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Investing.com - Morgan Stanley (NYSE:MS) upgraded SF Holding Co Ltd (002352:CH) from Equalweight to Overweight on Thursday, raising its price target to RMB57.00 from RMB53.40.
The upgrade comes as Morgan Stanley expresses confidence in SF Holding’s self-help initiatives, which include sustained efforts to boost revenue and reduce costs through improved courier incentives, price reductions for customers, and exploration of new business domains in industrial, consumption, and fresh goods supply chains.
SF Holding’s management remains confident in achieving 20-30 basis points annual margin expansion during 2025-2027, following an expected 40 basis points margin expansion in 2024, according to the research note.
Morgan Stanley believes SF Holding is likely immune to the industry’s increased competition, particularly in its core profit driver of premium parcels, as pricing competition has led to service quality deterioration from peers using the franchising model, while SF’s high service quality under its direct model has protected its high-end market share.
The firm views SF Holding’s valuation as attractive, projecting free cash flow yields of 6-8% during 2025-2027, which leaves room for shareholder return improvement.
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