SF HOLDING(002352)：3Q22 NET PROFIT JUMP CUES ALLOCATION OPPORTUNITY

In 3Q22, SF achieved an impressive recurring attributable net profit (ANP) of Rmb1.72bn. During the same period, its revenue from express logistics increased by 8.5% YoY, highlighting its resilience amid Covid resurgences and downward pressure on macroeconomic growth. China will likely adopt more targeted pandemic prevention and control measures in the future.
Even with a weak recovery in consumption, SF’s net profit may increase by more than 30% YoY in 2023. We estimate that SF’s time-definite delivery business revenue will record about 8% YoY growth in 2022 and double digit growth in 2023. SF’s healthy operations strategy continues to yield results. The Company may terminate the lease of more than 60 premises in 2022 and improve its trunk route network, thus indirectly optimizing its transportation cost. Meanwhile, a 10% toll concession for trucks in 4Q22 may cut the Company’s transportation cost by Rmb100mn-200mn. As Ezhou Airport consolidates its resource barrier, the airport hub may bring about a 10%-20% reduction in the unit cost of SF’s air transportation network. In a pessimistic case, we only consider the Company’s time-definite express delivery, economic express delivery and express transport businesses in our market cap estimation (Rmb360.8bn). Since SF’s current valuation appears quite attractive, we suggest eyeing opportunity of allocation on the stock.
In 3Q22, SF achieved recurring ANP of Rmb1.72bn. During the same period, its revenue from express logistics increased by 8.5% YoY, highlighting its resilience. Even with a weak recovery in consumption, the Company’s net profit may increase by more than 30% YoY in 2023.
Therefore, we suggest timely allocation on the stock.
In 1-3Q22, SF’s operating revenue increased by 46.6% YoY to Rmb199.15bn; its revenue/recurring ANP came in at Rmb4.47bn/3.86bn, much better than the recurring ANP of Rmb330mn in 1-3Q21. In 3Q22, SF’s operating revenue increased by 45.4% YoY to Rmb69.08bn (hereinto, its revenue from express logistics business increased by 8.5% YoY to Rmb44.85bn); its revenue/ recurring ANP came in at Rmb1.96bn/1.72bn, much better than those (Rmb1.04bn/810mn) in 2Q22. Benefiting from the revenue growth brought by the consolidated financial statements of Kerry Logistics, the Company’s combined labor, depreciation and financial expense ratio dropped by 2.0ppts YoY to 9.2% in 3Q22. We reckon that 2022 is the initial stage of SF’s capacity ramp-up period, and the Company’s healthy operations strategy continues to show results. The main rationale for SF to achieve earnings growth mainly comes from three fronts: more increments of time-definite delivery services, declining losses and rising profits of new businesses, as well as cost optimization through terminating lease of premises and integration of four networks. China will likely adopt more targeted pandemic prevention and control measures. Even with a weak recovery in consumption, the Company’s net profit may increase by more than 30% YoY in 2023. Since SF’s current valuation is quite attractive, we suggest timely allocation on the stock.
The parcel volume of SF’s express logistics business increased by 8.9% YoY in 3Q22. We estimate that the Company’s time-definite delivery business revenue growth rate will be about 8% (totaling c.Rmb104bn) in 2022 and in double digits in 2023.
Amid continuous optimization of product structure and gradual manifestation of scale effect, ecommerce standard express delivery may become a new profit growth driver in the medium term. The parcel volume of SF’s express logistics business increased by 8.9% YoY to 2.82bn units in 3Q22, highlighting its resilience amid Covid-19 resurgences and downward pressure on macroeconomic growth. We estimate that the Company’s time-definite delivery business achieved a high single-digit growth rate in 3Q22, mainly thanks to the YoY increase in the volume of returned ecommerce parcels and the demand for fresh fruits in peak season. Due to seasonal factors, this year’s hairy crab sales were mainly in the first half of Oct, which may affect the growth rate of SF’s time-definite delivery business by nearly 2ppts, while the daily average number of returned parcel volume may exceed 3mn units. We estimate that the Company’s time-definite delivery business revenue growth rate will be about 8% (totaling c.Rmb104bn) in 2022 and in double digits in 2023. In Jul, SF withdrew its loss-making discount special delivery business from the market. We estimate that the number of the Company’s ecommerce standard express delivery parcel volume increased to nearly 9mn units per day in Oct, and the GPM was about 5%. Amid gradual manifestation of scale effect, ecommerce standard express delivery may become a new profit growth driver in the medium term.
