Thank you for standing by. Welcome to the ZTO Express Q4 and fiscal year 2022 financial results conference call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sophie Li, Director of Capital Markets. Thank you, Sophie. Please go ahead.
Thank you, operator. Hello everyone, 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 zto.investorroom.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, Ms. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights. I will go through the financials and guidance. We 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 on current market and operating conditions, 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 Committee. 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, and I'll translate for him in English.
Meisong Lai.
大 家 好 ， 感 谢 各 位 参 加 今 天 的 电 话 会 议 。2022 年 四 季 度 ， 中 通 业 务 量 达 到 了 六 十 五 点 九 亿 件 ， 同 比 增 长 百 分 之 三 点 九 ， 市 场 份 额 比 去 年 同 期 提 升 了 一 点 五 个 百 分 点 。 我 们 的 公 众 满 意 度 排 名 继 续 保 持 行 业 领 先 ， 服 务 能 力 稳 健 提 升 。 同 时 我 们 实 现 了 二 十 一 点 二 亿 元 的 调 整 后 净 利 润 ， 同 比 增 长 百 分 之 二 十 一 。2022 年 ， 受 疫 情 影 响 ， 快 递 行 业 整 体 增 速 放
缓 。 面 对 多 变 的 挑 战 ， 中 通 专 注 自 身 ， 市 场 份 额 、 服 务 质 量 和 盈 利 水 平 更 上 一 层 楼 ， 进 一 步 扩 大 了 优 势 。2022 年 全 年 ， 我 们 的 业 务 量 增 长 到 了 两 百 四 十 三 点 九 亿 件 ， 市 场 份 额 提 升 一 点 五 个 点 ， 达 到 百 分 之 二 十 二 点 一 ， 实 现 了 六 十 八 点 一 亿 元 的 调 整 后 净 利 润 ， 同 比 增 长 百 分 之 三 十 八 。 中 通 良 好 的 业 绩 表 现 来 自 于 全 网 上 下 ， 包 括 加 盟 合 作 伙 伴 与 一 线
快 递 小 哥 在 内 的 所 有 人 的 协 同 努 力 。 我 们 从 明 确 的 战 略 出 发 ， 脚 踏 实 地 地 落 实 具 体 的 工 作 。 首 先 ， 我 们 加 强 了 标 准 化 安 全 操 作 的 管 控 力 度 ， 对 安 全 隐 患 进 行 逐 个 排 查 和 整 改 ， 大 力 保 障 网 络 安 全 。 疫 情 期 间 ， 全 网 在 严 格 推 行 管 控 措 施 的 同 时 ， 保 通 保 畅 ， 尽 力 为 消 费 者 提 供 最 好 的 保 障 和 服 务 。 第 二 ， 通 过 有 效 把 控 收 转 运 派 全 链 路 运 作 的 质 量 和 有
效 联 动 各 个 环 节 ， 我 们 的 服 务 质 量 、 公 众 满 意 度 再 度 提 高 ， 切 实 提 升 了 中 通 的 品 牌 形 象 和 服 务 口 碑 。 第 三 ， 强 化 网 络 政 策 的 公 平 性 和 透 明 度 ， 进 一 步 梳 理 直 营 市 场 部 客 户 占 比 的 合 理 性 ， 以 及 客 户 质 量 ， 逐 步 清 楚 网 络 ， 网 络 内 不 健 康 的 竞 量 ， 在 提 高 经 济 效 益 的 同 时 ， 提 高 网 点 的 市 场 竞 争 力 。 第 四 ， 持 续 深 化 业 财 税 的 融 合 ， 从 而 提 升 数 字 化 运 营
的 能 力 。 数 字 化 工 程 从 为 总 部 提 供 自 主 数 据 的 能 见 度 ， 升 级 到 了 为 运 营 层 面 提 供 过 程 管 理 的 抓 手 ， 及 时 发 现 问 题 并 解 决 问 题 。2022 年 ， 面 对 挑 战 ， 中 国 经 济 展 现 了 坚 强 韧 性 ， 中 通 也 经 受 住 了 各 种 考 验 ， 取 得 了 量 价 双 收 的 好 成 绩 ， 这 充 分 证 明 我 们 战 略 的 正 确 性 ， 给 我 们 持 续 专 注 做 好 自 己 和 提 升 经 营 效 率 、 效 益 增 添 了 更 多 的 自 信 。 进 入 二 三 年
一 季 度 ， 中 国 经 济 稳 步 复 苏 ， 大 众 消 费 信 心 升 温 。 物 流 业 是 支 撑 国 民 经 济 发 展 的 基 础 性 、 战 略 性 、 先 导 性 产 业 。 作 为 排 头 兵 ， 中 通 将 不 负 国 家 对 实 业 做 大 做 强 的 期 盼 ， 在 注 重 行 业 和 网 络 稳 健 发 展 的 前 提 下 ， 围 绕 市 场 份 额 的 扩 大 、 盈 利 水 平 的 提 升 、 高 质 量 产 品 与 服 务 的 提 供 来 推 动 以 下 几 项 重 点 工 作 。第 一 ， 确 保 全 网 基 地 生 产 道 路 信 息 事 情 安 全 不
