ZTO Express (Cayman) - Q4 2023

Transcript

Operator (participant)

Today and welcome to the ZTO Express Fourth Quarter and Fiscal Year 2023 Financial Results Announcement Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal Conference Specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would like to turn the conference call over to Ms. Sophie Li, Director of Capital Markets. Please go ahead, ma'am.

Sophie Li (Director of Capital Markets and Head of Investor Relations)

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, and Mrs. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Mrs. Yan, who will go through the financials and guidance. They will both be available to answer your questions during the 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 the 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. 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. It is 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.

Meisong Lai (Chairman and CEO)

大家好，感谢各位参加今天的电话会议。2023年四季度，中通的工作满意度继续处于行业领先，业务量达到87.1亿件，增速为32%，高于行业平均4.8个百分点。同时，我们实现了22.1亿元的调整后净利润。2023年，快递市场保持了较好的增长，但是价格竞争，尤其在产粮区，依然非常激烈。中通在积极维护网络政策普惠性的同时，对部分主上传的业务量进行了必要的保底和激励，实现了业务量302亿件，同比增长23.8%。尽管快递核心业务单票收入下降了1毛6分，当时精细化管理数字，精细化管理数字化运营所带来的成本效益显著，有效地消化了单票价格下滑的压力，经营性盈利水平有了显著的提升，结合管理成本结构的合理把控，中通2023年调整后的经营性利润率从去年的22.4%提升了4.3个百分点，达到26.7%。全年调整后利润90亿元，同比增长32.3%。中通一贯尊重服务车辆、市场份额和盈利指标的平衡发展。一个企业的宗旨是创造价值，规模和盈利两者之间没有绝对的取舍，这有相对的平衡。面对23年大环境的不确定性、消费结构的变化以及行业的竞争状态，我们更加注重服务质量和差异化能力的建设。我们对亏本尽量的清理、折扣业务量的重新分配、主上传核心业务量的保障补贴，确保了整体业绩，尤其是单票盈利水平和总体利润的提升。虽然市场份额的扩大低于年初的预期，但是我们寻求最佳的平衡的方针和结果是符合环境和合理的。从更长远的角度而言，快递事业市场马拉松加盟网络稳定、健康和持续的发展，是中通保持生命力的基础，确保整体网络政策的公平普惠，这是我们同建共享的理念，有助于我们与加盟合作伙伴和业务员共同协力，促进能力建设、资源共享、末端拓展和服务提升等重要工作的持续开展。专注自身，强化运营成本效益，是2023年业绩的亮点之一。全年单票总成本下降了1毛7分，其中试运下降了6分，分解下降了5分。除了规模带来的效益之外，近年来中通不但推进了数字化、精细化管理，在岗位责任的细分、绩效标准的确立和衡量对比，尤其是平衡时效要求和资源最大化利用等方面，取得了显著的成效。有能见度、能及时发现问题的根本，加上团队强有力的责任担当和执行力，我们快速落实调整，改变结果的能力在不断地提高。进入2024年，快递行业在前两个月呈现了稳健增长的态势。新型电商包括直播和社交平台的举起，激发了大众消费的活跃度。尽管行业的价格尚未稳定或提升，从高数量向高质量发展的转变是必然的趋势。继续把自己的事做好，统筹发展和安全，守住业务量的底线，做好网络各方，尤其是中心、站点和业务员之间的利益分配，将是我们近期的工作重点。具体落实的抓手包括：一、充分赋能基层网络，提高运营效能效益，提升政策的透明性和公平性，及时匹配政策，充分利用空仓资源，有效激励网点可获得业务量，让量利之的关系更切实际。二、充分发挥规模优势，推进中心资源部署到最小分解单位，帮助网点进行相应的能力和末端建设，加速到边到角和质量，推动三网叠加的落实。三、提高个性化服务能力，加快展现标块送货上门和揽收速度，减少遗失、延误、破损，保持服务质量和客户满意度水平的领先。四、提升数据的准确性和及时性，提高能见度和利用率，让团队高效管理和执行有工具有抓手。中国快递优生利态的进程，将持续提高行业的集中度，国家一贯支持物流企业做大做强，进而缩短社会物流成本与发达国家的差距。在数字化、绿色环保、数量向质量转型的进程转型的过程中，快递及其未来的综合物流能力，将渗透到生产、分配、流通、消费等各个环节，并提供优质的服务，促进现代化产业以及乡村消费市场的建设和发展。整体行业的发展空间和机遇是非常广阔的。中通今天所具备的综合实力，是构建未来全链路竞争优势的基础，也是我们不但塑造自己与时俱进的底气，更是我们持续为快递人和社会创造价值，以及提升投资者回报的信心。谢谢。

