We believe a discounted cash flow (DCF) valuation methodology is appropriate for assessing the fair value of ANE, given its robust growth momentum and the relatively high visibility of its free cash flow over the longer term. We forecast free cash flow over a 10-year time horizon up to FY35E and then use a WACC of 9.8% and a terminal growth rate of 1% to discount back to a target price of HK$10.5, trading at 9.3x forward 25E P/E.

We rate ANE shares as High Risk given their relatively short trading history (listed in November 2021). Key risk factors that could prevent the shares from reaching our target price include:1) weaker-than-expected macroeconomic growth, including due to any macro impacts such as the pandemic, extreme weather, or other issues; 2) fierce industry competition; 3) high dependence on freight partners; 4) ability to utilize and develop new technologies effectively; 5) surge in fuel or labor costs.