断 优 化 安 全 管 理 机 制 降 低 有 质 事 故 例 及 人 员 伤 亡 。 第 二 ， 提 升 基 础 建 设 能 力 投 入 与 产 出 效 益 结 合 全 网 长 远 发 展 需 求 和 投 资 能 力 更 加 科 学 合 理 地 优 化 产 能 规 划 投 入 统 筹 包 括 加 盟 网 点 在 内 的 能 力 部 署 。 第 三 ， 通 过 不 断 升 级 数 字 化 管 理 体 系 完 善 成 本 价 钱 分 析 以 流 量 流 向 为 抓 手 灵 活 调 控 优 化 排 班 提 升 人 效 监 控 和 提 高 设 备 运 力 的 使 用 率 进 一 步 推 进 精 细
化 管 理 。 第 四 ， 多 维 度 赋 能 网 点 以 市 场 份 额 为 基 础 设 施 业 务 量 指 标 打 消 网 点 对 年 年 加 码 的 顾 虑 将 服 务 质 量 考 核 奖 罚 与 源 头 操 作 挂 钩 从 根 本 上 提 升 服 务 质 量 深 入 剖 析 低 速 增 长 网 点 的 短 板 有 针 对 性 地 进 行 帮 扶 和 治 理 。 通 过 数 - 数 字 技 术 赋 能 尽 - 尽 量 多 为 网 点 提 供 管 理 工 具 。 第 五 ， 注 折 到 角 到 边 工 作 激 发 一 线 员 工 内 生 动 力 创 造 行 业 最 佳 收 益 水 平 真
正 从 就 业 走 向 创 业 从 而 更 好 地 服 务 我 们 的 消 费 者 。 第 六 ， 加 速 末 端 建 设 推 动 和 提 升 门 店 执 业 和 安 师 派 送 能 力 并 探 索 社 区 商 业 服 务 智 慧 在 降 低 揽 派 成 本 的 同 时 丰 富 末 端 产 品 和 服 务 。 第 七 ， 在 筑 墙 主 营 业 务 的 同 时 梳 理 各 生 态 板 块 的 资 源 与 优 势 聚 焦 核 心 产 品 打 磨 多 元 化 运 营 健 全 有 质 量 有 协 同 的 生 态 布 局 。 我 们 一 直 对 快 递 行 业 中 长 期 稳 健 发 展 持 积
极 乐 观 态 度 快 递 行 业 强 者 愈 - 愈 强 的 发 展 趋 势 已 非 常 明 显 企 业 追 求 和 保 障 盈 利 的 态 度 也 越 来 越 明 朗 低 价 竞 争 带 来 的 业 务 量 和 市 场 份 额 不 可 持 续 只 有 稳 健 的 网 络 高 效 的 运 能 优 质 的 服 务 最 佳 的 成 本 才 是 企 业 做 大 做 强 的 根 本 精 细 化 管 理 水 平 的 提 高 会 不 断 优 化 我 们 网 络 政 策 的 制 定 提 升 运 营 效 益 举 措 ， 运 营 效 益 举 措 的 精 准 度 和 有 效 性 从 而 使 中 通 对 战 略
目 标 和 资 源 调 配 的 把 控 能 力 不 断 增 强 。2023 年 ， 我 们 会 凭 借 同 建 共 享 的 企 业 文 化 规 模 稳 健 的 网 络 充 裕 的 产 能 以 及 健 康 的 现 金 流 加 速 高 数 量 向 高 质 量 的 转 变 统 一 思 想 明 确 目 标 用 好 资 源 做 好 协 同 保 障 安 全 做 到 量 质 并 重 生 态 优 化 公 平 普 惠 赋 能 执 业 增 强 网 络 信 心 提 升 网 点 能 力 保 障 员 工 权 益 增 加 一 线 收 入 筑 墙 主 业 拓 展 生 态 丰 富 产 品 链 条 满 足 社 会 需 求
承 担 社 会 责 任 创 造 更 大 价 值 。 谢 谢 。
Hello, hello, everyone. Thank you for participating today's conference call. For the fourth quarter of 2022, ZTO delivered a parcel volume of CNY 6.59 billion, which increased 3.9% year-over-year, extending our market share by 1.5 points. Our public satisfaction ranking continued to be among the top of the industry with steady improvement. Meanwhile, we achieved an adjusted net income of CNY 2.12 billion, which increased to 21% over the fourth quarter of last year. In 2022, affected by the recurring pandemic, overall growth of the express industry decelerated. Facing by varying challenges, ZTO focused internally and further solidified our industry leading position, which increased the market share, improved the service quality and profitability. In 2022, our parcel volume reached CNY 24.39 billion, which extended our market share by 1.5 point to 22.1%. At the same time, our adjusted net income grew 37.6% year-over-year to CNY 6.81 billion.
