机构：招银国际证券有限公司研究员：Hanbo Xu
SF Holding announced financial results for FY19.Revenue and adjusted netincome were in line with expectations.We believe that the Company's strategy toleverage on e-commerce parcels to achieve economies of scale has leveled off.As price war escalates,the Company's self-operation model will weigh on its profitmargins.We adjust TP up to RMB 47.79.The Company is currently trading at33.6x 2020E P/E,higher than peers.Downgrade to HOLD.
FY19 revenue and adjusted net income in line.In 4Q19,parcel volumeincreased 49.0%YoY,26.2ppt above industry average.Annual parcel volumeincreased 25.1%YoY to 4.8bn,capturing a market share of 7.6%,flat YoY.For FY19,revenue increased 23.4%YoY to RMB 122.2bn,in line withexpectations.Adjusted net income increased 27.2%YoY to RMB 5.8bn,inline with expectations.Adjusted EPS increased 66.3%YoY to RMB 1.31.Netcash generated by operating activities increased 68.1%YoY to RMB 9.1bn.
The surge in parcel volume caused decline in profit margin.TheCompany's gross profit in FY19 was RMB 19.5bn,with a gross profit marginof 17.42%,a decrease of 0.50ppt YoY.As percent of revenue,labor costincreased 0.41ppt YoY,transportation cost increased 0.20ppt YoY,and otheroperating costs decreased 0.10ppt YoY.We believe that the Company'sstrategy to leverage on e-commerce parcels to achieve economies of scalehas leveled off.As price war escalates,the Company's self-operation modelwill weigh on its profit margins.
Catalysts.(1)Increasing revenue contribution of freight and supply chainbusinesses.In FY19,the Company's freight business recorded revenue ofRMB 12.7bn,an increase of 57.2%YoY,and issued convertible bonds ofUS$300mn.With independent financing capability,the Company's freightbusiness will develop rapidly.Revenue of the Company's supply chainbusiness increased 11 times YoY due to consolidation of SF DHL since Mar.(2)Release of consumption demand as domestic epidemic eases.(3)Declinein oil prices.
Valuation.For FY20E,we expect the Company’s parcel volume will increase25%YoY,5ppt above industry average.ASP will decrease 7%YoY and GPMwill decrease 0.3ppt YoY.We forecast 2020E adj.EPS to increase 3.9%YoYto RMB 1.37.We adjust TP up to RMB 47.79.Our TP corresponds to 35x2020E P/E.The Company is currently trading at 33.6x 2020E P/E,higher thanpeers.Downgrade to HOLD.