Good day and welcome to the ZTO to announce second quarter and half-year 2026 financial results. All participants will be in a listen-only mode. Should you need assistance, please signal a 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 your touchtone phone. And to withdraw your question, please press star then 2. Please limit yourself to two questions. And please note that this event is being recorded. I would now like to turn the conference over to Ms. Sophie Li, Company Secretary. Please go ahead.

Thank you, Chuck. 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 the 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 Security Litigation Reform Act of 1995. Such statements are based on management's current expectations and 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 statement as the 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 before I translate for him in English. 大家好,感谢各位参加今天的电话会议。

In the second quarter of 2026, the business volume of the courier industry increased by 4.2% at the same time. With the continuation of the anti-selection policy, the market competition gradually returned to rationality. The overall price and profit level of the industry are steadily improving. The entire industry has been fighting for size and price since the past. and many others. The core business indicators of the Sino-Tung-2 system have made a sharp progress. Business volume reached 104.9 billion lines and growth rate increased by 6.5%, market share increased by 0.4%, and many more. After adjustment, the net profit is 30.9 billion yuan, which is 50.3% of the total profit growth. The profit strength is verified again. The retail business is 47% of the total profit growth. The high-value diversified business continues to grow to widen the collection channel. This system Thank you for watching. Please subscribe to our channel for more videos. and many other partners are working together to improve the five-dimensional system of the product structure. In addition, we are working with more than 10,000 business owners and couriers. First of all, the industry is under the control of the island, and the anti-insurgency policy has become commonplace. The CCP is determined to maintain a good industry competition. and Jiamengshan, which is a three-party platform. It is a sustainable network ecosystem that can be shared and developed by all parties. Fourth, the company has always been a long-termist. It simply pursues a large-scale initial development model. Not only does it hinder the development foundation of the medium and long-term system, but also the competitive advantage. We will steadily grow our late profit and loss. Express Pennsylvania Inc. Inc. Inc. 4. Improving the management of operation and management to the end point. We have established a standardized operating data expansion system. and many more. In this way, it is possible to achieve a sustainable, sustainable, sustainable, sustainable, sustainable, sustainable, sustainable, sustainable and Zhezhe Business Group. The single business wave in the middle of China has strengthened the strength of the whole network. However, the Chinese express industry has already said goodbye to the simple scale competition. It is the new stage of high-quality and sustainable development, which surrounds the two high and low strategic core, that is, high-quality service, high-quality share and low full chain cost. Sustainable Zhongtong will continue to promote the following five core tasks. First, maintain the competitive environment of the industry. Strictly follow the rules and regulations. Lead the way in promoting the overall competitive system of the industry and improving it rapidly. Second, maintain the comprehensive competitiveness of the service sector in terms of service, share, cost, and three-in-one. The service sector focuses on strengthening the ability of top-level services. 3. 垃圾全网经营管理水平,统一全网政策标准 4. 深化素质化运营和赋能 and many more. 5. Ensure the safety and control of the whole network, and ensure the safety and control of the whole network. Yasheng Geqi Guanli Zeren, Nian Shou, Shen Chang, Yong Gong, Sui Wu, etc. He Guihongjie, Chi Xu Youhua, Ye Wu Yuan, Jilei Li, Fen Pei Jishi, Bao Zhan, Jicheng Chongye Zhe, He Li, Shou Ruo, He Yu, He Fa Quan Ye 20多年一路走来,我们经历过逆境,也经历过这类市场竞争的锤炼我们始终看得明白,规模则是几股,质量才是根本 We adhere to the concept of sharing the same building with reasonable profits in the market segment, reasonable profits in the market segment, and the concept of developing the same building to share the same building. Cashiers are the whole of the same life project. Only by jointly improving the business effect, rationalizing the distribution of interests, and organizing the network can we act on our own will. We hope to use our products to build the strength of more people's happiness, to rely on the firm foundation, the stable financial strength, the quality of the food, the quality of the food, and the stability and stability of the network. We are confident and capable of achieving the stable development of the whole network. Thank you Chairman Lai. Now let me do a translation first. Hello everyone, thank you for joining today's conference call. In the second quarter of 2026,