Our strong performances came from concerted efforts by everyone under the ZTO brand, including network partners and the couriers. Start with a clear set of strategic goals were implemented specific work priorities as the following. Firstly, we strengthened and standardized operational safety controls and removed or rectified potential safety hazards. During the pandemic period, we made best effort to ensure uninterrupted package flow of consumers' necessities without compromising prevention efforts. Second, through the effective control quality and coordination of all four stages of pickup, sortation, transportation and delivery activities, we are able to improve our service quality in the public satisfaction, which in turn enhance the ZTO brand recognition and reputation.
Third, we raised the level of fairness and the transparency of network policy, particularly with regards to PA customer operations, by assessing the volume breakdown and the profitability makeup of PA customers with the systematically eliminated effective parcels and restored market competitiveness as well as earnings for partner outlets.
Fourth, we further integrated operations, finance and IT to improve data-driven process management. Previous reporting, which mainly presented results to headquarters, was upgraded to analytics that provide insight to help identifying problems on a timely basis, and solutions can quickly follow. In 2022, China's economy demonstrated resilience against multiple headwinds. ZTO also overcame various challenges and achieved the both volume and price, which proved the effectiveness of our strategy and added confidence for us to continue to focus on ourselves and improve operational excellence. Entering the first quarter of 2023, we saw signs of recovery in China's economy, where consumers' confidence have increased. The logistics industry has been regarded as a strategic and foundational harbinger of the national economy. As a pace setter, ZTO strives to live up to the country's expectations to grow bigger and stronger.
Under the priority of stability and sustainability, we will continue to execute our corporate strategy with the following initiatives. First, ensure the safety of pickup and delivery, sorting and transit and data security throughout our business processes. Continuously improve controls and measures to reduce accidents and avoid casualties. Second, improve output of infrastructure investments, optimize capacity planning with a more scientific approach, and coordinate investment planning to improve our network partners' capabilities against the long-term needs. Third, increase granularity and improve the accuracy of cost analysis and adjust the set price accordingly by line haul route. The reuse of digitized tools to improve effectiveness of labor resource planning with improved unit efficiency. Increase utilization of PP&E, including transit fleet.
Fourth, empower our partner outlets in various aspects, such as setting parcel volume KPIs according to achievable market share goals to alleviate concerns of added weight year after year, measured by growth rates. Link rewards and recommend assessments with associated operational conduct so as to drive improvements. Analyze the shortcomings of outlets growth and provide support for targeted reform. Provide as many practical tools as possible to better manage their day-to-day. Fifth, firm up implementation of last mile policies to fully incentivize the courier in acquiring retail customers. With the highest pay level in the industry, our couriers will truly achieve entrepreneurship and better serve their customers. Six, accelerate the last mile presence, promote direct linkage and improve on-demand delivery capacity by pooled operations. Explore opportunities of community service, and not only reduce delivery cost, but expand reach to last mile products and services.
Seven, strengthen the core express business. Organize resources and competitive advantages of eco businesses. Rely on core competencies and refine diversified capabilities to form coordinated and high-quality eco capability matrix. We remain optimistic about the long-term growth prospects of China's express delivery industry, that the strong will become stronger is an apparent development trend. The desire to pursue profitability has become mainstream. Volume and market share obtained through low price and bottom line losses are not sustainable. Only with robust network, efficient delivery capacity, high quality of service, and excellent cost efficiency can a business develop into a bigger and stronger enterprise. Data-driven process management will help us continuously optimize precision in policy design, the effectiveness of process improvements and efficiencies in resource utilization.
We have quickly improved our measured what we have and target what we want to achieve in order to accomplish a balanced set of results in accordance with our overall corporate strategy. In 2023, we will accelerate the transformation from high quantity to high quality by relying on our shared success culture, vast yet stable network, high operating capacity and strong cash flow. We will unify our thinking, clearly lay out our goals, make full use of our resources, drive synergy, maintain safety, achieve on both quantity and quality. We will support our network partners and couriers with fairness and protect their rights and interests, help improve our network partners' capabilities and strengthen their confidence. We will keep growing our core business and expand the comprehensive logistics products and services to meet diverse consumer needs.
