Group 1 - The core viewpoint of the report is that HuTongDa Network (09878) is expected to experience high-quality and rapid growth driven by rural revitalization policies, AI empowerment, and external mergers and acquisitions, with a target price of HKD 23.38 and a buy rating [1] - The company has a diverse ownership structure, with Alibaba holding a 16.28% stake since 2018, and the management's focus is returning to the company, enhancing its strategic position within the group [2] - HuTongDa is leveraging policy benefits and urbanization trends to drive growth in the trillion-level sinking market, optimizing its supply chain and product structure to meet local consumer demands [3] Group 2 - The company serves over 251,000 rural couple stores and reaches 300 million rural residents, with a projected revenue CAGR of 12.5% from 2018 to 2024 [4] - In 2024, the company is shifting its strategy from scale-oriented to profit and cash flow-oriented, leading to historical highs in gross margin (4.6%), net margin (1.0%), and net profit margin (0.6%) in the first half of 2025 [4] - The company has submitted a full circulation application for 350 million domestic shares and plans to repurchase up to 500 million RMB of H-shares, aiming to enhance its market value and re-enter the Hong Kong Stock Connect [4]

Core Viewpoint - First Shanghai initiates coverage on HuTongDa Network (09878) with a target price of HKD 23.38 and a buy rating, highlighting the company's strong growth potential driven by rural revitalization policies, AI empowerment, and external acquisitions [1] Group 1: Company Overview - HuTongDa, established in 2010, has become a leader in the small B e-commerce market in China's lower-tier cities, providing AI + SaaS solutions to meet local shopping needs [1] - The company has a diverse shareholding structure, with Alibaba holding a 16.28% stake since 2018, and management's focus is returning to the company in 2024, enhancing its strategic position [1] Group 2: Growth Drivers - HuTongDa is capitalizing on the trillion-level lower-tier market, benefiting from urbanization and consumption upgrades, along with national subsidies and rural revitalization policies [2] - The company is enhancing its supply chain advantages and optimizing product structures to better match consumer demands in lower-tier markets, with AI + SaaS revenue exceeding 65 million yuan in the first half of the year [2] - A strategic partnership with Alibaba Cloud is in place to continuously optimize the "QianCheng AI" solution, while the company plans to acquire 25% of JinTongLing for approximately 1 billion yuan to enhance its industry layout [2] Group 3: Financial Performance - HuTongDa serves over 251,000 rural couple stores, reaching 300 million rural residents, with a projected revenue CAGR of 12.5% from 2018 to 2024 [3] - The company is shifting its strategy from scale to profit and cash flow, achieving historical highs in gross margin (4.6%), net margin (1.0%), and net profit margin (0.6%) in the first half of 2025 [3] - Positive operating cash flow is expected to create a virtuous cycle of business optimization, with rapid revenue and profit growth anticipated starting in 2025 [3] Group 4: Market Positioning - The company has submitted a request for full circulation of 350 million domestic shares, which is expected to significantly enhance its market capitalization [3] - A plan to repurchase up to 500 million yuan of H-shares and a shareholder dividend plan for 2025 are in place, aiming to reinstate the company into the Hong Kong Stock Connect [3]