They expressed delivery industry grew 4.2% in volume year-over-year. As anti-involution policies continued to gain traction, competition became increasingly rational, and the overall industry pricing and profitability experienced steady recovery. The industry is fundamentally shifting from its previous singular focus on scale and price wars toward greater emphasis on value creation. Network stability and tangible benefits for frontline partners. ZTO made solid progress across key operating matrix in the second quarter. Passive volume reached 10.49 billion, up 6.5% year-over-year, with market share expanding by 0.4 percentage points, entrenching our industry leadership position. Adjusted night income was 3.09 billion, up 50.3% year-over-year, reaffirming the resilience of our profitability. Retail parcel volume grew 47% year-over-year, as our higher value and diversifying value-added service continue to scale up, increasing revenue diversity for our network outlets. While facing temporary cost pressures caused by oil price fluctuations during the quarter, Our end-to-end digitization led intelligent transformation combined with refined operational execution enabled us to lower the combined unit cost of transportation and sorting by two cents over last year, preserving cost competitiveness that were forged over the years. CTO's second quarter performance is the outcome of synergies across five core aspects, which are productive policy guidance, on wavering long-term strategic focus, solidarity and concerted efforts by network-wide partners, continuous increases in operational efficiency, and improving product structure. It also owes much to the hard-won contributions by thousands of OLED operators and frontline delivery workers network-wide. First, Regulatory direction remains clear and anti-involution policies were being consistently implemented. CTO stands firm to safeguard a healthy competitive order, balances the interests of headquarters, franchises, and frontline practitioners, and commits to fostering a sustainable eco-network with equitable shares of benefits for all stakeholders. Second. The company maintains a long-term mindset that discourages permanent short-term scale gains and the continuously consolidated foundational strength for its mid- and long-term development. We regard steady profit increases for network outlets, sustained earnings growth for front-line careers, and healthy corporate development as our core operating objectives. and we continue to deepen our initiative surrounding three key priorities. Market share expansion, service quality upgrading and end-to-end cost reduction. Third, the entire network were unified with strategic alignment and increasingly advocate fairness and the transparency in network policy making and implementation. We have an objective view on regional economic disparities and have further streamlined grassroots feedback. By tailoring incentive schemes and support resources to match all its actual operating conditions, we have further optimized the profit distribution mechanisms at the ground level through performance-based remuneration, hence steadily elevated the overall profitability and operational stability of the entire network. Fourth, we are extending our know-how for efficiency gains to outlets. We have built a standardized and ongoing operational data analytical system to enable performance, visibility, and traceability. We continue to enhance last-mile ops efficiency through direct linkages, reducing organizational layers, and expand profit margins. We continue to enhance our tiered high-value business portfolio by penetrating deeper into retail parcels and reverse logistics, which optimize the mix between standard e-commerce parcels and value-added services. This also hedges against the potential single source fluctuations and strengthens the resilience of network profitability. China's express delivery industry is progressing from high-quantity competition to high-quality and sustainable development. Focusing on the strategic principle of achieving high-quality service, high-quality market share, and low end-to-end costs, ZTO will further our tasks in the following five key areas. First, continue to safeguard an environment of fair competition. We will adhere to regulatory guidance and take on a leadership role in maintaining industry's overall competitive order. Second, improve integrated competitiveness in service, market share, and cost. On service, we will focus on door-to-door capabilities to build a clearly differentiated brand awareness. On market share, we will refine customer segmentation Increasing the proportion of small to medium-sized customers and value-added services. On cost, we will establish benchmarks for comparable outlets and pass through the what and how of efficiency gains to the end-notes. Third, improve consistency of managerial capabilities across the network. We will standardize policies and customize improvement plans for loss-making outlets. By pushing down digitalization efforts, we will empower franchisee partners to reduce costs and grow revenue. We will encourage top performing outlets to scale up and support struggling outlets in overcoming adversity to foster an equal network of mutual benefit and shared prosperity. Fourth, deepen digitization design and implementation. We will roll out hands-on trainings across the network, guide analysts in effectively utilizing tools to narrow gaps in volume, cost, and service. We will also proactively align demand and capacity through careful planning. Sixth, ensure comprehensive safety management and protect grassroots rights. Regular safety inspections will be conducted to identify and eliminate hazards, enforce accountability at all levels, and establish strict compliance boundaries such as safety, labor practice, and taxation. We will continue to refine career incentive and compensation schemes, safeguarding their legitimate rights and interests. Over the past two decades, We have overcome adversity and weathered intense competition. We have always been clear-minded that scale is merely an outcome, and quality is what truly matters. We are committed to our development principle that integrates service quality, market share, and reasonable profitability. We practice our philosophy of shared success and we firmly believe that the headquarters, outlets, and couriers are interdependent parts of that unity. Only when all parties collectively improve operational efficiency and increase shares of benefits, the entire network can then achieve lasting stability and long-term success. Guided by our mission of bringing happiness to more people through our services, supported by a solid infrastructure foundation and sound financial strength, we will continue to harness digitization efficiency, maintain and strengthen cohesiveness and stability of our partner network. We are confident and capable of achieving steady, sustainable growth across entire network. Navigating through industry or economic cycles, and creating a lasting value for industry participants and other investors. Now, let's invite Ms. Yan to present the financial results and guidance. Ms.