Sophie Li (Director of Capital Markets and Head of Investor Relations)

Hello everyone, thank you for participating in today's conference call. For the fourth quarter of 2023, ZTO's customer satisfaction level continued to rank among the industry top. Our volume reached 8.71 billion parcels, which increased 32% over last year, or 4.8 percentage points above industry average, and we achieved RMB 2.2 billion of adjusted net income for the quarter. In 2023, China's express delivery industry maintained relatively strong growth momentum, yet price competition, particularly in the production regions, was severe. We insisted on keeping the underlying pricing policies across the network consistent, while taking necessary measures in certain markets to maintain base volume. Our annual parcel volume grew 23.8% to reach 32.2 billion. Core express delivery unit price declined RMB 0.16 for the year. That was fully absorbed by cost productivity gains thanks to digitization and process management that have been continuously lifting operational efficiencies.

Together with effective cost control, we raised the adjusted operating margin rate by 4.3 percentage points to 26.7% for the year. As a result, the adjusted net income for the year was RMB 9 billion, which increased 32.2% over 2022. ZTO has been consistently focused on balance among quality of services, market share, and earnings. The goal of any enterprise is to create value, and there is no absolute give or take between scale or profit. Instead, there is always relative trade-offs or balance among competing priorities. Facing microeconomic uncertainties, mix of e-commerce structure shifts, and industry competitive dynamics, we focused on improving overall service quality and the differentiated service capability. We continue to eradicate unprofitable volume. We direct the KA customers to capable network partners, increase incentives to protect critical market presence. Our overall performance results were solid, and particularly so in unit economics and total profit expansion.

Even though we did not gain market share against what was targeted in the beginning of the year, we believe our results were consistent with a balanced approach to strategies and adaptive to current market environment. In a longer-term perspective, express delivery is like running a marathon. Stable and healthy development of the partner network is the foundation of ZTO's longevity. Equitable and fair policies stem from our shared success culture, and it's important for us to successfully implement initiatives including partner capacity and capability building, existing facilities upgrade, and resource utilization enhancement, last-mile expansion and better customer reach and service quality, and customer satisfaction improvements. Focusing on our own affairs, we achieved another year of significant cost productivity gain. Total unit cost decreased RMB 0.17, within which transformation decreased RMB 0.06 and sortation RMB 0.05.

Other than benefiting from increasing scale leverage, we have continuously implemented digitization and lean management initiatives in recent years and generated meaningful results. Through clearly defined roles and responsibilities and associated measurements matrix, labor efficiencies and resource utilization greatly improved. Better visibility and timely identification of issues matched up with strong execution. We have greatly improved our ability to quickly adjust, solve problems, and drive better results. China Express delivery experienced a stable growth for the first two months of 2024. The rise of new e-commerce channels, such as video streaming and retail social networks, stimulated mass consumption. Even though price stabilization and increase have yet to arrive, the shift from high quantity towards high quality is the undercurrent that is inevitably taking shape.

