2025 Annual Report Insights | Zhongtong Express: Orders “Taken a bit too much,” Gross Profit Margin Drops by 6 Percentage Points

Why is AI asking: Why did profit decline while Zhongtong’s order growth increased?

On March 18, 2026, SF Express? (02057.HK) released its 2025 full-year unaudited financial report, delivering a mixed set of results. At a critical juncture where industry policies against “involution” continue to deepen and the shift from “growth by price cuts” to high-quality development accelerates, Zhongtong’s full-year parcel volume hit a new record again. It maintained scale leadership, yet gross margin dropped sharply by 6 percentage points year over year, and the pressure of “revenue growth without profit growth” became prominent—reflecting both the opportunities and challenges facing industry leaders during the transition period.

As a leading company in the express delivery industry, Zhongtong’s 2025 financial performance is not only a direct reflection of its own operating conditions, but also mirrors the development trajectory of the entire express delivery sector amid transition pains. Based on financial report data, industry policies, and the market environment, this provides a neutral, objective, in-depth analysis across dimensions including volume and pricing performance, cost structure, strengths and hidden concerns.

Volume expands to lead the industry; revenue grows steadily, but profitability faces pressure

The financial report shows that in 2025, Zhongtong continued to break through in business scale. It completed 38.52 billion parcels for the full year, up 13.3%, adding 4.5 billion parcels; its market share remained stable at 19.4%, maintaining the number-one position in the industry for multiple consecutive years.

Revenue also maintained steady growth. Total revenue for the full year reached RMB 49.1B, up 10.9%. Among this, core express delivery business revenue was RMB 48.29B, up 11.3%, becoming the main pillar behind revenue growth. Cash flow was strong: net cash flow from operating activities for the full year was RMB 11.97B; total assets were RMB 91.02B; total liabilities were RMB 23.89B. The company’s overall financial structure remained healthy, with strong resilience against risks. In addition, the company launched a USD 1.5 billion share repurchase plan, committing to use no less than 50% of adjusted net profit for shareholder returns, demonstrating confidence in its long-term value.

However, what stands out starkly against the impressive scale data is that the company’s profit side faced significant pressure. The most notable is that gross margin fell from 31.0% in 2024 to 25.0%, a drop of 6 percentage points and the lowest level in recent years; gross profit for the full year was RMB 12.27B, down 8.5% year over year, making the “higher revenue, lower profit” pattern especially evident. Profitability data also came in below expectations: net profit for the full year was RMB 9.24B, up only 3.9% year over year; adjusted net profit was RMB 9.51B, down 6.3% year over year; adjusted net profit per parcel was RMB 0.25, down RMB 0.05 year over year—profit margins were continuously compressed.

Cost surge is a key drag; cost-reduction results are partially offset

A deeper breakdown of the financial report shows that the core reason for the decline in gross margin is that cost growth far outpaced revenue growth, and structural cost increases became the main drag. Data shows that in 2025, Zhongtong’s total operating costs were RMB 36.83B, up 20.5%, significantly higher than the 10.9% revenue growth rate. Sales costs accounted for 75.01% of revenue; in each quarter of the year, this ratio remained above 75%, meaning cost pressure ran throughout the entire year.

It is worth noting that although Zhongtong’s cost reduction achievements at the trunk line and sorting ends—driven by scale effects—were outstanding, these were offset by a surge in structural costs. In the financial report, the “other costs” item surged 96.2% year over year to RMB 11.68B, becoming the largest increment in costs. This was mainly due to high service spending brought by expansion of the direct-customer (direct) business, as well as a sharp increase in end-stage investments such as加盟商 subsidies, station support, and protection of couriers’ rights and interests. In addition, the implementation of new social insurance contribution rules in 2025 drove a rigid increase in labor costs across the industry. Combined with rising rigid costs such as manpower, depreciation, and energy, it further eroded the company’s gross profit space, leading to an increase in comprehensive cost per parcel of RMB 0.06 year over year to RMB 0.94.