As a corporate citizen, we will take on more social responsibilities and create greater social value. Let's welcome our CFO, Miss Yan, to introduce the financial results and the status of ZTO.
Thank you, Chairman. Thank you, 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 percentage changes refer to year-over-year comparisons. Detailed analysis of our financial performances, unit economics, and cash flow are posted on our website. I will go through some of the highlights here. We achieved volume targets by growing parcel volume 9.4% to RMB 24.39 billion for the year, with firm implementation of our consistent strategies. Our leading market share expanded further by 1.5 points to 22.1%, while we maintained superior quality of services. The adjusted net income increased 37.6% to RMB 6.8 billion for the year.
Total revenue increased 7.1% to RMB 9.9 billion for Q4, and 16.3% to RMB 35.4 billion for the year. Annual ASP for the core express delivery business increased 4.7% and 8.1% for Q4 and full year respectively, as industry pricing became more and more stabilized. Total cost of revenue was RMB 7.1 billion and RMB 26.3 billion, respectively, for Q4 in 2022, which increased 1.9% for Q4 and 10.6% for the year. Unit cost of revenue for the core express delivery business decreased 0.7% for Q4 and increased 2.4% for the year.
Unit transportation costs declined 2.5% for Q4 and 0.7% for the year, primarily due to increased use of self-owned high-capacity trailer trucks and improved load rate, absorbing the negative impact from increase in diesel fuel price. Unit sorting cost was flat for Q4 and increased by 5.8% for the year because of higher level of automation and improved economics as economies of scale, offsetting partially increased labor costs and higher depreciation and amortization costs for automated sorting equipment and facilities placed in service. Gross profit increased 23.2% for Q4 and 37.2% for the year as a result of increased volume and ASP. Gross profit margin increased 3.7 points to 28.1% for Q4 and 3.9 points to 25.6% for the year.
SG&A, excluding SBC, increased 18.8% to RMB 561 million for Q4 and increased 16.6% to RMB 1.9 billion for the year. SG&A, excluding SBC, as a percentage of revenue, remained low at 5.7% for Q4 and 5.4% for the year as our corporate cost structure remained lean and stable. Income from operations excluding SBC increased by 19.8% for Q4 and 37.6% for the year. Associated margin increased 2.6 points for Q4 and 3.5 points for the year. Operating cash flow was RMB 3.8 billion for Q4 and RMB 11.5 billion for the year, increasing 24.7% and 59% respectively. CapEx totaled RMB 7.2 billion for the year. Operating cash flow steadily increased and CapEx spending level stabilizes.
We anticipate free cash flow to further increase for 2023. The company announced a $0.37 US dollar dividend for the year for shareholders on record as of April 6, 2023, representing a 30% dividend payout ratio compared to 25.9% last year. Turning to our business outlook. Given considerations for the current market conditions, the company expects the parcel volume of 2023 to be in the range of 28.78 billion to 29.75 billion, equivalent to an 18%-22% year-over-year increase. Relative to the entire industry performance, the company is confident to achieve at least 1.5 percentage point increase in its market share for the entire year. These estimates represent management's current and preliminary view and are subject to change. This concludes our prepared remarks.
Operator, please open the lines for questions. Thank you.
Thank you. We will now begin the question and answer section. We ask.
You to limit yourself to two questions per person. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your questions have been addressed and you would like to cancel your request, please press stars then two. Your first question comes from Tian Hou from TH Capital . Please go ahead.
赖 总 ， 严 总 ， 各 位 你 们 好 。 有 两 个 问 题 ， 一 个 呢 ， 就 是 咱 们 的 volume 的 这 个 指 导 呢 ， 我 看 还 是 蛮 强 的 ， 那 我 就 想 看 一 下 今 年 的 这 个 volume 的 成 长 ， 它 的 主 要 的 来 源 是 什 么 ， 传 统 电 商 ， 那 现 在 又 加 上 这 个 自 营 ， 那 应 该 是 怎 么 样 的 一 个 分 配 ， 然 后 再 看 一 下 ， 就 是 说 这 个 这 个 运 输 的 这 个 单 价 的 成 本 一 个 趋 势 ， 这 是 第 一 个 问 题 ， 我 先 翻 译 一 下 吧 。
Okay, the guidance for 2023 in terms of volume growth is actually pretty impressive.
I would like to know more about the drivers for such growth, how much would come from a traditional e-commerce, and how much will come from the newer, you know, newer players like by then, and how much will from the other merchants. That is the question, the first part. The second part would be, is that possible to share the trend for the unique economics? That is the first question. Thank you. 我 先 提 第 一 个 问 题 ， 一 会儿 再 说 第 二 个 。
嗯 。
谢 谢.
