“Full Circulation + Shares Repurchase”: Huitongda Network (9878.HK) to Offer Solid Fundamentals and High Growth Potentials
As a leading industrial internet company in China's lower-tier markets, Huitongda Network (9878.HK) has recently been garnering media attention over "industrial upgrades" and "AI+".In July, Huitongda saw accelerating development for its “production and sales integration”, with new product launches across categories including air conditioners and furniture.
On August 8, 2025, the company signed an agreement with Alibaba Cloud on a full-stack AI collaboration. The two parties will collaborate to provide AI+ digital empowerment solutions to small and micro businesses from towns and villages, realizing the potential of lower-tier consumer markets that are worth RMB 20 trillion in value, injecting further growth momentum into China’s product circulation and economic development.
On August 10, 2025, Citigroup has once again updated its research coverage on the company, reiterating its “Buy” rating. Some foreign investment funds have also made frequent top-ups on the company’s shares, reflecting the growing recognition of Huitongda’s strategic transformation and its long-term investment value by overseas investors.
- The “Full Circulation + Buyback” Combination Highlights Its Strategic Foresight
Since 2025, Huitongda has maintained its strategic focus by investing in smart supply chain and AI+ strategy, and has implemented a series of measures on the capital front to enhance shareholder value.
On the one hand, the company has applied to the China Securities Regulatory Commission to convert its 350 million domestic shares into H shares. This is a capital operation of significant strategic importance. Upon full circulation, the company's outstanding shares will drastically increase, bringing its circulating market value close to its total market capitalization, and in turn, significantly boosting stock liquidity and market pricing efficiency.
On the other hand, the company announced its share repurchase plan in June, saying that it would, depending on market conditions, repurchase H shares on the open market over the next 12 months with a total repurchase amount of up to RMB 500 million. This further highlights how the company sees its financial strength and stability, as well as prospects and its undervalued situation.
According to the 2024 annual report, the company reported a positive operating cash flow for six consecutive years. Supported by the strategic transformation in 2H2024, the company also saw an improvement in gross profit margin, up 15% YoY for the full year, with a 23% HoH improvement in the second half of the year.
It becomes increasingly obvious that, despite industry fluctuations, Huitongda's cash flow generation ability remains outstanding. Its high level of cash reserve should also provide sufficient flexibility for improving shareholder returns.
In addition, the company also stated in its 2024 annual report that it will realize dividend distribution as early as this year, in accordance with the "Shareholders’ Dividend Return Plan for the Next Three Years". This will increase earnings per share (EPS), demonstrating the company’s focus on shareholder returns and instilling market confidence.
2.Institutions' Recognition Over Huitongda’s Strategic Transformation
According to the data from the Hong Kong Central Clearing System (CCASS), foreign institutions such as Citigroup, Merrill Lynch, and HSBC were among the recent major buyers. This shows that institutional investors have identified Huitongda’s undervalued situation despite market fluctuations. The continued inflow of smart money also shows growing confidence in Huitongda's future development, an evidence that is more convincing than any kind of persuasion.
In fact, the confidence of these institutions is not groundless, but is based on in-depth research and long-term tracking. After carefully reviewing the prevailing market opinion, it is obvious that most institutions remain optimistic about Huitongda's long-term value. For example, Citigroup reinitiated its coverage on Huitongda after two years, yet released two research reports within half a month, both calling for "Buy" with a target price of HK$23.0, as a result of Huitongda’s strategic transformation and the expectation of improving future performance.
In particular, Citigroup recognizes the company's solid fundamentals, based on its clear path to improving profitability and its ability to capitalize on favourable policies such as national subsidies. The report predicts that, by strategically reducing the scale of its low-margin businesses, along with the increasing revenue contributions from its high-margin self-owned brands development, the company's profit margin will increase significantly this year.
Following the comprehensive partnership agreement with Alibaba Cloud, Citigroup issued another report, citing the move as a key milestone for Huitongda. The report noted that, by integrating with Alibaba Cloud's Qwen large language model (LLM) technology and its cloud computing resources, Huitongda will be able to strengthen its AI agent and supply chain capabilities and rapidly advance its industry model, which will be able to better address the operational inefficiency and recommendation imprecision for retail stores in lower-tier markets.
