cost reduction. We understand that the competition of express delivery business is not only about cost reduction at the line-haul, but also about cost reduction at the home network, especially at your network partners and last mile. So would you help us to better understand our initiatives to help the network and last mile to reduce cost and potential cost-saving room in the next few years?

請您介紹我們目前每天的零售包裹量、營業量佔總數量的比例、我們今年的目標以及未來幾年可能要達到的目標？第二個問題是關於降低成本。我們明白，快遞業務的競爭不僅是長途運輸成本的降低，更重要的是家鄉網路的成本降低，尤其是網路合作夥伴和最後一公里的成本降低。那麼您能否幫助我們更了解我們為幫助網路和最後一哩路降低成本以及未來幾年潛在的成本節省空間所採取的舉措？

(spoken in foreign language)

（用外語說）

Thank you very much for your question. Currently, our daily volume of non-ecommerce parcels exceeded 5.4 million, and our year-end goal is to achieve daily volume average 6 million packages. You know that in last year, we started off with daily volume about 4 million packages, and we are on track to achieve our goal to double that volume because the peak volume would most likely exceed 7 million parcels per day. And this is our goal, and we are confident to achieve that. How do we achieve that?

非常感謝您的提問。目前，我們日均非電商包裹量已超過540萬件，年底目標是日均600萬件。您知道，去年我們的日處理量約為 400 萬個包裹，我們預計將實現將處理量翻倍的目標，因為峰值處理量很可能會超過每天 700 萬個包裹。這就是我們的目標，我們有信心實現這個目標。我們如何實現這項目標？

And Chairman went into the details, so give me some time, I will go through the specifics with you. First of all, it's related to increasing the ratio, is what we referred to in our remarks, of non-e-commerce packages as a ratio to our delivery total. So in other words, if I deliver 100 packages and there needs to be at least 6 packages pick up as non-e-commerce. So one other thing, there are four specific strategies that we implemented to improve the portion of non e-commerce or what we call it, individual parcels or retail parcels.

主席談到了細節，所以給我一些時間，我會和你們一起討論細節。首先，這與提高非電子商務包裹占我們交付總量的比例有關，這就是我們在評論中提到的。換句話說，如果我配送 100 個包裹，那麼至少需要有 6 個包裹作為非電子商務來提貨。另一件事是，我們實施了四種具體策略來提高非電子商務或我們所說的個人包裹或零售包裹的比例。

One is to enhance consumers' willingness to send parcels at our post through deliberate marketing effort and the promotions in using of digital tools. So the handheld, building your own focused group or targeted group is something that are being implemented. Number two, training our couriers to improve their awareness of serving customers in the customer loyalty. So more personalized, more higher-quality standards issued to our couriers so that they are able to be recognized having the capability of serving two doors as well as pickup from the customers.

一是透過刻意行銷和數位化工具的推廣，提高消費者到郵局寄件的意願。因此，手持設備、建立自己的焦點小組或目標小組是正在實施的事情。第二，培訓快遞員，提高服務客戶的意識，提高顧客忠誠度。因此，向我們的快遞員發出了更個人化、更高品質的標準，以便他們能夠被認可為具有為客戶提供兩門服務以及為客戶取貨的能力。

Number three, shifting quality management of the delivery services, focus from post-event to pre-event, so thereby reducing the customer complaints or anticipate any potential problems that could arise, so hence, improve the overall experience. Number four, strengthening the corporation with e-commerce platforms, enhancing direct coordination between the headquarters and Tongda platforms. Currently, while we have achieved direct settlement process with as well as, improving the second part is reducing the cost of the last mile. The initiatives, there are two folds: the first one is relating to the couriers, what we call it the policy or initiatives, which started last year.

第三，轉移交付服務的品質管理，將重點從事後轉移到事前，從而減少客戶投訴或預測可能出現的任何潛在問題，從而改善整體體驗。四是加強與電商平台的連動，加強總部與通達平台的直接連動。目前，我們在實現直接結算流程的同時，改善第二部分是降低最後一公里的成本。這些舉措有兩個面向：第一個與快遞公司有關，我們稱之為政策或舉措，是去年開始的。

The goal is to increase the income of our couriers. So early on in our remarks, we talked about allowing the couriers to achieve market pricing or gaining the majority share of the market pricing is to incentivize them so that they are motivated to make a special trip to go pick up. The second part of the initiatives relates to improving the outlet's profitability. Last year, we have about close to 2,000 outlets installed machinery and equipment that enabled them to provide package that are sorted or directed or destined directly to post. Chairman gave an example.

