SF HOLDING(002352)：PREANNOUNCED 4Q22 RESULTS LARGELY IN LINE DUE TO DEMAND RECOVERY

Preannounced attributable net profit up 42-46% YoY to Rmb6.05-6.25bn in 2022
SF Holding preannounced its 2022 results, estimating its attributable net profit rose 42-46% YoY to Rmb6.05-6.25bn in 2022, vs. the target of Rmb5.4bn based on equity incentive assessment. The firm estimates that its recurring net profit rose 186-197% YoY to Rmb5.25-5.45bn. In 4Q22, its attributable net profit fell 28-36% YoY to Rmb1.58-1.78bn, and median attributable net profit fell 14% QoQ to Rmb1.68bn, as non-recurring income (including income from the sale of SFMap) reached Rmb970mn in 4Q21. In 4Q22, the firm’s recurring net profit stood at Rmb1.39-1.59bn (implying a YoY change between -8% and +6%), with a median of Rmb1.49bn (down 13% QoQ), largely in line with our expectations.
Express logistics business: The State Council announced 10 new measures to optimize China’s COVID-19 response in December 2022. In 4Q22, SF's revenue growth in this segment reached 12.7%, 15.7ppt higher than the industry average, benefiting from its leading service capabilities and stable logistics network. In 4Q22, its revenue rose 7.3% YoY due to optimized product mix. Supply chain business: Revenue from this segment fell 28.3% YoY in 4Q22 due to a high base resulting from the consolidation of Kerry Logistics and a downturn in the freight forwarding business. We believe the firm's total revenue slightly declined YoY in 4Q22.
Trends to watch
We expect SF Holding to benefit from its sound logistics services in the near term and a recovery in consumption and logistics demand in the medium term amid optimized COVID-19 containment measures; watch sustainability of its revenue growth. In 2H22, the firm's time-definite delivery business came under pressure due to the slowing macroeconomic growth. However, its economy shipping business reported relatively strong growth and the structure of related product portfolio was further optimized. As the government optimized COVID-19 containment measures in December and the firm’s logistics network was sound, SF Holding’s earnings growth accelerated. In December, its parcel volume grew 23.2% YoY, 22.1ppt higher than the industry average.
Looking ahead, we expect the industry to achieve double-digit growth as consumption and express delivery demand recover. We also expect the revenue growth of the firm's time-definite delivery business to recover and accelerate. We believe that its earnings will improve, given its continued expense control and operating leverage.
We see long-term investment opportunities in SF Holding. Overall, we suggest paying attention to three aspects.
1) Product stratification and customer grouping: As was stated in our report Analyzing the express delivery industry from the perspectives of market, platform, and regulatory perspectives (published on April 14, 2022), we believe leading players will likely explore new growth drivers through product stratification, customer grouping, and new businesses. As SF started its business transformation earlier than its peers, we think it will likely enjoy first-mover advantage and is thus more likely to succeed.
2) Ezhou Huahu Airport commenced operation on July 17, 2022: We expect the hub-and-spoke model for transfer and collection and the shift from small aircraft to larger ones to help reduce SF Holding’s transportation costs per bill. In addition, we think the firm will likely strengthen its advantages as the Ezhou Huahu Airport should help the firm expand the coverage of its time-definite delivery services, grow its supply chain business, and boost the growth of its global business.
3) International business: SF Holding has mature air transport and operational capabilities. We expect its air cargo transportation capability to improve further as the newly built Ezhou Huahu Airport ramps up. Furthermore, Kerry Logistics, in which SF Holding holds a controlling stake, specializes in cargo agencies and deals with a wide variety of goods. It serves many multinational enterprises and has expanded its express delivery business in Southeast Asia. We expect effective synergies between the two parties.
Financials and valuation
COVID-19 resurgence weighed on the growth of the firm’s time-definite delivery business in 2022. We expect the growth to rebound as demand recovers. We lower our 2022 net profit forecast 12.8% to Rmb6.2bn, raise our 2023 net profit forecast 6% to Rmb9.1bn, and introduce our 2024 net profit forecast of Rmb11.0bn. The stock is trading at 32x 2023e and 26x 2024e P/E (34x 2023e and 27x 2024e P/E excluding one-off impact). We maintain our target price, implying 33x 2023e P/E (38x 2023e P/E excluding one-off impact) with 11.8% upside.
Risks
Disappointing growth in business volume due to COVID-19 or weak demand; sharp rise in costs.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。