Results Review

1H26 results slightly miss our expectations

The firm announced its 1H26 results: Revenue rose 5.9% YoY to Rmb155.51bn; net profit attributable to shareholders fell 4.1% YoY to Rmb5.502bn, mainly due to the high base from the oneoff after-tax income on the deconsolidation of the Nanfang SF Logistics REIT in 1H25; recurring net profit rose 9.3% YoY to Rmb4.975bn; and recurring net margin rose 0.1ppt YoY to 3.2%, slightly missing our expectations as rising fuel costs pushed up shipping capacity costs, in our view.

In 1H26, revenue from the express delivery and logistics business rose 3.2% YoY to Rmb112.81bn, with per-parcel revenue up 3.3% YoY thanks to the optimization of business structure. This translates to high-quality development and solid fundamentals for core earnings. Revenue from the supply chain and international business rose 15.6% YoY to Rmb39.58bn, with revenue excluding KLN rising 46.6% YoY.

Trends to watch

Core business grew steadily; supply chain and international expansion accelerating; upbeat on synergies. Backed by years of investment in resources and customer accumulation, we believe SF Holdings has established three major business segments: Standard products (large-package freight + small-parcel express), supply chain services, and international business. In 1H26, the firm’s revenue of timesensitive express business (excluding e-commerce returns) increased by 5.3% YoY, that of freight services increased by 12.6% YoY, revenue from intra-city instant delivery rose by 22.1% YoY, and revenue from supply chain and international businesses (excluding KLN) rose by 46.6% YoY. The growth of these segments has been accelerating. We expect synergies between the three segments under the support of technology and AI.

Operations resilient despite oil price disruptions in 2Q26; recurring net profit margin up 0.1ppt YoY. In 1H26, although shipping capacity as a percentage of revenue rose 1.9ppt YoY, labor cost and other operating cost as percentages of revenue fell 1.4ppt and 0.7ppt YoY. We attribute this strong performance to a series of measures including the value enhancement program, lean management, and AI application, which have effectively hedged the impact of rising oil prices.

Stable dividend and increased share buyback show confidence. In 1H26, the firm proposed a cash dividend of about Rmb2.5bn, accounting for about 45% of net profit attributable to shareholders (+5ppt YoY). It plans to raise the cash dividend ratio to 45% in 2026, 50% in 2027, and no less than 50% in 2028.

Financials and valuation

Given rising oil prices and slowed growth in parcel volume, we cut our 2026 and 2027 earnings forecasts 8% and 8% to Rmb11.04bn and Rmb12.55bn. We maintain OUTPERFORM ratings for A- and H-shares. A-shares are trading at 16x 2026e and 14x 2027e P/E. We cut our target price 9% to Rmb47 for Ashares, implying 22x 2026e and 20x 2027e P/E and offering 40% upside. H-shares are trading at 13.5x 2026e and 11.5x 2027e P/E. We cut our target price 11% to HK$45 for H-shares, implying 19x 2026e and 16x 2027e P/E and offering 37% upside.

Risks

Global economic slowdown; lower-than-expected parcel volume; sharp rise in fuel costs.