YONGTAIYUN CHEMICAL LOGISTICS(001228)：1H24 RESULTS SLIGHTLY MISS; PROFIT RECOVERY STILL ON THE WAY-格隆汇

机构：中金公司
研究员：Wenjie ZHANG/Qibin FENG/Xin YANG

1H24 results slightly miss market expectations
Yongtaiyun Chemical Logistics announced its 1H24 results: Revenue rose 73% YoY to Rmb1.85bn. Gross profit grew 10% YoY to about Rmb191mn. GM fell 6.3ppt YoY to 10.4%. Net profit attributable to shareholders fell 40% YoY to around Rmb62mn, and attributable net margin fell 6.6ppt YoY to 3.3%, slightly missing market expectations, partially due to a YoY decline of about Rmb9mn in FX gains and a YoY increase of about Rmb26.8mn in provisions for credit impairment losses.
In 2Q24, revenue rose 76% QoQ and 116% YoY to Rmb1.18bn. Gross profit grew 27% QoQ and 21% YoY to Rmb107mn, and GM fell 3.5ppt QoQ and 7.2ppt YoY to 9.1%. Net profit attributable to shareholders fell 21% QoQ and 58% YoY to Rmb27mn, and attributable net margin fell 2.8ppt QoQ and 9.6ppt YoY to 2.3%. In 2Q24, per-container revenue increased by 12% QoQ and 78% YoY to Rmb14,805. However, per-container gross profit declined by 20% QoQ and 1% YoY to Rmb1,343, and per-container profit dropped by 50% QoQ and 65% YoY to Rmb343.
Trends to watch
Industry demand has remained under pressure YTD; however, we expect the firm's container volume to maintain YoY growth due to the acquisition of high-quality assets. Due to weak overseas demand, the export value of organic and inorganic chemicals (in Rmb terms) fell 6% YoY in 1H24 and 4% YoY over January-July 2024. We believe that the recovery in industry demand is still underway. In 2Q24, the firm's total container volume increased 22% YoY. The cross-border chemical logistics supply chain services business rose 19% YoY, the warehousing and storage business increased 2% YoY, and the transportation business surged by 44% YoY, all of which outperformed the industry. We attribute this growth to the firm's integration of high-quality assets, such as Hunan Hongsheng Shipping and Hunan Xinhong Sheng Chemical. Looking ahead, we expect the firm's container volume to maintain YoY growth that exceeds the industry average. This is thanks to the capacity ramp-up of high-quality acquired assets, such as Yongtaiyun (Tianjin).
Ocean freight rates rose in 1H24 due to tensions in the Red Sea and restocking of goods in the US and Europe, which we believe will support the firm's earnings improvement. Due to tensions in the Red Sea and restocking of goods in Europe and the US, supply and demand pressure on marine transportation eased. Consequently, ocean freight rates increased in 1H24, with the CCFI rising 19% and 53% YoY in 1Q24 and 2Q24, and surging 142% YoY in July. Despite uncertainties surrounding the tensions in the Red Sea and the sustainability of the restocking cycle, we believe the company's recovery in per-container profitability in 2024 is becoming increasingly apparent. If the company improves expense control and reduces the impact of bad debts in 2H24, we expect a stronger earnings recovery.
Financials and valuation
As industry demand recovery is still on the way, we lower our 2024 and 2025 earnings forecasts 26% and 32% to Rmb154mn and Rmb185mn. The stock is trading at 11.5x 2024e and 9.6x 2025e P/E. We maintain an OUTPERFORM rating, as the firm is poised to benefit from industry consolidation in the long term as a leading firm in the industry. Given falling average sector valuation, we cut our TP 40% to Rmb20.5, implying 14x 2024e and 12x 2025e P/E, and offering 20% upside.
Risks
Sharp decline in container shipping rates; weak demand for hazardous chemicals; progress of new projects disappoints.