Core Viewpoint - SF Express has chosen to prioritize profit over volume by relinquishing its e-commerce return business with Douyin, aligning with its strategy to enhance profitability amidst ongoing industry challenges [5][15]. Business Strategy - SF Express has decided to terminate its contract for e-commerce return services with Douyin, which will now be handled by other logistics providers like JD Logistics and ZTO [5]. - The decision to abandon low-margin e-commerce return orders is consistent with SF's focus on improving profitability and optimizing its business structure [5][15]. - The company has been facing pressure on its profitability due to a prolonged price war in the logistics industry, leading to a decline in single-package pricing [17][21]. Financial Performance - In the first three quarters of 2025, SF Express reported a total business volume of 12.15 billion packages, a year-on-year increase of 28.3%, and revenue of 225.3 billion yuan, up 8.9% [13]. - Despite revenue growth, the average revenue per package has decreased by 8.49% to 13.47 yuan, contributing to a decline in gross profit [18][21]. - The gross profit for the first three quarters of 2025 was 29.2 billion yuan, reflecting a year-on-year increase of only 1.2%, while the gross profit margin fell by 1.0 percentage points to 13.0% [13][21]. Operational Adjustments - SF Express has initiated an "Enhancement Plan" aimed at optimizing customer structure, reasonable pricing, and cost reduction to improve the proportion of high-value orders [14]. - The company is also implementing flexible resource cost-reduction strategies, including the introduction of local and external resources for e-commerce and return orders [14]. - SF Express has launched new high-value services, such as the "High-Speed Express" product, which aims to provide high-quality, time-sensitive delivery services [23]. Market Context - The e-commerce sector, particularly driven by live-streaming sales, is projected to generate significant order volumes, with Douyin's GMV expected to exceed 4 trillion yuan in 2025 [7]. - However, the high return rates in the e-commerce industry pose challenges for logistics companies, particularly those like SF Express that focus on premium services [8][10]. - The logistics industry is currently experiencing a recovery phase, but SF Express has yet to benefit from this trend, as indicated by its continued decline in single-package revenue [18][25].

Investment Rating - The report maintains a "Strong Buy" rating for SF Holding (002352) with a target price of 56.3 CNY, representing a 40% upside from the current price of 40.33 CNY [3][6]. Core Insights - Q3 performance is under short-term pressure, with a year-on-year revenue decline of 8.5%. The company emphasizes its "Gain Plan" to optimize its structure and enhance high-value customer ratios [6][10]. - The company reported a total revenue of 225.26 billion CNY for the first three quarters of 2025, a year-on-year increase of 8.9%, with express logistics revenue at 167.32 billion CNY, up 11.7% [6][10]. - The report highlights that the company's proactive market expansion strategy and necessary long-term investments have led to short-term fluctuations in performance [6][10]. - The company has increased its share buyback program from 5-10 billion CNY to 15-30 billion CNY, indicating a commitment to shareholder returns [6][10]. Financial Summary - **Revenue Forecasts**: - 2024A: 284.42 billion CNY - 2025E: 312.70 billion CNY - 2026E: 351.14 billion CNY - 2027E: 392.52 billion CNY - Year-on-year growth rates are projected at 10.1%, 9.9%, 12.3%, and 11.8% respectively [6][12]. - **Net Profit Forecasts**: - 2024A: 10.17 billion CNY - 2025E: 10.83 billion CNY - 2026E: 12.48 billion CNY - 2027E: 14.52 billion CNY - Year-on-year growth rates are projected at 23.5%, 6.4%, 15.3%, and 16.3% respectively [6][12]. - **Earnings Per Share (EPS)**: - 2024A: 2.02 CNY - 2025E: 2.15 CNY - 2026E: 2.48 CNY - 2027E: 2.88 CNY [6][12]. - **Valuation Ratios**: - Price-to-Earnings (P/E) ratios are projected at 20, 19, 16, and 14 for the years 2024A to 2027E respectively [6][12]. - Price-to-Book (P/B) ratios are projected at 2.2, 2.1, 1.9, and 1.8 for the same period [6][12]. Operational Performance - The company achieved a total of 12.14 billion parcels in the first three quarters, a year-on-year increase of 28.7%, with Q3 showing a 33.4% increase [6][10]. - The average revenue per parcel decreased by 13.3% year-on-year to 13.8 CNY for the first three quarters [6][10]. - The gross profit margin for the first three quarters was 13.0%, down 1.0 percentage points year-on-year, while the net profit margin remained stable at 3.7% [6][10].

Investment Rating - The investment rating for the company is "Outperform" (maintained) [1] Core Insights - The company reported Q3 2025 results with total revenue of 78.403 billion yuan, a year-on-year increase of 8.21%, and a net profit attributable to shareholders of 2.571 billion yuan, a year-on-year decrease of 8.53%, which met expectations [5] - Strategic investments are beginning to yield results, with a significant increase in package volume, and an expectation for gradual improvement in gross margin [5] - The peak of capital expenditure has passed, with strong cash flow allowing for increased share buybacks to enhance shareholder returns [5] - The profit forecast has been revised downwards, but the long-term high-quality development trend remains intact, with expected net profits for 2025-2027 being 10.812 billion, 12.286 billion, and 13.920 billion yuan respectively [5] Financial Data and Profit Forecast - Total revenue projections for 2025 are 308.483 billion yuan, with a year-on-year growth rate of 8.5% [4] - The expected net profit for 2025 is 10.812 billion yuan, reflecting a year-on-year growth of 6.3% [4] - The gross margin is projected to be 13.5% for 2025, with a return on equity (ROE) of 10.8% [4]