Other than Citi, First Shanghai Securities also released a research note, citing that Huitongda has reached a turning point in its strategy and financial performance. The firm is optimistic about Huitongda’s unique market position in lower-tier markets, and the potential synergies brought about by its strategic cooperation with Alibaba.
Huaxi also pointed out in its research note that, leveraging the cooperation with Alibaba, Huitongda is expected to further improve its operational efficiency and product matching capabilities with the support of Alibaba's computing resources, large-scale data analysis, and decision-making models. This would, in turn, bring more technological convenience and product innovation to lower-tier markets. Huaxi values Huitongda at HKD 17.5 billion.
- AI-empowered Industrial Development
On Huitongda itself, it has proactively grasped the industry trend of growing AI penetration, and has seen rapid development in AI applications since the beginning of the year.
In February, Huitongda announced its integration with the DeepSeek LLM, marking a key step in the company's AI application. For Huitongda, a company that is focusing on the rural markets, the rural business landscape remains diverse and complex, encompassing multiple dimensions such as supply chain management, merchant services, and consumer demand analysis. Due to market complexity, traditional operating models proved to be difficult in effectively addressing the needs of rural markets.
DeepSeek, an LLM with advantages in natural language processing and data analysis, provides Huitongda with powerful algorithmic support. By integrating this model into its ecosystem, Huitongda can rapidly improve its data processing efficiency, and accurately analyze key information such as consumer habits and merchant pain points in rural markets, thus laying a solid foundation for its subsequent AI services.
In April, Huitongda released 5 AI Agents as a significant step towards the implementation of AI technology in specific business scenarios. Rural commercial services generally involve numerous processes, including supply chain collaboration, customer service, and sales and marketing activities. While traditional manual operations are inefficient and prone to errors, AI agents with autonomous decision-making and execution capabilities can automate processes for diverse business scenarios.
In May, Huitongda Network's "Qiancheng Cloud AI" industry vertical model was registered with the Cyberspace Administration of China. This achievement has multiple strategic significance.
On the one hand, this filing approval signifies the authority’s recognition of the model's data security and compliance, clearing the way for its future widespread penetration. On the other hand, as a vertical-focused model specifically tailored to rural commerce, Qiancheng Cloud AI deeply integrates industry knowledge and data characteristics of the rural markets, capable of better meeting the personalized needs of rural businesses than general-purpose models. It is expected that the customized model can provide rural businesses with accurate market forecasts, operational advice, and other related services, helping them to greatly improve operational efficiency.
In August, Huitongda reached a cooperation agreement with Alibaba Cloud, which is an important step for the company to integrate external resources and achieve complementary advantages in the field of AI.
Alibaba Cloud boasts extensive technical expertise and a rich ecosystem in cloud computing, big data, and AI infrastructure. Huitongda, with its years of experience in rural markets, possesses a vast amount of rural business data and extensive offline service experience. Through this partnership, Huitongda will leverage Alibaba Cloud's technical capabilities to further optimize the performance of its "Qiancheng Cloud AI" LLM, improving data storage and computing efficiency. Alibaba Cloud's ecosystem resources will also support Huitongda in expanding its AI applications across scenarios. This collaborative model is expected to advance Huitongda’s AI applications and model upgrades, while achieving efficient resource utilization and expanding its business into broader areas.
The main goal of these initiatives is to promote its "AI+industry" strategy, and increase the number of customers and AI-related revenue from lower-tier markets. By improving service efficiency and quality, the company is targeting to ultimately drive the digital transformation and sustainable development of rural businesses.
Conclusion
The true investment value of a company is always rooted in solid fundamentals: whether it possesses sufficient entry barriers, a clear strategic direction, and improving profitability.
Huitongda has built a unique channel network and digital ecosystem in China's vast and promising lower-tier markets. Its in-depth partnership with industry giant Alibaba Cloud further highlights the immense potential of its technology-driven development. Considering the company’s proactive business transformation and track record of delivering long-term growth, it is not difficult to see its investment value; investing in Huitongda simply reflects the confidence in its leading position and the growth potential of China’s lower-tier digital consumer markets.
