The company announced the first quarter report of 2022:1) Performance: 2022Q1's revenue was 105.53 billion yuan, +62.8% year on year; net profit of Gimu was 27.62 billion yuan, +78.7% year on year, +27.2% month on month, in line with the performance forecast; net profit of non-return mother was 27.48 billion yuan, +78.4% year on year, +26.3% year on month. 2) Cost side: 2022Q1's operating cost was 62.75 billion, +44.9% year on year; container shipping business cost was 61.64 billion yuan, +45.3% year on year. 3) Cash flow: 2022Q1 net operating cash flow was 62.53 billion yuan, +131.8% year on year and +9.7% month on month. 4) Profit margin:
2022Q1 gross profit margin was 40.5%, +7.3 year on year, +1.5pct month-on-month; net interest rate returned to the mother was 26.2%, +2.3 yoy, +4.9pct month-on-month; net interest rate of 26.0% after deducting non-homogenous net interest rate was 26.0%, +2.3 year on year, +4.8 pct month-on-month. 5) Undistributed profit: As of the first quarter, the parent company reported undistributed profit of 27.85 billion yuan, an increase of 70 million yuan over the previous quarter.
Q1 Profit margins improved month-on-month, and the problem of cost pressure and poor supply chain turnover inhibiting freight volume still exists. 1) On the revenue side, Q1 freight revenue was 103.85 billion yuan, +63.5% year on year, including revenue from trans-Pacific, Asia, Europe, Asia, other international and mainland China routes was +93.3%, +64.5%, +48.6%, +55.6%, +1.9% year-on-year.
2) Cargo volume, Q1 box volume was 6.162,000 TEU, or -9.2% year on year. Among them, trans-Pacific, Asia, Europe, Asia, other international countries, and mainland China were -7.7%, -4.2%, -10.9%, -3.9%, and -15.6%, respectively. 3) Single box revenue, Q1 international route revenue was 2,975 US dollars/TEU, +84.9% year on year and +6% month on month, including +114.5%, +75.9%, +75.7%, +65.9% for trans-Pacific, Asia, and other international routes, respectively; single box revenue for domestic trade routes was 2,775 yuan/TEU, +20.8% year on year. 4) Single box cost. The cost of a single box in the shipping business is about 1,574 US dollars/TEU, +63% year on year, +6% month on month; corresponding gross profit per box is about 961.7 US dollars/TEU, +134% year on year and +14% month on month. 5) Shipping profit, EBIT margin was 38.1%, +8.0 year on year, +3.4 pct month on month; net interest rate of freight forwarding was 31.9%, +4.2 year on year, +4.8 pct month on month.
Focus on the recovery pace of shipments after the epidemic abates in the short term, and focus on the transformation of companies into “ships” in global economic and trade changes in the long term
A revaluation of the shift to a “chain”. 1) Demand fluctuates due to seasonal factors and the turbulence of the epidemic. It is expected that demand will gradually ease in the future, and spot freight prices will remain high: the demand side, a seasonal decline during the Spring Festival. In the past, as domestic work resumed eight to nine weeks after the holiday, cargo volume recovered and freight rates steadily rebounded. This year, due to the disturbance of the domestic epidemic, the pace of post-holiday shipping recovery slowed down due to domestic epidemic disturbances, suppressing spot freight rates. Looking at it later, short-term US line demand is still supported. NRF expects 22Q2 import container volume -0.5% yoy, +0.9% month-on-month, and +4.7% year-on-year in July-August.
On the supply side, the domestic epidemic is conducive to the temporary relief of port blockages in Europe and the US, but its inland turnover problem is still serious and has not been substantially alleviated. After domestic shipments resume, heavy transportation systems in Europe and the US will still be tested. We believe that after the Spring Festival holiday and the phased disruption of the epidemic, the shipping supply chain still tends to have systematic capacity tight, and the current freight prices of short- to medium-term shipping companies may remain high. 2) The industry pattern has improved. In the future, the effective balance between supply and demand will be superior to the apparent indicators of nominal supply and demand, and the increased anti-cyclical capacity of leaders is expected to drive the company's steady profit center upward. Furthermore, in the uncertainty of the global economic and trade pattern, the importance of supply chain stability and safety continues to increase, and the trend of “ship-to-ship disputes” in shipping is clearly shifting to “chain-to-chain disputes”. The company has huge room for expansion in end-to-end integrated logistics expansion and digital transformation.
Investment advice: 1) Profit forecast. We maintain the net profit forecast for 2022-2024 at 1,388, 746, 22.5 billion yuan. The corresponding three-year EPS was 867, 4.66, and 1.41 yuan, and the corresponding PE was 2, 3, and 10 times, respectively.
2) Based on the 22-year performance corresponding to the PB level, we believe that the market may underestimate the value of the company's shipping network and the value of the “ship” to “chain” transformation. 3) We expect the industry to enter the normalization stage in 2024, giving 15 times PE with its profit, corresponding to the target market value of 337.5 billion yuan, corresponding to the stock price of 21.1 yuan. Expected 46% more space than the current price, with an emphasis on “strong push” ratings.
Risk warning: European and American import demand has declined sharply, spot freight rates are lower than long-term agreement prices, large-scale expansion of capacity, etc.