你 提 的 第 一 个 问 题 就 是 业 务 量 这 个 指 引 的 来 源 是 吧 ？ 还 是 各 家 电 商 的 占 比 。
来 源 和 占 比 ， 就 是 它 有 总 有 增 量 嘛 ， 那 个 增 量 是 从 哪 来 的 呢 ？ 是 从 现 有 的 这 些 原 来 传 统 的 呢 ， 还 是 从 新 生 的 ？ 就 是 我 想 看 一 下 这 个 增 量 是 谁 带 来 的 。
疫 情 以 后 ， 我 们 预 判 呢 ， 今 年 行 业 肯 定 是 会 有 增 长 。 我 们 政 府 这 个 会 议 上 面 呢 ， 是 今 年 业 务 营 收 ， 快 递 营 收 增 长 7% ， 我 们 大 概 率 呢 ， 就 这 个 行 业 增 长 ， 我 们 预 判 大 概 会 在 10% ， 我 们 ZTO 的 增 长 份 额 要 增 加 ， 那 么 我 们 这 个 指 引 是 18%-22% ， 这 个 是 一 个 这 是 指 引 的 问 题 。 至 于 这 个 来 源 呢 ， 肯 定 大 部 分 是 有 传 统 线 ， 上 线 ， 有 ， 有 这 个 电 商 线 ，
电 商 肯 定 这 个 你 目 前 来 说 ， 这 个 比 如 说 自 营 这 种 增 长 还 是 比 较 强 劲 的 。 具 体 这 个 数 字 就 不 讲 了 ， 这 个 商 业 秘 密 不 能 讲 。 抱 歉 。
好 吧.
这 个 第 二, 运 输 成 本 的 问 题, 因 为 我 们 这 个 业 财 新 融 合, 这 个 梁 本 利 的 小 组, 包 括 现 在 这 个 政 策 小 组, 因 为 更 加 接 地 气, 我 们 今 年 呢, 确 实 这 个 成 本 会 下 降, 因 为 我 们 一 个 呢 运 输 成 本 就 是 装 载 力 会 上 升, 第 二 个 上 的 更 好, 因 为 成 本 问 题 渗 透 到 最 前 端, 这 个 是 可 以 确 定 的. 谢 谢.
Thank you for your question. First regarding the guidance. The post-pandemic, the entire industry we have as we enter into the first quarter observed a rebound. As the indication given by the government key conferences, they expect the entire industry's revenue would grow 7%. As we look at the numbers for the first quarter and relative to last year, we anticipate a reasonable level of growth about around 10% for the industry in terms of volume. ZTO's goal is to continue to expand our market share steadily by at least one and a half points. We set our goals to increase our volume by 18%-22%, and hence, relative to our prior experience and our prior track record, we believe this is achievable.
Regarding the source or the makeup of the revenue, certainly we won't be able to communicate specific numbers because it really relates to all the other platforms. They wish for us to maintain these numbers within ourselves, by ourselves. What I wanted to add is that we as an open platform, we do serve all the up and coming and increasing, in addition to the traditional e-commerce players, for example, the ZTO, right? We as the largest player with the biggest capacity and the level of quality of services, we typically command the highest portion of all their volume. Going into 2023, we believe the growth is still there, and we want to achieve the largest portion of that increments.
The second part relates to the cost of our transportation operations. We have implemented digitization projects initiatives so that we have greater visibility in how our operations is being conducted and how we can improve the efficiency, specifically load rates, utilization of our vehicles, as well as the route planning. With all these, we believe that the transportation cost trend will continue to being trending down.
Thank you. Thank you.
Thank you. Your next question comes from Qianlei Fan from Morgan Stanley. Please go ahead.
Let me translate my first question. This is about the outlook of unit profitability of this year. Last year we have seen a very like slow growth for the industry, but the company has still achieved a remarkable earnings growth and strong dividend payout. Just want to understand with a better growth outlook for the industry this year, with the unit cost down, thanks to higher utilization and lower fuel. Also considering the digitalization tools will continue to help the company to manage its pricing and cost. Is it fair to say we can continue to expect that the unit profit can still increase from last year's level?
Let me translate and hopefully supplement to Chairman's response. ZTO is a company that has been consistently setting its strategy and also sound performing with sound execution. You are aware that we focus on quality, we focus on market share growth as well as profitability. All three by our track record has been improving throughout the years. Digitization in last year has presented us with favorable results, and we anticipate these benefits will even further being demonstrated in 2023.
