initial public offerings (IPOs) trading on American exchanges

Thursday, October 27, 2016

=ZTO Express (ZTO) began trading on the NYSE on 27 October 2016

  • The biggest IPO by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba in 2014.
  • ZTO Express says it is one of the largest express delivery companies in the world, in terms of total parcel volume in 2015. In the 2015, the company had a total parcel volume of 2.95 billion.
  • XTO covers more than 96% of cities and counties in China, with more than 3,300 trucks and 74 sorting centers. All packages are delivered in 24 to 72 hours.
  • The company sets up a network to delivers good from e-commerce sites such as Alibaba and (JD) and uses partners for pickup and last-mile delivery services.
  • In comparison, United Parcel Service Inc. (UPS)  delivered an average of 18.3 million packages globally a day in 2015, which would translate to about 6.7 billion packages for the year, but not all would be considered express delivery.

Chinese package delivery company ZTO Express debuted on the stock market Thursday morning, opening at $18.40 a share before falling more than 15 percent. The stock ended the day at $16.57.

"It's quite usual to see the volatility" in the shares, James Guo, the company's chief financial officer, told CNBC in a phone interview.

"The Chinese delivery market has tremendous potential," he said. "We expect we [will] continue to benefit from the continued e-commerce boom in China."

The stock market debut, the biggest by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba in 2014, gave the Shanghai-based company a market value of more than $12 billion.
ZTO priced 72.1 million shares at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share. That price is about 27 times its expected 2017 earnings per share, according to people familiar with the company's financials.

The interest, analysts tell CNBC, comes from the access to the both the Chinese consumer and the Chinese e-commerce industry.

"There are very few stocks that allow access to the Chinese consumer, and this is one of them," Cindi Profaca at told CNBC. "Industry trends in e-commerce are all pointing upward, at least for the moment."
China is the world's largest market for delivery services, with total parcel volume of 20.7 billion in 2015, approximately 1.5 times the total parcel volume of the United States. Most of ZTO's business is driven from e-commerce, which is still under-penetrated in China. Gross merchandise volume (GMV) has reached $609 billion in 2015 and is expected to increase to $1.465 trillion in 2020.
Something to note, however, is that 75 percent of ZTO's volume comes from Alibaba.

"Although we plan to expand and diversify our customer base, we still expect to be reliant on the Alibaba ecosystem for the foreseeable future," the company said. ZTO also acknowledges it may be difficult to control costs given the competitive nature of the Chinese e-commerce industry.

The company raised $1.4 billion in the biggest U.S. initial public offering of the year as its backers cashed in on China's booming online-shopping industry, a source familiar with the deal said.

The company is profitable, with strong operating cash flow, a projected $1.5 billion in sales by the end of 2016, according to Renaissance Capital.

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