Thank you, Chairman Lai and 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 comparison. Detailed information on our financial performance, unit economics, and cash flow are posted on our website, and I'll go through some of the highlights here. In the second quarter, our long-term profitable growth strategy delivered solid results. Anti-involution regulatory efforts and our resilient franchise network continue to drive steady market share expansion with industry-leading efficiency. Our parcel volume grew significantly. and Hsien-Hsien Hsien-Hsien. as our wholly owned subsidiary qualified for a 10% preferential tax rate for tax year 2025. ASP for our core express delivery rose 19 cents or increased 15.5%, driven by a 17 cent positive impact derived mainly from increased KA volume mix, which included higher value reverse logistics. and a $0.02 increase from higher average rate per parcel. Total cost of revenue was $10.8 billion, which increased 21.7%. Overall unit cost for the core express delivery business increased 14.6% or $0.12, which includes KA cost increase of $0.14 that was consistent with the strategic increase in KA volume. Despite cost pressures stemming from the rise of oil prices, our combined unit sorting and transportation costs decreased by 3.2%, or 2 cents, thanks to digitization and lean operations. Specifically, unit costs of line haul transportation decreased by 3.7%, to 32 cents, reflecting optimized route planning and enhanced load rate efficiency. Unit sorting cost decreased 2.6% to $0.24, benefiting from continued improvements in labor and automation productivity. Gross profit increased 26.8% to $3.7 billion, and gross profit margin rate increased by 0.8 points to 25.7%. SG&A expenses excluding SBC decreased 10.5% to 555.5 million SG&A excluding SBC as a percentage of revenue declined to 3.8% reflecting strong corporate cost efficiency Income from operations increased 30.4% to 3.2 billion and associated margin increased 1.3 points to 22.2%. Operating cash flow totaled $4.6 billion for the quarter, primarily attributable to higher operating profits, lower financing receivables, an interest income realized upon maturities of long-term financial products, and favorable terms on sizable fuel payables due for payment in the next quarter. Adjusted EBITDA increased 20% to $4.2 billion. Capital expenditure for second quarter totaled $952 million, and we anticipate the annual capex in 2026 to be around $6 billion. Now moving on to our guidance. Considering the current economic conditions and anticipated industry parcel volume growth, We have updated our full-year parcel volume growth guidance to 6% to 10% year-over-year, representing a parcel volume range of $40.83 billion to $42.37 billion. These estimates reflect management's current preliminary view and are subject to change. Now this concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you please limit yourself to two questions. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Kui Li Fan with Morgan Stanley. Please go ahead. Pardon me. We have Mr. Steve Kui with Goldman Sachs as our first questioner. Please go ahead.