Be the best we can, focusing on safety, healthy volume base, and fair allocation of economic interest among brand operators, partner outlets, and express couriers, are main focuses of our work going forward. The following are some of the key initiatives. First, support and enable improvements in frontline operating efficiencies. Improve transparency and fairness of pricing policy. Design suitable policy and deploy swiftly to maximize utilization of idle resources. Incentivize volume acquisition with improved effectiveness. Second, optimize scale advantage. Reduce the level of aggregation and sort to the smallest delivery unit possible. Reduce last-mile delivery costs and improve productivity. Help outlets to build out capacity and the capabilities that fit well with that of our sortation hubs. Ensure couriers get to take home the lion's share of the profit from incremental non-e-commerce packages they help to market and forward.

Increase direct linkage to last-mile to reduce costs and improve delivery efficiencies. Accelerate reduction of sortation frequency. Third, improve service quality meeting individualized needs. Improve timeliness of pickup and delivery, including service to door. Reduce damages and loss, and stay on top of quality of service and customer satisfaction. Fourth, enhance the accuracy and timeliness of data and analysis. Improve utilization of digitization tools to help enhance the effectiveness of operational management. We believe that going forward, the China Express industry will continue to bifurcate by scale and profitability, plus increasing concentration. National economic policies have been consistently supportive of Express delivery companies to scale up and improve efficiencies and raise quality of earning. Plenty of work needs to be done to measure up to develope countries.

Underpinned with digitization and environmental consciousness in its transformation from quantity to quality, express delivery businesses will be an integral part of all aspects of production, distribution, and consumption, providing high-quality products and services, and becoming an important driving force for modernization of manufacturing, agriculture, and development of urban and rural markets in China. There are positive growth prospects and earnings upside to the industry. Our strengths today will serve as foundations for comprehensive competitiveness in the future, ensuring our relevancy and, most importantly, affirming our commitment and confidence in creating long-lasting value for our business partners and shareholders. Now, let's welcome our CFO, Ms. Yan, to take us through our financials and outlook.

Huiping Yan (CFO)

Thank you, Chairman. Thank you, Sophie. Hello everyone to 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 information on our financial performances, unit economics, and cash flow are posted on our website, and I will go through some of the highlights here. We achieved volume target by growing parcel volume 32%-8.7 billion for Q4 and 23.8%-30.2 billion for the year, with firm execution of our consistent strategies. Our adjusted net income grew 4.4%-RMB 2.2 billion and 32.3%-RMB 9 billion for the quarter and the year, respectively, while we maintained high quality of services and customer satisfaction. Total revenue increased 7.6% to RMB 10.6 billion for Q4 and 8.6%-RMB 38.4 billion for the year.

ASP for the core Express delivery businesses decreased 18.2% or RMB 0.27 for Q4 and 11.3% or RMB 0.16 for the year. During the fourth quarter, we did not raise price as would take place in the past during e-commerce promotional period, given price competition and our readiness to process concentrated high volume. ASP decline was attributable to a mixed shift in KA volume, an increase in volume incentives, and a lower average weight per parcel. Total cost of revenue was RMB 7.5 billion and RMB 26.8 billion, respectively, for Q4 and 2023, which increased 5.5% for Q4 and 1.6% for the year. Combined unit cost of sorting and transportation decreased 14.9% or RMB 0.13 for Q4 and for the year was 13.2% or RMB 0.11, benefiting largely from economies of scale.

In addition, unit cost of line haul transportation decreased 11.5% to $0.46 for Q4 and decreased 12.1% to $0.45 for the year, driven by more effective route planning in conjunction with low-rate improvements. Without affecting timeliness, fuel prices also helped. Unit sorting costs decreased 20.1% to $0.26 and 15% to $0.27 for Q4 and the year, respectively, driven by increased automation and labor efficiency gains achieved through standardization in operating procedures and optimization of performance metrics. Gross profit increased 12.8% to RMB 3.1 billion for Q4 and increased 29% to RMB 11.7 billion for 2023 as a combined result of increased volume, offsetting ASP decline, plus added benefits from cost productivity gain. Gross profit margin rate increased 1.4 points to 29.5% and increased 4.8 points to 30.4% for the fourth quarter and the year, respectively.

