SF Tongcheng is a leader in third-party instant delivery, and profitability continues to improve. SF Express Tongcheng adopts a full-scenario business model, covering all delivery scenarios for all kinds of products and services. The scope of services includes food and beverage takeout, retail in the same city, near-field e-commerce and near-field services. The service targets include merchants, consumers, and last-mile businesses. As the company's economy of scale and network effects strengthened, the cost ratio gradually declined, and the company's net profit turned loss into profit in 2023, achieving the first profit since the company went public.

The instant delivery industry is driven by new consumption models, and the supply-side competition pattern is clear, leading companies compete differently, and the value of tripartite distribution platforms is prominent under private traffic construction. In recent years, China's per capita disposable income has increased, the consumption capacity and will of the local consumer market has continued to expand, and in the new consumption era, consumers' dependence on instant delivery services has continued to increase, consumption habits have gradually formed, and the number of industry orders has increased year by year. As the number of takeaways continues to grow, the downstream application scenario market has expanded to consumer scenarios such as supermarkets, online fresh food retail, pharmaceutical e-commerce, etc. Among them, the scale of the current tea market is growing rapidly, and stores are expanding extremely fast, so the penetration rate of new tea drinks continues to increase, while the average selling price is increasing, raising the tolerance threshold for merchants to delivery costs to a certain extent. The rapid growth in the number of current tea stores and the concentrated promotion of IPOs have brought new developments to major platforms, but as Internet traffic gradually enters a bottleneck period and traffic traps on major platforms become more and more serious, the construction of private traffic has become a consistent choice for many brands. This trend has made diversification and multipolarization of traffic more obvious, thus promoting the rapid development of third-party instant delivery platforms. Third-party instant delivery platforms, as high-quality instant delivery, strengthen delivery service fulfillment capabilities, and are the primary choice for local offline merchants as their business scale continues to expand.

SF Express has positioned itself as a third party with significant value to further monetize the SF brand. As an excellent subsidiary of the SF Express Group, SF Express Tongcheng's brand strength protects the company's order volume, and the last-mile business guarantees a basic revenue market. At the same time, the company's share of non-food business has increased, the order structure has been optimized, cooperation with KA customers is stable, the share of the sinking market has increased, and the average cost of contract fulfillment has improved due to scale effects. As an independent third-party platform, the company is not restricted by platform competition, and the value of private domain traffic is remarkable under accelerated construction. In 2023, SF Express's tea distribution revenue in Tongcheng increased 75% year over year. Currently, it has deepened cooperation with many popular brands, including brands such as Lucky, Bawang Chaji, McDonald's, Jasmine Milk, and Taobao Grocery Shopping. The instant delivery service emphasizes delivery services with strong instantness, peer-to-peer, and high timeliness requirements. The logistics system independently developed by SF Express Tongcheng effectively supports its large business volume and highly differentiated orders, laying the foundation for the company's business growth.

Covered for the first time, it currently has an “gain” rating. We expect the company's revenue from 2024 to 2026 to reach 149.44, 17.573, and 20.304 billion yuan. Based on revenue forecasts, the current market capitalization corresponds to PS 0.57x, 0.48x, and 0.42x, respectively. From an industry perspective, the following three similar listed companies were selected as comparable companies, including Meituan, Dada, and Dingdong Grocery Shopping. From the perspective of the main business of the above three companies, they are all instant delivery industry companies, similar to SF Express in the same city. 2024E-2026E The average PS of the three comparable companies was 0.66X/0.57X/0.51X, respectively. Based on the average valuation level of the instant delivery industry at home and abroad, we believe that the company's reasonable PS valuation ratio in 2024 is 0.66X, and there is still 17% room to rise from the current market value. Covered for the first time, it currently has an “gain” rating.

Risk warning: the risk of falling demand for instant delivery, the risk of losing major customers, the risk of increased competition, and the risk of declining sales growth of new tea brands.