Citi lowers the target price for SF INTRA-CITY to 20 yuan, urging a buy, expecting healthy growth in the delivery business

Citigroup's research report indicates that SF Intra-City (09699.HK) will have strong performance in 2025. The bank expects that the first quarter of this year will maintain a healthy momentum in intra-city delivery services, driven by the holiday effect and the continuous expansion of major clients, with a slight quarter-on-quarter growth. Due to the high base of food delivery services in the second to third quarters, the expansion of the rider team last year should support capacity, thereby driving reasonable growth across various businesses.

Additionally, in the first half of this year, last-mile delivery may be affected by the expiration of the return service agreement between SF and Douyin e-commerce, as well as the high base of e-commerce parcels in the second quarter, but the impact may diminish in the second half of the year.

Based on strong execution capabilities and AI empowerment, management believes that the mid-term profit margin target of 3% can be achieved ahead of schedule, and the recent local service AI agents have become more active, potentially providing the company with another important traffic entry point to capture the growing demand for instant retail.

The bank has raised its revenue forecasts for SF Intra-City for 2026 and 2027 by 3.1% and 3.2%, respectively, to RMB 27.6 billion and RMB 32.5 billion, to reflect the healthy growth of intra-city delivery and last-mile delivery services, and has also raised the adjusted profit forecasts for the same period by 12% and 2%, to RMB 546 million and RMB 753 million, based on improved operating leverage and continued use of AI; the target price has been lowered from HKD 22 to HKD 20, reiterating the "Buy" rating