FIRST SHANGHAI has released a research report initiating coverage of HUITONGDA NET (09878) with a target price of HKD 23.38 and a "Buy" rating. Driven by rural revitalization policies, AI empowerment, and external acquisitions, the company has sustained positive operational cash flow, achieving record high profit metrics in the first half of the year. Additionally, the complete circulation of domestic shares, a HKD 500 million H-share buyback, and dividend plans aid in its return to the Hong Kong Stock Connect, highlighting its potential for high-quality and rapid growth. The firm projects revenues for the group to reach RMB 58.3 billion, 62.5 billion, and 67.6 billion from 2025 to 2027, with net profits attributable to shareholders expected to be RMB 3.43 billion, 4.46 billion, and 5.79 billion, respectively.

Key insights from FIRST SHANGHAI include: - Strategic investment from Alibaba, with the founder refocusing on operations - Established in 2010, HUITONGDA has become a leading e-commerce platform serving the lower-tier markets in China, providing one-stop AI+SaaS solutions to meet the shopping needs of local customers, particularly in rural family-owned stores. The founder, Wang Jianguo, leads a team originally from the well-known home appliance chain store, Wuxing Electric, and has also incubated ventures like KidKing focused on the maternal and infant market, and Haoxiangjia, which targets smart home solutions. - With a diversified equity structure, Alibaba initially invested in the company in 2018, currently holding a total stake of 16.28%. The management's focus is set to return to HUITONGDA in 2024, gradually enhancing its strategic position within the group while implementing strategic upgrades and optimizing business structures, aiming to replicate the commercial growth trajectory of KidKing.