Strengths and hidden risks coexist; leadership is tested in the transition period

Against the backdrop of industry transformation, Zhongtong’s scale advantages and network moat remain prominent. At the same time, it faces multiple hidden concerns such as market competition and network stability, presenting a development pattern of “strengths and risks side by side.”

From the strengths perspective, the company’s network moat is difficult to replicate: 31k+ outlets, 93 sorting centers, 3,800+ trunk lines, and over 10,000 high-capacity vehicles together form an efficient logistics network covering the entire country, with scale effects and operational efficiency leading the industry. The optimization of its business structure also delivered notable results. Parcel business volume grew 46% year over year, and average daily parcel volume in the fourth quarter reached 9.8 million, up 38% year over year. Direct-customer business revenue surged 111.8% year over year; the share of high-margin business increased, effectively offsetting the pressure from low-price competition in e-commerce shipments. Meanwhile, the industry’s “anti-involution” policies took effect in 2025: the State Post Bureau依法打击恶性竞争 below-cost pricing, and in multiple regions, the floor prices for express delivery were raised. In the second half of the year, revenue per parcel gradually recovered, providing policy support for Zhongtong’s subsequent profit recovery.

But hidden risks cannot be ignored. Although its market share remains the top, Zhongtong’s 19.4% market share for 2025 was the same as 2024 and did not break through. Competitors such as YTO? accelerated expansion, industry concentration continues to rise, and the leading players’ share faces ongoing competitive pressure. Risks to end-stage network stability are increasing. Due to pressure on franchisees’ profitability, in multiple places there have been issues such as outlet closures, parcels getting stuck in transit, and staff shortages. The survival cycle of station points has shortened, and the health of the network faces challenges.

In addition, while the direct-customer business has achieved high growth, it is still in a stage of “growing revenue without growing profit.” The high service and subsidy costs temporarily weigh on the overall gross margin, and the profit model has not been fully proven yet. At the same time, as regulatory enforcement increases, the company has been called in for discussions multiple times due to issues such as non-standard services and insufficient protection of couriers’ rights and interests. Compliance costs and brand risks continue to rise.

Amid industry transition pains, leaders must break through through a balance of volume and quality

Overall, Zhongtong’s 2025 financial performance is a real snapshot of China’s express delivery industry transitioning from “growing by price cuts” to “growth driven by both volume and quality.” In 2025, the national express delivery business volume reached 198.95 billion parcels, up 13.6%. The industry has officially moved on from the era of destructive price wars and entered a new age of value-based competition. Zhongtong’s “more volume, less profit” effect is precisely the unavoidable pain during the industry’s transition.

For Zhongtong specifically, the core issue today is how to balance scale growth with improved profitability. In the short term, the problems that need urgent resolution include the decline in gross margin, higher costs, and pressure from the end-stage network. In the long term, optimizing the structure of the parcel and direct-customer businesses, continuously deepening cost reduction and efficiency improvements, and building a healthy end-stage network will be key to consolidating its leading position and navigating through industry cycles.

Industry analysts believe that in 2026, the year-over-year growth rate of parcel volume in the express delivery industry is expected to return to around 8%, with reduced room for incremental growth; competition will focus even more on service quality and operational efficiency. If Zhongtong can continuously deepen its digital and intelligent transformation, further optimize its cost structure, and fully implement a profitable model for the direct-customer business, while also strengthening end-stage network construction to balance the relationship between scale and profit, it has the potential to continue leading the industry amid high-quality development. Conversely, if it cannot effectively ease cost pressure and mitigate end-stage risks, its leading position may face even greater challenges.

Looking ahead, as the industry’s “anti-involution” policies continue to deepen, compliant operations and value enhancement will become the core main line for development. Every step of Zhongtong’s deployment will provide important reference for high-quality development among franchise-based express delivery companies.