目標是增加我們快遞員的收入。所以前面我們講到，讓快遞員實現市場定價或獲得市場定價的大部分份額，就是為了激勵他們，讓他們有動力專程去取件。該舉措的第二部分涉及提高商店的盈利能力。去年，我們為大約 2,000 個網點安裝了機器和設備，使他們能夠提供經過分類、定向或直接郵寄的包裹。主席舉了一個例子。

In the past, the couriers have to go to the outlet, help sorting or they have to ride to the outlets to pick up the packages that are bound for their delivery service area. So with the installation of those machines, the outlets no longer rely on manual sortation. So the riders or the couriers do not need to travel to the outlets anymore. And instead, they will receive packages directly from the outlet, either through autonomous driving vehicles or electrical vehicles that are utilized by the outlet to send those packages directly to the couriers.

過去，快遞員必須前往網點幫忙分揀，或騎車到網點取運送到其配送服務區域的包裹。因此，隨著這些機器的安裝，網點不再依賴人工分類。這樣騎士或快遞員就不再需要前往網點了。相反，他們將直接從網點接收包裹，無論是透過自動駕駛車輛還是網點使用的電動車將這些包裹直接發送給快遞員。

So that the couriers can work within a much smaller and more concentrated service area radius, and hence, allowing them more time and more focus on serving to door and also pick up from the door. Another aspect of this second initiatives relates to the outlet. Sending the packages directly to the couriers as well as sending the packages directly to last-mile post, the outlet owners are able to reduce their delivery cost. For example, in the past, each package is, on average, would cause the outlet about RMB0.80 for the carriers to deliver.

這樣快遞員就可以在更小、更集中的服務區域半徑內工作，讓他們有更多的時間和精力專注於送貨上門和上門取貨。第二項舉措的另一個面向與出口有關。將包裹直接發送給快遞員以及將包裹直接發送到最後一英里郵政，門市所有者能夠降低運輸成本。例如，過去，平均每個包裹需要業者派送約人民幣0.80元。

Now, couriers would then put part of their packages into the post, which will share their RMB0.80, so RMB0.40 out of that RMB0.80 will go to the post. With that initiative that we implemented, the direct linkage between outlet and the post would allow a greater portion of close to 60% or 40% of the packages going to post directly. So then the outlet does not need to pay the whole RMB0.80. So we estimated and we calculated, of that RMB0.40, because it still needs to be sent to the post, the outlet owners would pay, on average, between RMB0.10 to RMB0.20 to achieve that direct delivery to the post.

現在，快遞員會將部分包裹放入郵局，郵局將分享他們的 0.80 元人民幣，因此這 0.80 元人民幣中的 0.40 元將進入郵局。透過我們實施的這項舉措，商店和郵政之間的直接聯繫將允許近 60% 或 40% 的包裹中的大部分直接郵寄。那麼門市就不需要支付全部0.80元了。所以我們估算、算了一下，這0.40元，因為還需要郵寄，那麼店家平均要付0.10元到0.20元之間，才能實現直效郵件。

So first of all, the RMB0.40 reduction in payment to the carrier and then a cost of about RMB0.10 to RMB0.20 to send those packages to the post, the outlets could net about a RMB0.20 or so saving on the cost. Going forward, we are going to focus on these initiatives in full implementation, and we will achieve a goal of not only improving the outlet profitability as well as the couriers' earnings, so hence, the long-term effect would be for the overall network stability to be established because the profit level will be increased. And it will provide support for our overall delivery fee reduction, not only for us, but also potentially as a solution to the whole industry. Not an overnight ago. We are working towards this change in shift from volume to quality, to focus on more differentiated products and services so that ZTO could break away from marginalized price competition and establish a unique competitive advantage.

因此，首先，向承運商支付的費用減少了 0.40 元人民幣，然後將這些包裹寄往郵政局的成本約為 0.10 元至 0.20 元人民幣，網點可以在運費上節省約 0.20 元人民幣左右。展望未來，我們將圍繞這些舉措全面實施，我們將達到不僅提高網點盈利能力，而且提高快遞員收入的目標，因此，長期影響將是整個網絡由於利潤水平將提高，因此將建立穩定性。它將為我們整體送貨費的降低提供支持，不僅對我們來說，而且也有可能成為整個行業的解決方案。不是一夜之前。我們正在努力實現從數量到品質的轉變，專注於更具差異化的產品和服務，使中通擺脫邊緣化的價格競爭，建立獨特的競爭優勢。

[Lou Jang], Haitong.

