BofA upgrades ZTO Express stock to Buy, raises PT to $29 on shareholder return
ZTO
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On Thursday, BofA Securities revised its stance on ZTO Express (NYSE:ZTO), elevating the stock from Neutral to Buy and increasing the price target to $29.00, up from the previous $22.00. This adjustment follows the company’s announcement of an enhanced shareholder return outlook.
ZTO Express has recently introduced a 40% dividend payout policy, which will be distributed semi-annually. Additionally, the company has expanded its share repurchase program by an additional $0.5 billion, to be executed through June 2025, with $0.94 billion still available for repurchasing shares.
According to BofA Securities, these strategic financial decisions suggest a potential shareholder return of up to 8%. This return is seen as a solid justification for considering ZTO’s stock a valuable long-term investment. The firm highlighted that despite the current competitive pricing environment, ZTO’s decision to increase its dividend payout indicates a cautious approach to further capacity expansion.
ZTO Express currently trades at 12 times its forecasted FY24 earnings per share (P/E), which is consistent with its peers in the franchisee-based sector. However, BofA Securities anticipates that ZTO deserves a higher valuation premium.
The price target has been lifted by 32% to $29.00, based on a 15 times blended FY24/25 earnings per share or a 1 times price-to-earnings growth (PEG) ratio. This new target reflects the anticipated benefits of H-share stock connect inclusion and greater visibility into the company’s dividend and buyback programs.
