Core Viewpoint - S.F. Holding is initiated with an OUTPERFORM rating and target prices of HK$50.37 for H-shares and Rmb51.87 for A-shares, driven by improving logistics network and domestic demand for logistics services [1] Investment Positives - The logistics market in Asia is the largest globally, accounting for 46% in 2023, with S.F. Holding ranking No.1 in various submarkets [1] - The company is expected to leverage its logistics network and diversified product portfolio to reduce logistics costs for clients [1] Operating Efficiency - The capex-to-revenue ratio has decreased from 13.9% in 2021 to 3.8% in 2024, indicating improved operating leverage and capacity utilization [2] - Earnings visibility has improved due to better control over investment pace [2] Revenue Growth Projections - Revenue for express and freight, global supply chain, and intra-city delivery segments is expected to grow at CAGRs of 9%, 3%, and 19% respectively from 2024 to 2026 [3] - Gross margin is projected to rise by an average of 0.4 percentage points per year [3] Market Differentiation - Historical fluctuations in business operations are attributed to mismatches between capacity investment and market demand cycles [4] - The company’s logistics network construction is expected to reduce cyclical fluctuations significantly [4] Financial Forecasts - EPS is forecasted at Rmb2.35 and Rmb2.74 for 2025-2026, indicating a CAGR of 16% [5] - EBITDA is projected at Rmb36.2 billion and Rmb40.4 billion for 2025-2026 [5] - H-shares are trading at 5.5x 2025e EV/EBITDA, with a target price set at HK$50.37, offering a 30% upside [5]