Key investment points

The scale grew steadily in the first half of the year, and the penetration rate of the sinking market increased:

The company achieved healthy revenue growth in the first half of the year, reaching 6.87 billion yuan, up 19.6% year on year, and order volume increased strongly by more than 30% year on year. The gross margin was 6.9%, up from the same period last year.

Profit performance reached a record high. Net profit was 0.062 billion yuan, net interest rate reached 0.9%, and net profit doubled by 105.1% year on year and surpassed the overall net profit level in 2023. By business, the overall revenue of distribution services in the same city increased by 19.2% from 3.39 billion yuan in the first half of 2023 to 4.04 billion yuan in the first half of 2024. Last mile delivery service revenue was 2.84 billion yuan, up 20.3% year over year.

Tea drinks are growing rapidly in the sinking market, and the company is fully enjoying the dividends of growth:

According to enterprise survey data, as of November 2024, the number of registered health tea-related enterprises nationwide reached 6.1 times that of the same period last year. Inventory increased by 44.4% year on year, and the potential market demand is huge.

We believe that with the continued intensification of competition in the tea, catering and other markets in the future, consumer delivery demand will continue to evolve and upgrade. In this market environment, more sophisticated supply chain management, independent ecosystems, and accurate geographical expansion layout will still form the core competitiveness of instant delivery brand development. With its expertise in the field of instant delivery and the ability to match big data, the company is expected to fully benefit from the market dividends brought by the growth of the food delivery industry, especially the tea industry.

The scale effect continues to be unleashed, and profitability has entered an upward channel:

Currently, the scale effect of the company continues, and the huge distribution network and efficient data algorithms form the core competitiveness of the company's continuous growth. We believe that there are three main driving forces for the company's future growth. First, the company continues to benefit from KA's deepening cooperation, and the scale can grow steadily; secondly, the company is expected to take on more “last mile” delivery needs from the SF Express Group; and finally, actively expand commercialization scenarios in the sinking market and continue to exert scale effects. We are optimistic about the company's current leading position in the instant delivery market and the commercialization potential of the industry, so we gave the company a target price of HK$14.9, corresponding to about 0.9 times PS in FY2024, to maintain the purchase rating.