Good morning. Thank you, Mr. Lai, Mr. Yan, and Sophie for answering my questions. I would like to talk about AI and AI-based education. The company has deployed three digital software and machine vision technologies in the transition center. Wang Dian has also upgraded the AI with speech-to-voice curve. The decision-making process of regional management has also been accelerated by AI. I would also like to ask about the strategic thinking of the center on the top of AI and some sharing on the specific work flow. I'd like to ask a question about AI-driven efficiency gains. So I've noticed that a company has deployed 3D digital twin and marked machine vision technologies at its sorting hubs and upgrade voice customer service and network outlets as well as accelerate regional management decision making. Could you share VDO's high-level strategic thinking on digitalization as well as AI? as well as your thoughts on the specific use cases in the operational workflows and where it's been implemented. Thank you.

感谢你的提问。 人工智能对中通的核心价值在于依托每天善意包裹的数据沉淀和成熟的网络运营体系, 持续优化全网协同成本,形成 and Zeng Xiao. The number of digital barriers in the construction industry is difficult to ignore. Currently, AI has completely transformed from building to sending all the chains and converted them into actual revenue. To be more specific, the central unit is a transportation link. The four-year Smart Routes system covers the six common scenarios. Through route optimization, demonstration, performance, portability, and practicality are significantly improved. The number of route systems has increased by 120% in the same ratio, and the traffic speed has decreased by 15%. In the first half of 2026, the cost of IR in the transportation sector was about 12% of the total transportation cost. In the final round, the smart district system covers the national control center, machine vision, real-time identification, classification, penetration, and other 28異常. Coordinated with the current epidemic and 3D visualization screen, it achieves from discovery to storage security management. The decoding efficiency is increased by 4%, the異常追溯覆蓋率達88.4%, Three, the management environment. This year's smart data analysis assistant solved the problem of the digital number of people in the report. It covers more than 2,000 managers in the headquarters and the provincial area. The hot topic analysis is estimated to reach more than 90%. Wang Dianban, according to the party environment, the local address system covers more than 250,000 workers per line. The location of the building is accurately up to 99.98%, supporting the distribution of orders, and the optimization of the route, and so on. The model is in line with the business scale, and continues to improve. 2. IR customer service system Businesses receive more than 90% of the inquiries, and the supply and demand is reduced by IR production, effectively reducing the cost of artificial operation. Xiaofei Dan, Tonggu Air, Qianzhi Fuleng, Kefu Man Yidou, Chong Ba She, Pi Sheng, Zhi, Jing, Bai Fen Zi Jiu She. Zai Guan Ling Fuleng Fan Mian, Zhi Yu, Zhi Neng Shu Zhi Fen Xie Zhu Shou, Jiang You She Jing Ying Fang Fa Ren, Biao Jun Hua, Pei Song Zhi Quan Wan, Liu Qian Du Ge Wan Dian. We will continue to deepen the integration of IR technology and business operations. We will break through the technology and transform it into a dual advantage for business efficiency and service quality. We will further strengthen the industry status. Thank you.

Thank you, Chairman, and now let me translate. For CTO, the core value of AI lies in leveraging data from over 100 million daily parcels and mature network operations to continuously optimize network-wide costs. It creates a self-reinforcing loop of lower cost and higher efficiency, building digital technological mode that is not easily replicated. Today, AI runs through the entire chain from pickup to delivery and has translated into tangible gains, specifically as following on the hub side or the super-sortation side. In transportation, our proprietary intelligent routing and dispatch system now covers six most common scenarios. By optimizing routes, it unlocks idle capacity and Zeng Shui-Feng. Our smart park system now covers all transit centers nationwide. Mission Vision monitors operations in real time and flags 28 types of anomalies, from congestion to missorting. Working with on-site alerts and 3D visualization dashboards, it closes the loop from detection to resolution. Uploading efficiency rose 4% and anomaly traceability coverage reached 88.4%. In management, our proprietary data agent now serves more than 2,000 managers at headquarters and provincial offices, fixing the problem of static reports and, after the fact, manual data polls, thus cutting the time for routing analysis by more than 90 percent. Now, on the outlet side, in picking up and delivery, our precision address system now covers more than 250,000 frontline couriers with building-level location accuracy of 99.98 percent. It supports dispatch applications from order grouping to route optimization, and its accuracy keeps improving as business volumes continue to grow. On the AI customer service front, more than 90% of merchant inquiries and ticketing are now resolved through AI self-service, effectively lowering labor costs. On the consumer side, with AI stepping in earlier, Customer satisfaction has risen from 80% to nearly 90%. On a management front, building on the data agent, we now push standardized best practice playbooks to more than 6,000 outlets across our network with a response rate of 88%, narrowing the capability gap across outlets and enabling proven management practice to be replicated in scale. AI has become core strategic driver for ZTO. Looking ahead, we will continue to deepen the integration of AI across our operations, covering technological breakthroughs in converting technical breakthroughs into gains in both efficiency and service quality to further solidify our market leadership.