SG&A excluding SBC increased 24.9%-RMB 0.7 billion for Q4 and increased 14.3%-RMB 2.2 billion for the year. SG&A expenses excluding SBC, as a percentage of revenue combined, remained low at 6.6% for Q4 and 5.6% for the year, as our corporate cost structure remained lean and stable. Income from operations increased 12%-RMB 2.8 billion for Q4 and increased 29.4% to RMB 10 billion for the year. Associated margin grew 1 points to 25.9% and 4.1 points to 26% for the year, indicating that we have achieved the goal of improving quality of earnings to the level better than 2019 prior to the COVID-19 pandemic. Operating cash flow was RMB 3.9 billion for the quarter and RMB 13.4 billion for the year. Adjusted EBITDA for Q4 and 2023 was RMB 3.7 billion and RMB 14.1 billion, respectively.

CapEx for Q4 totaled RMB 0.9 billion, and the annual CapEx came in at RMB 6.7 billion in 2023, indicating that we have achieved another year of free cash flow. The company has now established a regular dividend policy and has announced a $0.62 per share cash dividend for 2023 to shareholders on record as of April 10th, 2024. This dividend represents a 40% payout ratio and a 68% increase from dividend from last year. For 2024, the company plans to declare and pay cash dividends semi-annually, no less than 40% of the company's distributable profit for the fiscal year. In addition, the company also announced an upsize to the $1.5 billion share repurchase program by $500 million to bring the total authorization amount of the current program to $2 billion and extend the program by another 12 months till June 30, 2025.

Combining share repurchase and dividends, we are committed to steadily improve shareholder returns. Now, moving on to business outlook. We anticipate the express delivery industry in China would grow 10% or more in volume in 2024, and we will maintain our leadership effort in industry transformation towards profitable growth with both quantity and quality. Balanced approach to service quality, volume, and earnings is our consistent strategy. Under the near-term conditions surrounding economic development and industry competition, our recalibrated strategy is to target a healthy earnings goal while improving quality of services and customer satisfaction and attain appropriate market share expansion. For 2024, the company expects its parcel volume to grow in the range of 34.73-35.64 billion, representing a 15%-18% increase year-over-year. The above estimates represent management's current and preliminary view, which are subject to change. This concludes our prepared remarks.

Operator, please open the line to calls and questions.

Operator (participant)

Yes, ma'am.

Sophie Li (Director of Capital Markets and Head of Investor Relations)

Thank you.

Operator (participant)

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchstone phone. If you're using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star, then two. We please ask that you limit yourself to two questions or one question and a single follow-up. Again, it is star, then one, to ask a question. At this time, we will just pause momentarily to assemble our roster. The first question will come from Ronald Keung of Goldman Sachs.

Ronald Keung (Managing Director)

谢谢赖总、严总、Sophie。嗨，恭喜这个2023年的这个业绩。那反正有两个提问。第一，就刚才说到这个2024年的这个包裹增长。那对于今年的这个订单格局我们怎么看？尤其这个价格和我们在2023年在这个比较低位的订单环境下还在做了一个比较stable，或者还有一些proposal的这个每单包裹利润的一些short的一些提升。那我们怎么看这个2024年？我们说平衡这个profit和market share的时候，我们对现在已经分享了这个volume growth，那我们怎么看这个每个包裹利润的一个2024年的一个大概的想法？第二呢，就想问我们今年的CapEx，因为我们看到我们也现在有一个regular dividend。那我们这个今年怎么看这个CapEx和中长期我们这个40%的dividend payout ratio是不是有提升的一些空间在一个中长期的看法？那么我翻译一下。 Thank you, management. I have two questions. One is that you've shared your possible volume growth for expectations this year. But what is your expectation on the competition, particularly on the pricing front, and whether we think what is the view on an EBIT or profit per parcel trend this year, given that we have achieved quite a stable, slightly upper proposal in 2023 despite the intense competition? Second is on CapEx. What is our CapEx expectation for this year? And given the free cash flows, do we see a higher dividend payout room in the near to medium and the medium term? Thank you.

