Parcel company, ZTO Express, delivers supernormal returns despite no apparent competitive advantage in an intensely challenging and commoditised industry. Alibaba accounts for 75% of its business but is building out its own delivery network and has invested in competitor YTO Express, which threatens longer-term prospects. Meanwhile, three-quarters of the delivery value chain is operated by ZTO’s related partnership networks that we think are barely profitable. Finally, a third of its trucking fleet is held by ZTO appointed employees but not consolidated. Overpriced at 32x 2016e PER, our conservative target price of US$10/share implies downside of 29%. Sell or Short.