As a leading player in the third-party instant delivery sector, Hangzhou SF Intra-City Industrial Co., Ltd. (hereinafter referred to as "SF Intra-City", 9699.HK) delivered a remarkably strong performance report for 2025. During the reporting period, the company achieved revenue of RMB 22.899 billion, a significant year-on-year increase of 45.4%. Net profit reached RMB 278 million, surging 109.7% year-on-year, while adjusted net profit was even higher at RMB 415 million, representing a growth of 184.3%. Against the backdrop of overall industry pressure, SF Intra-City's counter-trend high growth has attracted market attention, yet the drivers behind this growth and potential risks warrant closer examination.
**Scale Effects Materialize, Profitability Achieves Breakthrough** In 2025, SF Intra-City successfully implemented its strategy of "high-quality, healthy growth." The robust revenue growth stemmed from strong performance across both business-to-business and business-to-consumer intra-city delivery services, as well as last-mile delivery services, with a substantial increase in order volume particularly from core categories like catering and supermarkets. More critically, the company stated that "network scale effects accelerated," driving operational efficiency improvements and cost optimization. This resulted in profit growth far outpacing revenue growth, with the net profit margin increasing from 0.8% in 2024 to 1.2% in 2025, signaling that the company has surpassed the scale-based breakeven point and entered a phase of profit release.
**Gross Margin Declines, Cost Control Under Pressure** Amid the largely positive data, a divergence in one key metric warrants caution: the company's gross profit margin decreased from 6.8% in 2024 to 6.3% in 2025. This reverse movement appears particularly striking given the common logic that expanding revenue scale and associated scale effects should typically lead to margin improvement. The financial report attributed this to operating costs increasing by 46.2% year-on-year, slightly higher than the revenue growth rate, primarily due to "increased rider delivery costs resulting from the expansion of business scale and order volume." This exposes challenges in the company's ability to manage costs within its vast flexible delivery network during a period of rapid business expansion. As order volumes grow, rigid costs such as rider compensation and subsidies are rising rapidly, potentially eroding the profit gains from scale effects. Looking ahead, the company's ability to maintain and improve its gross margin, especially if industry competition intensifies or rider costs increase further, will be a key test of the substance of its "healthy growth."
**High Proportion of Related-Party Transactions Raises Questions About Business Independence** SF Intra-City's rapid growth is closely tied to its affiliation with the "SF Holding ecosystem." The financial report shows that revenue from "subsidiaries of SF Holding" amounted to RMB 10.029 billion in 2025, accounting for approximately 43.8% of total revenue. Although this proportion increased slightly from 42.8% in 2024, it remains at a high level. Substantial related-party transactions are a double-edged sword. On one hand, they provide the company with a stable and growing foundational business, with significant synergies evident in last-mile delivery services through integration with the SF Express network. On the other hand, such a high reliance on related-party revenue raises market concerns about the company's business independence and competitive strength in the open market. Is the company overly dependent on support from its parent? How strong is its service capability and appeal to external third-party clients, especially those outside the SF ecosystem? What impact would strategic or structural changes within the SF Group have on SF Intra-City? These questions remain points of uncertainty for investors.
**Stock Price Roller Coaster Reflects Market Divergence** SF Intra-City's stock price trajectory in 2025 was akin to a "roller coaster." Starting from around HK$9 in the first half, the share price soared to over HK$19 between May and July, driven by positive earnings expectations and sector enthusiasm, marking a stunning rally. However, the price retreated from its highs starting in the third quarter, ending the year hovering around HK$11, a correction of over 40% from its peak. This price action reflects that, despite strong operational performance, concerns about its high valuation, gross margin pressures, and the long-term competitive landscape of the industry gained prominence in the market, leading to significant profit-taking.
SF Intra-City undoubtedly staged an impressive turnaround in 2025, proving the viability of its business model with doubled profits. The profitability breakthrough driven by scale effects is its primary highlight. However, hidden beneath the halo of rapid growth are pressures on cost control revealed by the declining gross margin, and concerns about business independence stemming from the high proportion of related-party transactions. The company's future challenge lies in refining its operations during continued expansion to improve gross margins, while simultaneously demonstrating strong customer acquisition and profitability capabilities as a truly "neutral and open platform" outside the SF ecosystem. Only by effectively addressing these two issues can SF Intra-City's current valuation and share price find more solid support.
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