Meisong Lai (Chairman and CEO)

感谢你的提问。这个24年这个行业的增长展望，我们官方就是国家局这个公布是8%，我们预测行业还会保持中高速的发展，10%以上的增长。那我们已经给了指引15到18，今年中峰的增长目标。那格局展望，这个行业格局，这个快递这个价格竞争拉长来看，它一定是会全部回归的。低价带来的份额增长也是暂时的。快递竞争的本质就是优秀的品质且稳定的网络，企业终将回归长期竞争的实力的构建。就中通一直非常注重，今年我们有三个转变，就从数量规模向质量和数量并重转变。那我们还是想在这个差异化服务上面形成一些竞争的壁垒。散件这个逆向经营的比例要显著增加。行业总体来看呢，就是你服务质量好，有成本优势，它的份额一定会持续的提升。那整个行业来讲呢，就是未来其实是快递是在还是在加速分化，就是头部企业有规模的，有网络优势的这个强者越强，这个趋势是非常明显的。这个第二个转变呢，就是从这个单一快递向综合物流转变。那我们中通呢，也是从电商件为主，这个局部要增加这个散件跟逆向这个件的比例，变成了这个生态竞争的优势，这个具备全面生态供应链布局的这个打好基础，有先发优势。那你刚才提的这个1到2月份，去年1到2月份做得比较好。那今年这个我们1到2月份的情况，今年我们的策略呢，就是进一步做好服务质量、市场份额和盈利的这个平衡，这个推进了这个业务量高质量的发展，提升了就是散件、时效件这种比重。我们的全年业务量增速这个15%到18%，351件，增长51件左右。那我们主要的措施呢，有第一呢，是优化服务能力，继续推广多元化产品，进一步设展全链路时效，推动客户服务体验升级，确保政策透明合理，挖掘网点增量潜力，提升网点盈利水平。第三呢，关注网点能力建设，打造折分折送能力，提升末单质量比例。第四，落实到角到边，提升散件占比。第五，强化末单能力建设，提升揽派效率，满足用户差异化的服务需求。谢谢。

Huiping Yan (CFO)

Let me first translate for the chairman for your first question, and then I'll answer the second part with our dividend. In 2024, the government or the Bureau of Posts have announced an 8% growth expectation, and we believe in our earlier remarks that we think at least a 10% is possible. Our goal is to grow 15%-18%. That's clearly above the industry average. We think that from a price perspective, the competition in a longer run will subside because it is a natural process that any industry would go through. The low price market share obtained from low price is not sustainable. The express delivery industries are accelerating their differentiation with the leading companies having clear advantage in scale, capital strength, and network stability.

The trend of strong getting stronger is quite clear and quite obvious as industry concentration continues to increase, leading express delivery companies will reach market value that is much greater than what it is today. The competition will go from single express delivery capabilities to comprehensive logistics capabilities. ZTO having the same goal in taking the leadership in the transformation from quantity only to combined with quantity and quality. We hope to develop differentiated price as well as differentiated product, including timeliness product, reverse logistics, so that we can build early move advantages to really stand out with quality of services because we believe that is the key to obtaining market share in the long run. There are several transformations or changes or shifts in the industry.

As I mentioned earlier, we have the quality towards quantity and quality, and we are also observing the comprehensive competitive advantages being built. Looking at the first and second month situation for 2024, we think our strategy remains the same, focusing on a balanced approach to improve our quality of services as our upper priority, and then looking at the balance between market volume, market expansion, as well as the earnings goal. We do want all three, and it is in the current environment a matter of allocating our resources and putting our attentions to achieve the most optimal and appropriate goals. Specific work has been cut out for us in addition to the summary that we've given in our prepared remarks.

We think our goal and the strategy really relates around the following five specific tasks: optimize service quality, promoting diversified products, further shortening the delivery time, and upgrade customer service experience to ensuring policy transparency and equitable policy, tapping into the incremental volume potential of outlets and increase the profitability of the outlets. Three, focusing on outlet capability building and capacity building, establish their sortation and delivery functions, and increase the proportion of delivery linkage towards the last mile, implementing last mile policies being the four increasing proportion of individual parcels, which is what we're referring to as non-ecommerce retail parcels. And then five, strengthening last mile capacity, building improvements in our ability to pick up, deliver to door, as well as meeting individualized needs of our customers. Now, let's move on to the second part of your question, the 40% payout ratio that we've announced.

