CICC: Maintaining the SF Express Tongcheng (09699) “Outperform the Industry” rating target price of HK$11.5

The Zhitong Finance App learned that CICC released a research report saying that it recently invited the management of SF Express Tongcheng (09699) to conduct a non-transactional roadshow. The bank believes that the company's revenue growth in the same city distribution business is still resilient, and the last-mile business is expected to recover in the second half of the year, and it is optimistic that the company's profits will maintain a high increase; in addition, the company has already initiated an H share repurchase plan with a maximum limit of HK$400 million. CICC kept the company's 2026/2027 adjusted net profit forecast of $543/860 million unchanged, maintaining the “outperforming industry” rating and a target price of HK$11.5, corresponding to 17/10 times adjusted P/E for 2026/2027, with 31% room for growth.

CICC's main views are as follows:

The revenue growth of the distribution business in the same city remains resilient

In July, 9 departments including the Ministry of Commerce issued “Opinions on Accelerating the Innovation and Development of the Retail Industry” to encourage exploration of model transformation including “instant retail”. The Ministry of Commerce Research Institute predicts that in 2026, the scale of instant retail sales will increase 28% year-on-year to 1.24 trillion yuan, reaching 2 trillion yuan in 2030, “becoming an important growth engine for the retail industry.”

According to QuestMobile, the average number of daily uses of Sam's and Dingdong grocery shopping apps increased by 35% and 25%, respectively, in August over the same period last year. The bank believes that the penetration rate of non-food scenes such as supermarkets is still increasing. Combined with the company's same-city delivery order volume increasing by more than 30% in the first half of 2026 and the revenue of the supermarket industry increasing by more than 50% year-on-year, the bank believes that the company's distribution revenue growth in the same city is resilient due to the neutrality of third parties, the ability to operate refined business districts, and the flexibility of the capacity network.

The growth rate of last-mile delivery is expected to recover in the second half of the year

CICC expects that the growth rate of last-mile delivery is expected to pick up in the second half of 2026, mainly due to the Group's product restructuring beginning in September last year, and the high base pressure will be relieved in the first half of the year; in addition, the company will gradually carry 0-6 km express delivery volume in the same city, which will also contribute to additional growth. In the long run, the bank believes that with multi-scenario network integration and product matrix expansion with SF Express Group, the penetration rate of large network delivery is expected to double.

Projected gross margin recovery in 2026

CICC expects the company's gross margin to recover in 2026. The bank expects the company's profit margin to continue to rise, considering the reduction in the cost of riders this year, while benefiting from the increase in order size and the reduction in rates brought about by the asset-light operating model. The company has initiated an H share repurchase plan up to HK$400 million, and the repurchased shares will be cancelled in due course. The bank believes that this move shows management confidence.