CICC has published a research report following its recent non-deal roadshow with the management of SF Intra-City (09699). The firm believes the company's intra-city delivery revenue growth remains resilient, with last-mile delivery services expected to recover in the second half of the year. CICC holds a positive outlook on the company's sustained high profit growth. Additionally, the company has initiated an H-share buyback program of up to HK$400 million.

CICC maintains its adjusted net profit forecasts for SF Intra-City at RMB 543 million and RMB 860 million for 2026 and 2027, respectively. The firm also reiterates its "Outperform" rating with a target price of HK$11.5, corresponding to 17 times and 10 times adjusted price-to-earnings ratios for 2026 and 2027, implying a 31% upside potential.

Intra-city delivery revenue growth stays resilient

In July, nine government departments, including the Ministry of Commerce, issued guidelines to accelerate innovation in the retail sector, encouraging the exploration of business model transformations including "instant retail." According to the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, the instant retail market is projected to grow 28% year-on-year to RMB 1.24 trillion in 2026, and reach RMB 2 trillion by 2030, becoming a significant growth engine for the retail industry.

Data from QuestMobile shows that in August, the average daily usage of the Sam's Club and Dingdong Maicai apps increased by 35% and 25% year-on-year, respectively. CICC believes that penetration in non-dining scenarios such as supermarkets and hypermarkets continues to rise. Given that SF Intra-City's intra-city delivery order volume grew over 30% year-on-year in the first half of 2026, with supermarket sector revenue up more than 50% year-on-year, the firm concludes that the company's intra-city delivery revenue growth remains resilient, supported by its third-party neutrality, refined business district operations, and flexible capacity network.

Last-mile delivery growth expected to recover in H2

CICC projects that last-mile delivery growth will rebound in the second half of 2026. This recovery is primarily attributed to the group's product structure adjustment initiated in September last year, which will alleviate the high base pressure from the first half. Additionally, the company is gradually undertaking intra-city express parcel volumes within the 0-6 km range, which will contribute incremental growth.

In the long term, CICC believes that as integration with the SF Group's multi-scenario network deepens and the product matrix expands, penetration in large-network parcel delivery is expected to double.

Gross margin recovery expected in 2026

CICC forecasts that SF Intra-City's gross margin will recover in 2026. Given reduced rider acquisition costs this year, coupled with benefits from order volume growth and lower fee ratios driven by its asset-light operating model, the firm expects the company's profit margins to continue improving.

The company has launched an H-share buyback program of up to HK$400 million, with repurchased shares to be cancelled in due course. CICC views this move as a demonstration of management's confidence in the company's prospects.