As we mentioned that as the company achieved free cash flow, and we believe our cash generation will allow us to continue to generate strong free cash flow, we have clearly, distinctly set ourselves up for a company with growth as well as return to our shareholders. 40% is certainly a start going forward combined with dividend share buyback. We are committed to provide healthy and consistent return to our shareholders that are going to be increasing steadily going forward. Hope that answers all your questions, Ronald.

Ronald Keung (Managing Director)

谢谢赖总、严总。

Operator (participant)

Next, we have Qianlei Fan of Morgan Stanley.

Qianlei Fan (Executive Director and Equity Research Analyst)

谢谢赖总、严总、Sophie。恭喜公司的业绩又创新高，也非常感谢管理层在投资者回报方向上的努力。我有两个小问题，第一个问题也是接着上一位的问题，我想问一下这个竞争的格局。其实我们今年还是有观察到行业的一些小玩家在竞争上比去年来说没有那么的激进。我想请教一下管理层的看法，就是这会是今年竞争的一个新常态，还是说如果行业的包裹量回落的话，竞争有可能再重新变得激进？行业最差的时候过去了吗？然后在这个单位净利润的方向，今年管理层的outlook年对年是怎么样？这是第一个问题。第二个问题想问一下，就是今年3月开始执行的这个快递上门新规对咱们的影响，咱们有没有观察到什么经营层面的一些改变？它对我们未来的成本和未来的竞争格局的潜在影响是怎样？ Let me translate for myself. Thank you, management, for taking my question. Congratulations for the new high in the annual profit. Please lift it. And we do appreciate a lot the management's efforts in terms of increasing shareholder return. I have two questions. The first question is related with competition. So what's management's expectation on the intensity of the competition? Have we seen the worst already or not yet? We have already seen a few smaller players have been competing less aggressively in this year compared with last year. Do you think that could be the new normal, or competition could escalate again if industry volume softens? What's the expectation on the unit profit outlook on a year-on-year basis? And the same question is about the door-to-door delivery requirements from regulators. Have you observed any changes to operations? What's the potential impact on cost and competition dynamics?

Thanks.

Meisong Lai (Chairman and CEO)

感谢你的提问。第一个问题，竞争格局长期来讲，因为快递是马拉松，做好自己，有成本优势，有服务时效，效率明显的企业一定会越来越强。这是必然的规律，长期来看份额肯定会越来越集中。那当前的竞争还是依然是非常激烈的，就是因为每一家都还非常注重份额的提升。那肯定是有涨有降。中通我们今年更加注重服务品质的提升，我们更加注重个性化、多样化的需求。所以我们的策略是确保盈利跟确保服务质量提升，跟合理的利润的基础上确保份额的稳定性。第二个问题就是上门新规，这个3月1号，快递上门新规可以加速推进行业规范化管理，让快递公司更加注重关注客户体验。长期来看，利于行业向高质量发展转型。中通一直非常注重服务质量及消费者体验，在平台指数和消费者满意度上一直在行业领先。目前我们已建了11万家末单的驿站，在缓解末单揽派压力的同时拉近与客户的距离，打造安区上门的服务，上门的能力满足客户差异化需求。长远来看，这是一件好事情。所以中通的策略还是做好我们自己提升服务质量。谢谢。

Huiping Yan (CFO)

Thank you for your question. Yes, we have observed that the competitive environment has been shifting in accordance with economic development, and particularly e-commerce development. We believe, again, the Express delivery business operation and the enterprise goal is like running a marathon. Focusing on being the best of ourselves is most important and feasible. With strong cost advantage, better quality of services and timeliness in our services, and better operating efficiencies, we will become the winner of the whole race. The concentration of the industry continues to take place. Looking at the current situation, everybody is still seeking market share gain. For ZTO this year, as we mentioned earlier, the strategy is consistent, and we are recalibrating across the three priorities. For this year, we are focusing more on improving the quality of services, providing customer satisfaction with differentiated product and services, and meeting individualized and customized needs.

