【True Insights IPO Trends】Introduction to SF Holding Co., Ltd. (06936.HK) new stock. Investment rating: 'Neutral'
$SF HOLDING(06936.HK) SF Holding is a leading integrated logistics service provider in Asia, offering services including express delivery, freight transportation, cold chain logistics, same-city real-time delivery, supply chain services, and international logistics. By 2023 revenue, SF Holding is also the world's fourth-largest integrated logistics service provider and one of the Fortune Global 500 companies. Time-definite express delivery is the company's flagship product. According to Frost & Sullivan, SF Holding held a 63.9% market share in China's time-definite express delivery sector in 2023.
In overseas expansion, SF Holding further strengthened its local and cross-border express delivery, international supply chain, and freight forwarding capabilities in Southeast Asia through the acquisition of Kerry Logistics in 2021. The successful integration of Kerry Logistics has further enhanced the company's international integrated logistics capabilities and customer base. SF Holding is also China's largest air cargo carrier, operating a fleet of 99 all-cargo aircraft, accounting for 32.0% of China's air cargo volume in the first half of 2024.
SF Holding's A-share (002352.SZ) price, converted to HKD, is currently HKD 45.52. The IPO price is set at an 80% discount to the current price. Additionally, SF Holding has secured 10 cornerstone investors, including Sino Land (00083.HK), China Pacific Insurance (02601.HK), Xiaomi (01810.HK), and Morgan Stanley, with a total subscription amount of HKD 1.59 billion.
SF Holding has recorded revenue growth over the past three fiscal years, with annual revenue increasing from RMB 207.2 billion in 2021 to RMB 258.4 billion in 2023, representing a compound annual growth rate (CAGR) of 11.7%. The company also updated its revenue as of September 30, 2024, with revenue for the first nine months of 2024 reaching RMB 206.9 billion, a year-on-year increase of 9.4%, faster than the 8.1% growth in the first half of the year. Net profit attributable to shareholders rose from RMB 4.73 billion in 2021 to RMB 8.23 billion in 2023, with a CAGR of 31.9% since 2021. However, SF Holding's profitability is constrained by its relatively low gross margin, which has remained around 12% over the past three years, lower than peers such as UPS (21.7%), FedEx (27.0%), and ZTO Express (02057.HK) (30.9%, TTM basis).
SF Holding's current IPO P/E ratio ranges from 18.0x to 20.2x, which is reasonable compared to other logistics stocks. The 20% discount to SF Holding's A-share closing price on November 18 is not significantly different from the 25% discount applied to Midea Group (00300.HK) during its IPO in early September. Given SF Holding's market capitalization of over HKD 100 billion, the market may speculate on its potential inclusion in major indices shortly after listing. With renowned cornerstone investors backing the IPO, we recommend a "Buy" rating.
IPO Details
Industry: Transportation & Logistics
Listing Category: Main Board
Major Shareholder: Wang Wei (53.11%)
Number of Shares Offered (million): 170.0
IPO Price Range (HKD): 32.3 – 36.3
Proceeds from IPO (HKD billion): 56.61
Placement Shares (million): 153.9
Public Offering Shares (million): 16.2
FY23 Net Profit (RMB million): 8,234.5
P/E Ratio (x): 18.0 – 20.2
Total Market Cap (HKD billion): 1,610.5 – 1,810.0
Total Shares Outstanding (new + existing) (billion): 49.86
Adjusted Net Asset per Share (HKD): 16.67 – 16.80
Board Lot (shares): 200
Sponsors: Goldman Sachs, Huatai International, J.P. Morgan
Timeline
Registration Start Date: November 19, 2024
Registration Deadline: November 22, 2024
Announcement of Application Results: November 26, 2024
Cheque Refund Date: November 27, 2024
Trading Start Date: November 27, 2024
Source: KGI Securities Analyst, Gong Junhua, CFA
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