On Tuesday, Goldman Sachs reinstated coverage on SF Holding Co Ltd (002352:CH), assigning a Buy rating to the company's stock along with a price target of RMB63.00.
The firm's analysis indicates that SF Holding is well-positioned to capitalize on the growth opportunities in both domestic and international express and integrated logistics markets.
The analyst from Goldman Sachs highlighted SF Holding's strong presence in the time definite express delivery segment, where the company is expected to continue its dominance with approximately a 64% revenue share.
SF Holding's industry-leading services are supported by substantial infrastructure, including the strategic Ezhou Airport in China, likened to Memphis in its importance to logistics.
This robust infrastructure is anticipated to strengthen SF Holding's competitive advantages in this market segment, allowing it to maintain a significant average selling price (ASP) premium over its competitors.
Furthermore, the analyst projected a multi-year pathway for SF Holding's margin expansion. This growth is expected to stem from ongoing cost optimization initiatives, the peak of its investment cycle in the current year, enhanced profitability in its less-than-truckload (LTL) freight business, and an integrated supply chain strategy.
These factors are projected to gradually increase the company's adjusted EBITDA margins to 12% by 2026, which would be the highest since 2017. As a result, SF Holding's group adjusted net profit is forecasted to rise from RMB8 billion in 2023 to RMB14 billion by 2026.
Additionally, SF Holding's growth is not limited to the Chinese market. The firm's direct operations and comprehensive logistics solutions position it to benefit from the ongoing trend of Chinese enterprises expanding their supply chains overseas.
SF Holding, through its significant stake in Kerry Logistics and other initiatives, has extended its total addressable market (TAM) to include global freight forwarding and the Asian supply chain, with an eye on further expansion into Southeast Asia and other global markets.
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