SF’s healthy operations strategy continues to show results. In 2022, the Company may terminate lease for over 60 premises and improve its trunk route network, thus indirectly optimizing its transportation cost.
Meanwhile, a 10% toll concession for trucks in 4Q22 may cut the Company’s transportation cost by Rmb100mn-200mn.
SF focuses on its core strategy and pays attention to long-term sustainable and healthy development. The results are gradually manifesting. With progressing integration of four networks, the Company terminated lease for more than 40 premises in 1H22 and may de-lease more than 20 premises in 2H22. Meanwhile, improved trunk route network will indirectly optimize its transportation cost. In 1H22, SF’s per-kilo transportation cost decreased by 4% YoY (-9% YoY when the oil price was excluded). Considering a 10% toll concession for trucks in 4Q22 and increased demand for land transportation demand in peak season, we estimate that favorable policies will help cut the Company’s transportation cost by Rmb100mn-200mn. Comprehensive outlets for small and large parcels facilitate the resource reuse of small and large parcel businesses. Newly built small outlets closer to end customers are conducive to direct distribution and shipment at transit sites. In 1H22, SF cut its outlet floor space by 100,000 sqm. Meanwhile, proximity to end customers is more conducive to strengthening the collection of scattered parcels, and the healthy operations strategy may continue to show results in 2023.
SF’s capex may drop to around Rmb11bn in 2023, which is favorable for the Company’s earnings growth during the capacity ramp-up period.
As Ezhou Airport consolidates its resource barrier, the unit cost of SF’s air transportation network may be reduced by 10%-20% in 2025, making it the No. 1 express delivery company in China benchmarked against overseas segment leaders. SF’s capex decreased by 14.8% YoY to Rmb4.05bn in 3Q22, and may further decline to about Rmb11bn in 2023. The Company’s earnings will be more significantly underpinned by the growth of business volume. We remain optimistic about the payback period of growing earnings brought by the Company’s capacity ramp-up. In Jul, Ezhou Airport completed the maiden voyage of cargo flights, and plans to build a mature hub-and-spoke network (with a cargo and mail throughput of 2.45mn tonnes) in 2025. As Ezhou Airport continuously consolidates its resource barrier, the airport hub may bring about a 10%-20% reduction in the unit cost of SF’s air transportation network. In this context, SF may become the No. 1 express delivery company in China benchmarked against overseas segment leaders.
Potential risks: Downward macroeconomic growth rate; rapidly rising labor costs; large increases in oil prices; slower-than-expected growth rate in the Company’s time-definite delivery business; and disappointing cost control results from integration of four networks.
Investment recommendation: In 3Q22, SF achieved an impressive recurring attributable net profit (ANP) of Rmb1.72bn. During the same period, its revenue from express logistics increased by 8.5% YoY, highlighting its resilience amid Covid resurgences and downward pressure on macroeconomic growth. China will likely adopt more targeted pandemic prevention and control measures in the future. Even with a weak recovery in consumption, SF’s net profit may increase by more than 30% YoY in 2023. We estimate that SF’s time-definite delivery business revenue will record about 8% YoY growth in 2022 and double digit growth in 2023. SF’s healthy operations strategy continues to yield results. The Company may terminate the lease of more than 60 premises in 2022 and improve its trunk route network, thus indirectly optimizing its transportation cost. Meanwhile, a 10% toll concession for trucks in 4Q22 may cut the Company’s transportation cost by Rmb100mn-200mn. As Ezhou Airport consolidates its resource barrier, the airport hub may bring about a 10%-20% reduction in the unit cost of SF’s air transportation network. In this context, SF may become the No. 1 express delivery company in China benchmarked against overseas segment leaders. We maintain our 2022E/23E/24E EPS forecasts of Rmb1.35/1.86/2.47 for the Company. Adopting the SOTP valuation method and considering the Company’s structural advantages, we give SF’s time-definite delivery business 30x 2022E PE. Using the 1.2x PS (TTM) of comparable companies-YTO Express (600233.SH) and Yunda Holding (002120.SZ)-as reference, we apply 1.2x 2022E PS to SF’s economic express delivery business. Benchmarking against Deppon Logistics (603056.SH), we assign 1.5x 2022E PS to SF’s express transport business.
With pessimistic expectations, we only consider the corresponding target market cap (Rmb360.8bn) of the Company’s time-definite express delivery, economic express delivery and express transport businesses. Since SF’s current valuation is quite attractive, we reiterate the “BUY” rating and continue to recommend the stock.
【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。

   【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。