So ensuring quality improvements and attaining appropriate earnings while expanding our market presence is our strategy going forward. The unit economics, if I may add the comments, everything is laid out in front of us as we further strengthen our productivity gain and supporting our network partners to grow last mile, expanding their capabilities. We are able to attain our goal of continued profit expansion. On your second question, yes, indeed, there are new rules that are being issued, and we believe that the emphasis is continuing on improving customer satisfaction and logistics experiences, which is consistent with what we've always been working on.

And particularly so, as we establish near 110,000 last-mile posts, it is indeed to help not only our network partners to improve their quality of earnings, but most importantly, is to help improve last-mile service quality, to-door delivery capability, meeting the demand individualized as well as customized. So in the longer run, this is a good thing for the industry as we are shifting towards more of quality of services. So we will continue our effort going forward in this arena.

Qianlei Fan (Executive Director and Equity Research Analyst)

好的，非常感谢。谢谢严总、赖总。

Huiping Yan (CFO)

Thank you.

Operator (participant)

Next, we have Lahong Cheng of Haitong Securities.

Speaker 7

好的，赖总、严总，Sophie 好。我是海通交易分析师罗月江。首先恭喜公司四季度和全年取得了好的业绩。年初至今我们也观察到同行的业务量增长比较强劲，结合公司此次业绩发布的主旨，快速迭代和与时俱进，想请教一下公司会在哪些方面进行改革或者调整？我们的长期战略是否还坚持会因为市场环境的变化而采取比较激进的价格策略来获取业务量吗？下面我翻译一下。 First of all, congratulations to company for achieving good performance in the fourth quarter and throughout the year. Since the beginning of this year, we have observed strong growth among our peer companies. I'd like to know the areas in which the company is undergoing transformation or adjustments. Is our long-term strategy still intact? Considering the market environment, are we planning to adopt a more aggressive pricing strategy to gain business volume? Thank you.

Huiping Yan (CFO)

Thank you very much for your question. Indeed, a very clear answer to your question is our long-term strategy or consistent strategy remains the same. I think our fourth quarter results as well as our plan for 2024 clearly indicates that our strong belief, first of all, that low-price attained market share is not sustainable. It is important, again, as a leadership role, taking the leadership role in the industry to grow from quantity to quality as well, in combination with quantity going forward is our goal. So we believe that the price competition, in combination with the earlier question asked by Ms. Herling, is that yes, indeed, there are indications or expressions by many of the industry players that they will also follow the trend, follow the transformation to go from quantity only to more quality.

We believe this is a process that will be taking place for the near term. The overall goal of our business remains to keep our network partners' and the interest among all the players, including our network partners, allocation being equitable. Market share is important, but it's not the only thing. Profit, profitable growth is what we aim to achieve going forward.

Speaker 7

非常清晰。谢谢严总。

Huiping Yan (CFO)

Thank you.

Operator (participant)

Next, we have Aaron Luo of UBS.

Aaron Luo (Research Analyst)

谢谢赖总、严总、Sophie 总接受我的提问哈。其实我有一个小问题想跟你们请教的，就是其实刚才赖总、严总也提到，我们也注意到了，就是我们其实一个长期的发展目标就是提升我们的服务质量嘛，然后包括这个完善我们的长期矩阵啊，推进这个产品分层。那能不能请您们就是再给大家多分享一下，就是如果今年来看，我们会有哪些具体的举措啊，会推出来，然后我们的优势和同行比在哪里哈，就是这个推进产品分层这一块，然后我们有没有什么这方面的一个可以量化的一个目标啊。谢谢赖总、严总。 Let me translate myself first. Thank you, management, for taking my question. As Mr. Lai and Ms. Yan have mentioned earlier, we also noted that we have a long-term focus on improving our service quality, product mix, and pushing for further product differentiation. Could you please shed more light on what kind of initiatives we will take for this year, and what are those advantages we have compared to peers? The last question would be, do we have any quantitative goals on this front? Thank you so much.