One of the key things in addition to what you just mentioned and what we communicated in the comments that we expressed earlier, the initiative relating to how we are better connecting between our sorting hubs, our outlets, as well as to the last mile delivery personnels. The allocation of responsibility and also share of the benefit has becoming one of our key focus, especially coming into 2003. This will impact not only on the top line in terms of gaining in more market share, bringing in more volume, as well as the efficiency all across as the integrated process will generate greater cost efficiency. These are what we anticipate going into 2023, and the goal we set for our business to achieve unit profit increases.
I'll translate. The second question is about the CapEx guidance for 2023, and considering that Miss Yan just mentioned our free cash flow will continue to increase this year, is there any consideration of increasing your dividend payout ratio going forward? Thank you.
Thank you for your question. Regarding the CapEx for 2022, it was CNY 7.2 billion. If you look at our prior years, it's around CNY 9 billion, CNY 9.3 billion, CNY 9.2 billion. As we indicated before, we have gone into the tail end of our investment cycle. Going into the next investment cycle is more placement for our comprehensive logistics services capabilities, including larger tracts of land for the comprehensive logistic park construction and development. That will take time as we first observe what the development of the market and the economy is, and at a second time, the development of our eco businesses would also be a very steady and stable and systematic approach, not a one-time spending splurge.
This sets our goal for CapEx spending at the level of current or if not lower. With the continued strong cash performances, we believe our free cash flow will increase. After taking into consideration what the business needs in terms of a reinvestment, any excess, we believe it's rightfully so to give back to our shareholders. We do anticipate a high probability of us increasing our dividend payout in the future. Secondly, if I might add, as we communicate to most of our investors that we are in the process of obtaining the 5% favorable dividend tax rate so that RMB could have a much efficient tax structure coming out of China as a way of our dividend.
With that in place, hopefully in a year or two, we are then able to further increase the payback and return to our shareholders.
Thank you very much.
Thank you.
Thank you. Once again, to ask a question, please press star then one on your telephone keypad and wait for a name to be announced. The next questions comes from Parash Jain from HSBC. Please go ahead.
Thank you for taking my question. If I may ask two question, please. First of all, can you help us understand your kind of balance sheet that you want to pursue? You have a very steady cash flow over the years, and now with the CapEx rolling over, free cash flow rising, you have been running a net cash balance sheet in the past few years. Is that the new normal, or you think that with the cash flow predictability, you want to leverage moderately, if not aggressively, your balance sheet and return the excess cash to the shareholder in the form of dividend or buyback?
Secondly, on business going into 2023, and appreciated you've given a guidance, but any color you can share on how has been the start of the year, both, in terms of getting into Chinese New Year and coming out of Chinese New Year and, on price competition? Thank you so much.
Thank you for your question. It's all in English, so I obtained permission from the chairman to answer you directly. For the balance sheet, yes, we looking to our past the business has been very conservative in terms of some borrowing and lending in terms of borrowing. Our balance sheet is very deleveraged. We don't have that much leverage. Now going into the next few years where when our cashflow, free cashflow becomes even greater, as I answered to the previous question, we intend to buy back or return a dividend to our shareholders. Indeed, that is our intention, we do have a high level of confidence that will be achieved.
With your second question, the 2023, any color. When we went into the year, especially after the Chinese New Year, we, including the open up of the pandemic restrictions, we did see a rebound in the Chinese economy, albeit slow, but very steady. Typically, especially during the recent shopping gala, as related to one of the national holidays or national celebrated holidays of March 8th, we saw a surge in the e-commerce packages. Typically, we have a business level of 75 million-80 million. We saw that went up to 85 million-90 million packages a day for our business. We do think there is a strong build up now either it being one time or consistent and continue.
We're still observing and wait to see. Given the signal, given the policy that's coming from the central government, we believe the economy will be on a steady recovery. As the logistic business, as we said, it leads all the other industry in terms of benefiting or being the benefactor of the economics development. We do believe the outcome for this year, for our goal to set as 18%-22%, above, way above what the current industry anticipated average growth, demonstrates our confidence in addition to our assessment of our own capabilities.
As far as pricing is mentioned, at the pricing we have observed in 2022, and starting actually in the second half, very apparently that the corporates are going for bottom line or paying more attention to profit as opposed to using price to obtain market share. This has been the case as we're going into 2023. We have made some adjustments specifically for smaller parcels. For that we have not seen any market reactions that would go towards price competition. We do believe we have got to a turning point where the long-term market price was steadily being stable and then rising. I hope that answers your question.
That indeed. If I can squeeze this one very quick question, if I may. Can you remind us the rationale of raising the convertible bond despite the strong balance sheet that as you already alluded to?
Yeah.
There any defined plan of how do you want to utilize that?