[Lou Jang]，海通。

(spoken in foreign language) First of all, congratulations to the company for assuming good performance in the second quarter. My question is about the capital expenditure plan for the year 2024 and '25 and number period. I'd like to know which area of the investments were allocated to and how we make the capital expenditure that? Second question is about the cost reduction place about the whole process in the future.

（外語）首先祝賀公司第二季取得了良好的業績。我的問題是關於 2024 年和 25 年期間的資本支出計劃。我想知道投資分配到了哪些領域以及我們如何進行資本支出？第二個問題是關於未來整個​​流程的成本降低的地方。

(spoken in foreign language)

（用外語說）

(interpreted) Thank you very much for your question. Well, the first question is about the CapEx. In the past, we have been consistently investing in CapEx, mainly to build sortation centers and established transit capabilities. So today, most of our super sorting centers were self-owned and above 90% to be specific, if I may supplement.

（翻譯）非常感謝你的提問。嗯，第一個問題是關於資本支出的。過去，我們一直在資本支出上進行持續投資，主要是為了建立分類中心和建立運輸能力。所以今天我們的超級分類中心大部分都是自有的，具體來說90%以上，我補充一下。

So going forward, we won't be in need of expanding our CapEx spending. Based on the economic development, some areas or weaker areas, we have also reserved base 200 to 300-hectare acres, for example. If our volume demand increases onefold or even twofold, we have sufficient reserves already there. So we don't need to spend capital to acquire further more significant land use rights.

因此，展望未來，我們將不需要擴大資本支出。根據經濟發展情況，一些地區或實力較弱的地區，我們也保留了基地，例如200到300公頃。如果我們的需求量增加一倍甚至兩倍，我們已經有足夠的儲備。所以我們不需要花費資金來獲得進一步更重要的土地使用權。

We just need to either develop them or upgrade them. The consideration, however, do need to be given to our initiatives in the longer term, they have a lot being comprehensive logistic capabilities, for example, warehousing or in warehouse processing, LTL businesses or those ecosystem businesses do rent spaces from us so that they are able to form a comprehensive and higher-efficient, efficiently co-located product and services by utilizing our capacity. Going forward, it is very clear that acquisition for land use rights, building supercenters are going to be very minimal. The growth or putting in line of services, putting services, the capacity is very much directed or matched with our anticipated demand of capacity in this sortation, transportation and all the segments of our operations.

我們只需要開發它們或升級它們。但是，我們的舉措確實需要考慮到更長遠的問題，它們有很多是綜合物流能力，例如倉儲或倉庫加工，零擔業務或那些生態系統業務確實向我們租用空間，這樣他們能夠利用我們的能力形成全面、高效率、高效率的同地產品和服務。展望未來，很明顯，收購土地使用權、建造超級中心的數量將非常少。服務的成長或投入、投入服務、容量在很大程度上與我們在分類、運輸和我們營運的所有部門中的預期容量需求相符。

We are able to foresee with a very clear visibility, and going forward, we will be able to generate increasing free cash flow, where we talked about giving back return to our shareholders. It's based on the fact that the cash generation will continue to be healthy, and the CapEx spending will be stable or reducing going into 2024, 2025, so that our overall return to the shareholders will increase. The second part relates to the question on how we are able to continue to reduce the operating cost. Indeed, as you look into the past, even though ZTO has been leading this effort, but for the whole industry, it has been continuously achieving high cost efficiencies.

我們能夠非常清楚地預見到，展望未來，我們將能夠產生越來越多的自由現金流，我們談到了回報股東。這是基於以下事實：現金產生將繼續保持健康，並且資本支出支出將在 2024 年、2025 年保持穩定或減少，從而使我們對股東的整體回報將會增加。第二部分涉及我們如何能夠持續降低營運成本的問題。確實，回顧過去，儘管中通一直在這方面處於領先地位，但對於整個產業來說，它一直在不斷實現高成本效率。

In the past, what we've been doing, and what we've been able to achieve greater results or ahead of everybody, is that our connection between the outlets and the sortation center has been more advanced or more ahead of everybody. Now going forward, as we continue to rely on lean operations, looking into greater visibilities of each of the segment of our operations. We are still able to, as volume increases, as our productivity gain continue to release, we still believe there are plenty of opportunities for us to achieve scale leverage as well as, on a unit level, continued cost efficiency. And then, the second consideration, which is more of a long-term but steady visibility to us is that because of the route planning, we talked about in the past, the tri-layer throughput concept, as again, we said earlier, we were able to improve the connectivity between the outlets and sortation center.