Meisong Lai (Chairman and CEO)

谢谢你的提问。我们的策略还是做好自身，从总部层面来讲，做好三个平衡，然后优先把质量摆在了更重要的位置。从整条线路上来讲，平衡好中心站点跟业务员的利益分配。同时，我们今年还是要很抓转运环节的效率，服务质量全链路时效要明显地要有提升，缩短全链路时效的时长。成本还会有进一步的优化。对站点方面，我们还是要分配好每个环节的链路分配，比如说业务员的到角到边政策，让他从就业走向创业，比如加快末单折链的推进。那我们今年是有明确的目标任务的，就是全国全省每一个地方要折链程度要增加多少。那么进一步强化这个分工，以末单驿站为单位，做好派件、上门服务和商业家的工作，就是三要素的工作。同时，增加站点的盈利能力，就折链以后，我们优化以后可以节省成本。第二，业务员上门服务增加，到角到边政策的推广，个性化需求满足用户个性化需求，产件比例增加，业务员的收入会增加。第三，在适合的门店末单做商业家的工作。那么明显来讲，就是我们全网的业务指标增长15到18，但是我们产件的比例的增长的幅度，这个指标是远远要高于这个指标的。我们相信通过我们这一系列政策的落实，我们希望中通能够跳出通达，形成有差异化的竞争力。谢谢。

Huiping Yan (CFO)

Thank you very much for your question. The overall strategy we have mentioned earlier that we will continue to focus on our own. At the headquarters level, we first have put forth the quality of services in the front and managing the relationship between profit and market share. At the sortation center's level, we are focusing on better allocation or more efficient allocation of resources to meet the varying interests of sortation center outlets as well as our network couriers. For ourselves, we will further our effort and initiatives to improve the transit efficiency and capability. For example, as we mentioned earlier, reduce the total process time, increase the quality by reducing losses and delay, and fully utilize our resources.

To the outlets, we think that many initiatives are there to, first of all, improve the clear allocation of roles and responsibilities between the sortation center, the outlet, and the couriers, so that they each individually, for every of their work segments, will improve quality as well as efficiencies. For our couriers, we distinctly laid out policies and laid out initiatives to improve linkage as well as ensuring that they are able to, as couriers, be motivated or incentivized to attain more non-ecommerce and retail shares by allowing them to gain the lion's share of the marketing price so that they are working for themselves instead of non-differentiated, compensated with no differentiation from pickup or delivery fee. With that, we are clearly, on an overall standpoint, having objectives for the last mile to achieve three areas of goal. One is to reduce overall cost.

And then, two, distinctly improve service to-door, on-demand services to meet the customized individual demand, and also improve connectivity with our customers so that couriers are able to gain access to more retail volume and retail packages. And then, thirdly, at the appropriate location and time, we want to introduce commercial opportunities to our last-mile posts so that they are also improving the quality of their earnings. On an overall basis, we have set our volume growth for the business to be 15%-18% for the year. And certainly, our retail volume or non-ecommerce volume growth goal is significantly higher than this 15%-18%, so that we hope to pull away from the senseless price competition and become truly differentiated from the Tongda group with longer-term and improved service quality and brand distinction. I hope that answers your question.

Aaron Luo (Research Analyst)

哎，谢谢赖总、严总，非常清楚。

Huiping Yan (CFO)

Thank you. I think we are at 9:30 A.M. Thank you very much, everybody, for joining today's call. We welcome further discussions and elaboration of our intention, which is very clear in the current environment of how we grow our business, how we develop our brand, and improving our shareholder returns. Thank you again for joining us today.

Operator (participant)

We thank you, ma'am, and to the rest of the management team for your time also today. The conference call has now concluded. Thank you again for attending today's presentation. At this time, you may disconnect your lines.