【Institutional Research Reports】Citi Maintains “Buy” on Huitongda Network (9878.HK), Citing GPM Enhancement and AI-related Revenue Boost with TP of HK$23

Citi issued an updated coverage on Huitongda Network (9878.HK) upon its interim results release, highlighting its accelerating AI initiatives and positive margin enhancement. During the Period, the company made business adjustment to improve business quality and efficiency. Its gross profit margin (GPM) increased by 1.1 percentage points year-on-year to 4.6% with net profit achieved a 4.1% yoy growth to Rmb239 million. After the official commercialization of AI+SaaS products in May 2025, AI-related revenues reached over Rmb60 million, accounting for approximately 20% of service revenues, making the digital service business a key growth driver.

In Apr, Huitongda officially launched Qiancheng AI Super Store Manager APP to integrate AI agents into full-chain store operations, such as intelligent product selection, marketing, and planning. Citi believes the solution has successfully increased automation for store operations, lowering labor input and driving better operational efficiency. That has led to AI-related revenue from zero to presence in the first half year. The full-stack AI comprehensive cooperation with AliCloud could also further accelerate AI-related service adoption in lower-tier markets, improving the company’s digital competitiveness.

Regarding its commerce business, Citi noted that the proportion of revenues from member retail stores further increased to 47.4%. The firm expressed optimism towards the company’s new product categories and sales channel expansion plan, especially in smart small appliances, AI consumer electronics, robotics, and elderly-friendly health products. The firm also emphasized the development of high-margin self-owned brands, along with strengthening cooperation with leading brands, as two of the key growth catalysts in the future.

In view of the results performance and the aforesaid drivers, Citi slightly adjusted the revenue forecasts for 2025-2027 (to Rmb63.1/67.5/71.9 billion respectively) while upgrading net profit forecasts to Rmb386/462/538 million. The core logic lies in the increasing proportion of self-owned brands and AI services with high GPM, which will continue to drive the improvement of profit quality, and GPM/NPM are expected to rise steadily in 2025. Citi reiterates its “Buy” rating at a TP of HK$23.