Yes, certainly. Of course, foremost is the way we operate our business. US dollar is something that we don't generate, right? We only generate RMB onshore because most of our businesses is RMB. To buy back pay dividend and then most importantly to inject cash into our project companies that acquire land and land use rights and invest in facilities. It provides us a greater advantage in terms of pricing if we are able to inject with US dollar. The local government has an attitude of welcoming foreign investment into China. With US dollar we have that advantage in terms of pricing and cost.
Absolutely. That's very, very clear. Thank you so much. Have a lovely day.
Thank you very much.
Thank you. Your next question comes from Ronald Keung from Goldman Sachs. Please go ahead.
谢谢 赖总、严总, Sophie. 可能 2 个 提问 吧。 第一 就 刚才 提到 可能, 今年 以来 可能 降 了 一些 小 包裹 的 价格, 然后 有 比较 好 的 一个 效果。 想 听 我们 有 没有 看到 其他 的 一些 同行 也 一起 做, 会 不会 回到 一个, 就 量 好, 大家 回到 一个 价格战, 或者是 也 未必 是 价格战, 大家 都 会 有 一些 降价 的 这个 压力 的 一年。 第二 呢, 想 听 一下 我们 刚才 说到 我们 CapEx 是 为了 建造 一个 比如, 物流园, 想 听 一
下 我们 对 物流园, 就 整个 中通 未来 是不是 快递 和 其他 我们 中通 有 哪些, 然后 这个 愿景, 这个 物流园, 还有 这个 物流区, 我们 希望 是 做到, 什么 一个 效果。 我们 在 上市 公司 里面 会 也要 比如 考虑, 就是 收购 啊, 或者 跟 中通 其他 的 一些 比如 中通零担 啊 这些 会 有 更多 的 一些 协同 和 合作。 我 翻译 一下。 Thank you management.
I wanna ask two questions. One is about the pricing that you mentioned some price cuts this year and had pretty good effects on achieving your volume growth. Do we see any other players following on? What could there be a risk of pricing deterioration through this year while volumes recover and the impact of that? The second is about you mentioned about the comprehensive logistics parks and part of your investments that you're putting into. How should we see that? What, what will this eventually look like? Would it be nationwide, with Express alongside some of your other ZTO like trucking companies and all of those? How should we see the cooperation between the ZTO entities and the effects of this logistics park construction? Thank you.
谢 谢 你 的 提 问 。 你 第 一 个 问 题 其 实 就 是 一 个 是 公 司 政 策 ， 第 二 个 是 价 格 战 的 问 题 。 呃 ， 我 们 的 政 策 呢 ， 中 通 一 直 致 力 于 把 市 场 份 额 、 盈 利 跟 服 务 质 量 三 大 指 标 的 平 衡 。 我 们 在 维 护 这 个 服 务 质 量 提 升 的 前 提 下 ， 首 先 制 定 利 润 目 标 ， 啊 ， 这 个 加 速 获 取 市 场 份 额 ， 这 个 中 通 一 直 是 这 样 的 策 略 。 所 以 过 去 我 们 看 我 们 这 三 个 指 标 都 是 很 均 匀 的 往 上 走 。
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是 在 呃 ， 工 业 园 区 里 面 的 ， 就 是 中 国 这 个 ， 其 实 我 们 一 线 的 员 工 ， 就 是 这 个 是 所 有 啊 ， 打 工 的 人 ， 他 都 希 望 能 够 赚 到 更 多 的 钱 ， 那 么 有 些 人 可 以 做 双 份 工 ， 就 是 我 们 大 部 分 这 个 厂 里 人 都 是 制 件 工 资 ， 或 者 是 小 时 工 资 ， 你 干 一 个 小 时 三 十 块 钱 ， 二 十 五 块 钱 ， 那 么 其 他 的 工 人 呢 。 而 且 这 个 是 长 期 的 ， 每 年 就 是 每 天 都 有 的 干 ， 那 么 可 以 增 加 员
工 的 收 入 。 那 我 们 如 果 这 个 仓 在 外 面 呢 ， 就 会 养 固 定 会 养 很 多 工 人 ， 比 如 说 你 两 万 票 件 就 会 养 个 一 两 百 个 工 人 ， 那 他 其 实 是 干 了 两 三 小 时 的 活 ， 他 要 付 啊 一 天 的 工 资 ， 就 是 呃 ， 成 本 更 低 。 那 比 如 说 我 们 这 个 园 区 里 面 有 快 运 ， 有 快 递 ， 因 为 是 同 向 的 ， 如 果 是 办 车 后 他 就 可 以 呃 拼 车 ， 那 么 也 会 节 省 一 些 成 本 ， 包 括 这 个 办 公 场 所 啊 ， 这 个 设 施 啊 ，
这 个 都 可 以 ， 比 如 说 食 堂 可 以 共 用 一 个 ， 就 是 这 个 啊 。 呃 ， 我 们 认 为 呢 ， 未 来 就 在 资 源 利 用 上 面 呢 ， 中 通 啊 ， 拓 展 生 态 方 面 呢 ， 我 们 把 资 源 用 好 ， 那 这 个 就 是 竞 争 力 。 谢 谢 。
Thank you for your question regarding the price. Before we get there, we want to give you a comprehensive view of our approach to pricing policy. The goal of our corporate is always been maintaining a high level of quality of services and at the same time giving greater market share and after obtaining the targeted profit goal. With this, our policy certainly would be consistently in accordance with this three-prong approach. It is stable, it is consistent and it's sustainable. In 2023, we have made some modifications, but it is all to the benefit of a stabilized network, as well as increased confidence to our network partners. For example, Chairman mentioned that we have changed the way we set goals for our network partners and also how we allocate those market share gain targets for them.
