Results Review

1Q26 results in line with our expectation

S.F. Holding announced its 1Q26 results: Revenue rose 6% YoY to Rmb74,142mn, attributable net profit grew 13% YoY to Rmb2,526mn, and recurring attributable net profit rose 17% YoY to Rmb2,317mn. Recurring net profit margin was 3.13%, up 0.3ppt from 1Q25, in line with our expectations, which we attribute to the firm's mechanisms aiming to activate operations launched since 3Q25, and its shift from scale-oriented incentives to value-oriented incentives.

1Q26 revenue by segment: Revenue from the express delivery and logistics business segment rose 5.9% YoY, with per-parcel revenue growing by 1% YoY or Rmb0.15 YoY thanks to finetuning of business structure, implying high-quality development and solid fundamentals for core earnings. Revenue from the supply chain and international business segment grew 8.2% YoY, and we think the growth rate of revenue of this business segment excluding the KLN business should be higher.

Trends to watch

Resilient operations despite external challenges in 1Q26; revenue and profit growth solid; scarce logistics network and supply chain service capabilities; capturing growing customer demand. Despite uncertainties in international trade, the firm's earnings grew steadily in 1Q26 despite a high base last year, reflecting its resilient operations. We believe the firm is the largest provider of integrated logistics services in China and Asia, and the fourth largest provider of integrated logistics services in the world. Thanks to its years of resource investment and customer accumulation, the firm has established three major business segments: standard products (large-parcel and small-parcel express delivery), supply chain services (end-toend supply chain solutions for key industries), and international business (following Chinese companies' overseas expansion). Supported by technologies and AI, we expect the three business segments to create synergies and promote each other to achieve more balanced and stable growth.

Stable dividends and increased share buyback show confidence. In 2025, the firm's operating cash flow was Rmb27.6bn and its free cash flow (excluding capex) was Rmb18bn, implying steady improvement in financial conditions. Its debt-to-asset ratio fell to a five-year low of 49%. In 2025, the firm’s total shareholder returns (returns from dividends plus share buybacks) accounted for 55% of its net profit attributable to shareholders, and the upper limit of its A-share buyback plan has been doubled to Rmb6bn. The firm has also launched an Hshare buyback plan (up to HK$0.5bn).

Financials and valuation

We keep our 2026 and 2027 earnings forecasts at Rmb12bn and Rmb13.6bn. The firm’s A-shares are trading at 15x 2026e and 14x 2027e P/E. For its A-shares, we maintain an OUTPERFORM rating and target price of Rmb51.87, implying 22x 2026e and 19x and 2027e P/E, offering 41% upside. The firm’s H-shares are trading at 13x 2026e and 12x 2027e P/E. For its H-shares, we maintain an OUTPERFORM rating and TP of HK$50.37, implying 19x 2026e and 16x 2027e P/E, offering 41% upside.

Risks

Global economic slowdown; sharp rises in fuel costs.