Brief comment on performance

In 2013, the company achieved revenue of 2.366 billion yuan, a year-on-year growth rate of 17.08%; the net profit attributed to the parent company was 53 million yuan, a year-on-year growth rate of-47.2%, corresponding to EPS0.32 yuan.

At the same time, the company announced the first quarterly report of 2014, with revenue of 681 million yuan in the first quarter, a year-on-year growth rate of 49.5%, and a net profit of 6.818 million yuan belonging to the parent company, a year-on-year growth rate of-37.5%. The performance is in line with market expectations.

Business analysis

The decline in performance is mainly due to the main pressure and the decline in financial subsidies: according to our general spin-off of the business, the contribution of basic logistics, integrated logistics and financial subsidies to the decline is roughly 40%, 40% and 20%.

Basic logistics: mainly sea-air freight forwarding business, affected by the depressed demand of the international freight forwarding industry in 2013, the gross profit margin fell from 13.0% in 2012 to 10.6% in 2013, which is the main reason for the decline in performance. Air freight forwarder business performance declined more significantly.

Integrated logistics: mainly warehousing logistics, affected by the downward and westward relocation of IT manufacturing, the decline in business volume of Acer and Asustek, the company's main customers, has become the main reason for the decline in revenue, while the transfer of the company's product structure from brands to ODM manufacturers has led to a significant decline in gross profit margin.

Financial subsidies: it fell from 21.45 million yuan to 13.42 million yuan in 2013, a decrease of 8.03 million yuan over the same period last year, which also contributed to the decline in performance.

From the perspective of net profit attributed to the parent company, Feili warehousing fell by 16.55 million yuan, parent company (mainly basic logistics business) by 21.31 million yuan, Nanjing company by 7.6 million yuan, and Eurasian train by 7.84 million yuan, which is the main point of decline in performance.

The negative factors are expected to weaken: the 13-year constraint is the decline of IT manufacturing and the westward relocation of IT, which has affected the company's warehousing business mainly in Kunshan; looking forward to 14 years, we judge that the westward relocation of IT has been basically completed, while the company's shift to ODM manufacturer business is expected to weaken the impact of IT manufacturing decline.

14 years of incremental performance: we expect that Nanjing Company to reduce losses, Changzhou Rongda delivery Depot, Shenzhen Asustek motherboard project will become 14 years of performance increment, and we believe that with excellent warehousing management and company visibility, cross-industry replication is still worth looking forward to.

Loss reduction of Nanjing Company: it is expected that the company will withdraw from the previous loss-making projects in 14 years, thus reversing the current situation of negative contribution to the performance of the region.

Changzhou Rongda project: the company holds 51% of the shares, mainly in cooperation with the Shanghai Futures Exchange to set up a metal futures delivery market in Changzhou, with a net profit of 1 million yuan this year.

Shenzhen Asustek project: it is expected that the 14-year Asustek motherboard project will turn losses into profits and begin to contribute to the performance with the increase of business volume.

The company pointed out in the annual report that it will strengthen the development of new industries, focusing on e-commerce, auto parts, communications, precision instruments and other industries. We believe that the company has excellent warehousing management capabilities, and cross-industry business development is still worth looking forward to.

There is room for improvement in operational efficiency: we expect that the sharp decline in performance in 2013 will help motivate the company to further improve its operating efficiency. This is reflected in the year-on-year decline in management costs in 2013 and the hiring of management consulting companies to help the company deepen internal reforms.

Profit adjustment and investment suggestions

We predict that the company's 2014-2016EPS will be 0.41,0.54,0.71 yuan respectively, with year-on-year growth rates of 28.5%, 31.1% and 33.0%, respectively. The current valuation corresponds to 28 × 14 PEP 21 × 15 PEP 16 × 16PE, maintaining the "overweight" rating.