過去我們一直在做的，能夠取得更大的成績或領先大家的，就是我們網點和分揀中心之間的連結更加先進或更加領先大家。現在，展望未來，我們將繼續依靠精實運營，尋求提高每個營運部門的可見度。我們仍然能夠，隨著銷售量的增加，隨著我們生產力的提高繼續釋放，我們仍然相信我們有很多機會實現規模槓桿以及在單位層面上持續的成本效率。然後，第二個考慮，對我們來說更多是一個長期但穩定的可見性，因為路線規劃，我們過去談過，三層吞吐量的概念，就像我們之前說過的那樣，我們能夠改善網點和分類中心之間的連結。

Going forward, as volume increases, we are able to establish greater connectivity between the origination outlets to a destination sorting center, or the third player being the origination better to the destination outlets, or the origination outlets to destination outlets. All these is, simply put, an effort to reduce the number of sortation. In the past, we were at the level of 2.5 per parcel. We are reducing it now to 2.09 and continue to decrease because of better our planning and volume increases. We estimated for each onetime reduction of the sortation, we are able to reduce about $0.25 being $0.10 in sortation and $0.15 for transportation.

展望未來，隨著數量的增加，我們能夠在始發地門店與目的地分揀中心之間建立更大的連接，或者第三個參與者更好地從始發地到目的地網點，或者始發地網點到目的地分店。所有這些，簡單來說，都是為了減少分類次數。過去我們是每包2.5的水平。我們現在將其減少到 2.09，並且由於我們更好的規劃和數量的增加而繼續減少。我們估計，每次減少分揀，我們就能減少約 0.25 美元，其中分揀費用為 0.10 美元，運輸費用為 0.15 美元。

With that, we have clear room for the future to further reduce our unit level cost because of this tri-layer throughput concept. Market share, as we looked at the first half of the year, declined two points. This is still matched relatively well with our capacity or capacity in services. Anywhere outside of that range will not generate as effective economy of scale and will cause us to have increased marginal cost with diminished marginal benefit.

這樣，由於這種三層吞吐量概念，我們未來有進一步降低單位級成本的明確空間。從我們上半年的情況來看，市佔率下降了兩個百分點。這和我們的能力或服務能力還是比較相符的。超出該範圍的任何地方都不會產生有效的規模經濟，並將導致我們的邊際成本增加，邊際效益減少。

So we are, as you asked the question, how we plan our capital investment and deployment. It's very much a science related to what we are able to serve, what are the capacity build up, what we anticipate to come with the most optimal volume and optimal cost. Thank you for your question.

因此，正如您所問的問題，我們如何規劃資本投資和部署。這在很大程度上是一門科學，涉及到我們能夠提供什麼服務、能力建設是什麼、我們期望以最佳數量和最佳成本獲得什麼。謝謝你的提問。

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

我們的問答環節到此結束。我想將會議轉回進行閉幕式。

Thanks again for your continued attention and support. Our strategy shift in the beginning of the year has been very effective for us, specifically in improving the non-e-commerce packages. It's reflected in our bottom line. Balanced approach will continue to be our future focus, including the last-mile initiatives. We believe we are building long-term competitive advantages so that we are differentiated from the rest of Tongda. We look forward to speaking with you in the future, and thanks again for joining today's call.

再次感謝您一直以來的關注與支持。今年年初我們的策略轉變對我們非常有效，特別是在改善非電子商務套餐方面。這反映在我們的底線。平衡的方法將繼續是我們未來的重點，包括最後一哩路的舉措。我們相信，我們正在建立長期的競爭優勢，從而使我們與通達的其他公司區分開來。我們期待將來與您交談，並再次感謝您參加今天的電話會議。

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。您現在可以斷開連線。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event

此文字記錄中標記（翻譯）的部分是由現場通話中的口譯員說出的。翻譯由本次活動贊助公司提供