The next question will come from Kweli Finn with Morgan Stanley. Please go ahead.

Thank you, operator. 賴總,言總,Sophie 早上好,歡迎,感謝接受我的提問,也恭喜公司很好的二季度的業績增長。 I have two small questions. The first question is about the retrofit. I also observed that the retrofit has actually played a very important role in the profit-making growth of the company. So I would like to ask about the current situation of the retrofit, and then the corresponding share price increase, and then this year, We forgot what our goals were and our goals for next year's image building growth. This is the first question. The second question is about social security's impact on company costs and operations. This year, we heard some discussions from other industries This social security full price perspective is also in the gradual promotion I would like to ask about the impact of social security full price perspective on company cost and management In history, we have observed that the cost of the entire industry has risen, and most of them have passed through the form of rising prices to and others. So I would like to ask, if there is an impact of social security, will the company and the industry consider to neutralize this impact through a way of coalescing? Let me translate for myself. Thank you management for taking my questions and congratulations on a very strong profit growth in the quarter. I have two questions. The first question is about the reverse logistics parcels. It's encouraging to see that the retail parcels have contributed a solid foundation for our profit growth. Just wondering In terms of daily volume, where are we now? And what's the implied year-on-year growth? Do we have any targets towards the peak season of this year and in next year? The same question is about the social insurance. So in this year, we start to We have more discussion about the full social insurance contribution implementation gradually pushed by regulators. Wondering what's the potential impacts on our costs and operations. Specifically, historically, we have seen that industry-wide cost inflation could be passed through by industry-wide price hikes. Do you think if there are any cost inflation related with this full social insurance contribution, the industry has opportunities to pass that cost inflation through? Thank you.

散监业务尤其是印象监业务的快速发展, 致使中通进行高质量的策略, 打造产品分层体制的重要成果。 It is also an important line of service quality lead and MoDAN network stability. In the second quarter, our retail Japanese army has more than 11.7 million units. Among them, the Japanese army has about 9.8 million units. The same number of lines are growing at high speed. Although the price of the retail business has been revealed due to market competition, it is subject to the control of the cost of scale effect and essence. We will continue to improve the level of single-voting profits. In the near future, the contribution of single-voting profits will be higher than that of ordinary e-commerce economy, effectively improving the overall single-voting profit capacity. The goal for next year is very clear. We want high-quality development, high-quality share, and high-quality service. So we will continue to Thank you very much for your question. Let me translate for Chairman.

The rapid growth of our retail parcel business, particularly reverse logistics parcels, is a key component of CTO's high quality strategy and product diversification. It demonstrates our leadership in customer service and quality, as well as the stability of our network. In the second quarter, average daily retail parcel volume exceeded 11.7 million. of which return parcels averaged approximately 9.8 million each day, increased approximately 80% year over year. Although the price of reverse logistic parcels has declined from the past as market competition continues, we expect per parcel profitability in this business to continue to improve supported by economies of scale and refined cost control. At present, reverse logistic parcels still generate higher per parcel profit than standardized e-commerce parcels, effectively lifting the company's overall per parcel profitability. Next year, again, our strategy is very clear. We are seeking high-quality, and Hsueh-Hsueh Chen. for our product diversification as well as the profitability gain across the whole network.