Instead of using year-over-year growth rates, we used their relative market share as of current, and then the goal we set for them to achieve in terms of market share for the year, which to a great extent, helped network partners to alleviate any of their concerns. Their initiatives or their own, they are driving volume increases out of their own initiatives because they do believe that the next year, the volume setting goals will be continuously or be reasonable for them and achievable at the same time. We have also implemented new what we call it, the reward and reprimand mechanism.
Instead of fining them for not achieving volume, certain volume goals, we focus more on positive reinforcement for them to grow on their own initiatives, but keeping their sort of a pocket tight without being punished. These are some of the examples we think that are all driving towards a stable network, sound policy. The pricing war that you have expressed concern with in the remarks we have talked about earlier, that the corporates are now focusing more on the quality as opposed to the quantity, but not at all costs, right? Volume is supposed to be profitable for the corporate and for the shareholders instead of just simply the top line. We do observe.
We have observed the changes in the sentiment and changes in the behavior of corporates in terms of their pricing practices. Let me see if I missed anything. The 2023, we would reasonably anticipate price fluctuations here and there depending on the season. ZTO's price will remain to be the highest amongst all the players because we have gained price premium in the past with our quality of services and stability of our services, as well as our scale and reach. These are stabilities that we have experienced and are anticipating going into 2023. Price war, price competition, healthy ones, yes, but certainly not those what we had experienced in the past. The second question relating to our comprehensive logistics.
The growth of our logistic business, eventually, we believe it is going to be a comprehensive. It's not just limited to express delivery. We had in the past developed businesses such as what you mentioned, the LTL businesses. Going into 2023 and onward, our goal remains to be eventually become a comprehensive logistic service provider. In the past, we build our facilities, including the larger operational parks, exclusively for express delivery. As we grow, as we've seen that there are more logistic services, and needs being developed in the marketplace, and our scale and reach allowed us to access greater and greater logistic service markets.
Our ability to obtain resources, as well as prudently operating them, has shown that in some of the examples that we have, pilot programs that we implemented, has shown that we are able to utilize our resources and maximize the use of our resources for comprehensive capabilities development. It has its advantages. For example, one, as we gather all the logistic services in addition to the core express delivery, for example, cloud warehouse, right? We have the in-warehouse process, one-stop product for our small B or large B customers, the LTL business that serves larger packages. Those businesses together in the same place, a one stop, not only can drive synergy, but also on a utilization, on a cost front, allow us to gain advantage.
Chairman gave an example of previous construction design is only two floors. Now we have six floors being developed and two or three floors are used by our other logistic businesses which we have a 20% or so investment. One example, if you have a cloud warehouse on the third and fourth floor, their customer's order placement can be later, hence giving better experience for their consumers because we don't need to go and fetch goods from other warehouse locations. We can just, we call it zero-distance packaging, zero-distance order fulfilling. It improves our timeliness in the delivery as well, let alone the fact that we are able to reduce costs.
In terms of labor, when you have labor being paid on by the number of processes they do, the number of packages they do, they are nearby, they are in the park, and they can serve for express delivery, they can serve for logistic, the LTL business, for example. These utilization of facilities, of labors, all provide us greater advantage in terms of cost, in terms of synergy, and ultimately, provides better experience for the consumers and better efficiency for our customers. To summarize, the comprehensive logistic part itself, we are preparing to meet greater and increasing demand for comprehensive logistics services, not just express delivery. At the same time, we are able to drive synergy, not only on the service front, but also on the cost front as well. Thank you.
I think, operator, we are at the close of our time.
There are no further questions at this time. I'll now pass back to the management team for closing remarks.
Yeah. Thank you all very much for participating on today's call, and thank you for all very good quality questions. I look forward to discussing and talking with you more as now we don't have much travel restrictions. Look forward to speak to you and perhaps seeing you in person. Thank you again.
Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.