第二個快遞員社保問題 當前監管層面持續推動完善快遞從業人員 都層次社會保障體制 與反內選政策協同引導行業規範用工 保障集成權益 Thank you for your attention. Thank you very much. Thank you.

Let me translate and supplement where needed. With the critical data sharing system being implemented, regulators plan to advance a multi-tiered social security system for flex work arrangements, including express delivery personnel. Together with entire pollution policies, these efforts aim to standardize employment practice, protect frontline workers' rights and interests, and drive high-quality industry development, which are consistent with CTO's core beliefs. The policy adopts an approach of a stepped rollout. Social insurance contributions are being enforced for personnel with formal employment relationships, whereas occupational injury protection is being expanded for flexible workers. From the beginning, the company have consistently upheld the core philosophy of shared success, placing great importance on protecting the interests of our network partners and frontline workers. In our own workforce management, we have always adhered to industry practice boundaries We welcome the regulators' guidance on Social Security contributions for couriers, addressing and also actively Encouraging and helping our network partners to address challenges for unique flex work arrangements. While the rollout of standardized social security initiatives will inevitably bring about end-to-end cost increases in the foreseeable future, over the long run, complete coverage will strengthen network stability Lai, Xuanyi Wang, and Jingxi Zhu. Thank you very much.

The next question will come from Aaron Lau with UBS. Please go ahead.

Hey, Mr. Lai, Mr. Yan, Mr. Su, hello, thank you for accepting my question. I have two questions here. The first one is, I see that we have also given new full-year business guidance, so I would like to ask about your expectation for the second half of the industry, including our company's overall strategy in the second half of the year. Let me translate for myself. Thanks, Ms. Lai, Ms. Yan, and Sophie for taking my questions. The first one is regarding our new full-year volume guidance. I'd like to seek a bit more of your insights on the industry's second half growth outlook and our company's strategic plan for the second half. And also, on the cost side, do we have any cost guidance for the future? And what is the sensitivity of our costs to oil prices? Thank you so much.

Hello. With the continued return on interest, In the first half of the year, the courier industry has undergone step-by-step adjustments. It has expanded from the initial launch to the gradual transition to high-quality development. The new steps of quality management are priority. Looking forward, the high-quality transformation of the industry will continue to advance deeply. The growth center is more focused on the improvement of service quality and operation efficiency. As much as possible, it is expected to maintain a reasonable and stable level. In the context of high-quality development in the industry, the value of long-term capitalism in the company is falling, and we are not blindly pursuing a large-scale expansion of the party. We will steadily improve the profit and loss level at the end of the day, and continue to grow the company's overall operating stability as a core standard for measuring high-quality development. At the end of the day, we will focus on improving the efficiency, creating differentiated service capabilities, Let me translate for the first part of the question.

As the anti-illusion policy continued to take effect in the first half of the year, the express delivery industry has undergone a period of adjustment and has gradually shifted away from price-led scale expansion to quality-driven development, leveraging operating efficiency. Looking ahead, the industry's transformation will continue to deepen. focusing more on improvements in service quality and operational efficiency. We anticipate the partial volume growth for the entire industry to be at stable or steady level. As industry shifts towards high-quality development, the company remains committed to a sustainable long-term mindset rather than seeking short-term scale expansion. For us, the core of high-quality development comes down to increasing profitability of outlets, rising income by couriers, and healthy increasing profit for the company. Strategically, we will continue to focus on these priorities, growing effective market share, building differentiated service capabilities and advancing end-to-end lean operations. While solidifying our leadership in partial volume, we will place greater emphasis on winning high-quality market share and maintain sound profitability, continually showing up our foundation for competitive growth for medium to long-term term. If I may supplement, when you asked about the volume and the price, again, we will be watch closely to what the industry's development is as our goal continues to be growing and expanding our market share leadership.

On the issue of cost and the guidance of annual cost, the cost performance is under pressure due to the rising price and the cost of transportation. The cost of single-voting transportation has risen by about two points. However, due to the deepening use of digitized tools, the cost of single-voting transportation and distribution has dropped by two points. Specifically, The shipping cost of the second system is 0.32 yuan, which is one cent lower than the previous one. The price increase of the second system affects the shipping cost by about two cents. In terms of cost reduction, it means continuous optimization and digitization of tool applications, and the use of self-taught and self-taught systems, and the prediction of the flow rate in advance, and the arrangement of intelligence, and the timely monitoring of optimized transport structure and route planning. At the same time, it is reasonable to use the auxiliary driving system to effectively reduce the cost of transportation at the same time. The second is to optimize the load-bearing index and assessment mechanism to promote the load-bearing mechanism of the stairs. The third is to continue to improve the car team management, the driver's license, the car team transportation, standardize the cost model, The cost-saving force has further reduced the cost of transportation. The second is the impact of oil prices. The oil price of the second wave has increased by 24% on average. There is pressure on the supply and delivery costs. In the second half of the year, the international situation has been much more unstable. Before the oil price has seen an obvious rebound, Japan's single-vote transportation costs We are still able to manage the cost of shipping. Because our single-vote volume has increased. So actually, its cost has dropped more than 12%. Second is the cost of division. The cost of division of the second-degree single ticket is 0.24 yuan, which is also a drop of one point. On the one hand, we continue to increase the investment of centralized intelligent equipment. By monitoring and predicting the improvement and transformation of old and new equipment, we can improve the efficiency of equipment operation while controlling the cost. and many more. On the other hand, through the use of location prediction and model optimization ranking, and deepening the implementation of the responsibility to the people, we will use the clear and sincere mechanism to improve the efficiency of the people. We expect that the year-end mid-term round will be expected to drop by three points. In the medium to short range, we will focus more on all-in-one infrastructure. This year, we will vigorously promote the optimization of the network, the optimization of the network, the optimization of the network, the optimization of the network,

The cost performance in the second quarter due to rising fuel prices which put pressure on transportation costs and impacted per parcel transportation costs by approximately two cents. Thanks to continued implementation of efficiency gain initiatives which includes smart tool, combined unit transportation costs and sorting costs, and Hsien-Hsien Hsien-Hsien. using our proprietary intelligent dispatch system to forecast shipment flows in advance, optimize ship scheduling, refine load capacity structure and route planning in real time while making prudent use of assisted driving system to shorten transit times duration and effectively lower cost. Second, we refined our load rate metrics and assessment mechanism wrote out tiered loading rate incentives. Third, we continue to strengthen fleet management, consistently refining standardized cost model as we use it as a benchmark to incentivize our drivers. Fuel cost impact on the transportation costs If diesel costs, everybody knows that it rose around 24% in the second quarter, which put pressure on line haul transportation costs. Looking into the second half, the global environment remains highly uncertain. Unit oil price pull back meaningfully. We expect the oil price are not necessarily going to pull back meaningfully. So we expect full fuel price continue to weigh on per parcel transportation cost by about one to two cents. To counter the fuel price volatility, we are leveraging our opportunist reserve of oil at a lower cost and to offset and then also continue to expand Our fleet of natural gas trucks, as well as actively exploring the deployment of electrical vehicles that is suitable for express delivery operations. To be exact, because the first half, and particularly second quarter, weight per parcel has increased, so therefore really the total cost has increased, for transportation. In that sense, we actually achieved more than 10 percent cost efficiency on transportation. Sorting costs in the second quarter was 24 cents RMB, down one cent year over year. On the equipment front, we steadily increased level of automation with smart solutions for sorting equipment and also upgrading old equipment. Through real-time monitoring and early warning, we improved equipment utilization. On the labor cost front, we optimized shift scheduling through station-based staffing forecast and recat procedures, so therefore enforced Thank you very much. Thank you very much. on end-to-end cost reduction. By leveraging digital tools to strengthen outlet operations, we are confident to improve service quality and reduce overall cost to help with our end-to-end total cost reduction for the entire year. Hope that answers your question.

Thank you so much.

So I believe this takes us to the bottom of the hour and we thank everybody for joining us for the call. We look forward to have further conversations with you to share with you our view and on the ground practice as we move forward towards higher quality development and sustainable return for Express delivery participants as well as our shareholders. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.