Brief comment on performance

In the first three quarters of 2017, the company realized operating income of 4.473 billion yuan, an increase of 70.60 percent over the same period last year, and realized net profit of 366 million yuan belonging to shareholders of listed companies, an increase of 41.41 percent over the same period last year, or 0.34 yuan per share. The performance is in line with expectations.

Business analysis

The company continues to expand its business scale and ranks among the top three in the industry: in the first half of 2017, the exchange of goods between regions was frequent, and the domestic market demand was released. From January to August 2017, the domestic trade container throughput of the country's major ports was 40.07 million TEUs, an increase of 9.8% over the same period last year and an increase of 5.3pts over the previous year. The company focuses on the introduction of ships and continues to expand its business scale, ranking among the top three domestic trade container logistics enterprises in the country. At present, the CR3 of the domestic trade collection and transportation industry is more than 70%. The company seizes the opportunity of the rapid development of the industry, increases its transport capacity, and fully enjoys the increase in business volume brought by the domestic trade industry, and the accelerated growth of revenue and profits.

The gross profit margin has declined significantly, and the expense rate has improved: although the company's revenue is growing rapidly, operating costs have increased by 85.2% compared with the same period last year, resulting in a gross profit margin of only 16.4%, down 6.6pts from the same period last year. We believe that it is mainly due to the rise in oil prices and the large number of external chartered ships used by the company in order to rapidly expand its business volume, and the higher charter charges lead to a lower gross profit margin. The rapid growth of net profit mainly comes from the outbreak of business volume, and cost control may become the focus of management in the future. However, the proportion of the company's expense rate has declined, and the three-fee rate was 5.7% in the first three quarters of 2017, which is lower than that of the same period last year (4.7pts).

Focus on multimodal transport, delay into diversified logistics business: as a domestic container integrated logistics service provider, based on the layout consideration of multimodal transport, the company hopes to expand the original "sea and land" intermodal transport mode to "sea, rail and land". It has been transferred 30% of the Beijing Antie supply chain in April, and has since arranged a number of special railway lines to cover customers and logistics to further expand to the whole country. At the same time, the company announced that the construction of station storage equipment and cold chain storage equipment was postponed based on the robustness of the project and the effectiveness of the use of raised funds. At present, with the fierce competition in the warehousing and cold chain market, the company's move can be seen as giving priority to the layout of multimodal transport, laying a solid foundation for entering the diversified logistics business in the future.

Investment suggestion

The company focuses on domestic trade container logistics services, the business scale continues to expand, but need to pay attention to cost control in the future. It is expected that through the absorption of railway assets to form a "sea-rail-land" multimodal transport model, to obtain the value of the whole logistics industry chain, or will enter into diversified logistics business. At the same time, we will carry out the employee stock ownership plan to bind the core employees to the interests of the company for a long time. It is estimated that from 2017 to 2019, the EPS of the company will be 0.53,0.75 and 0.97 yuan respectively, corresponding to 43 times, 31 times and 24 times of PE, respectively, maintaining a "buy" rating.

Risk hint

The demand for domestic trade is declining, and the development of multimodal transport is not as expected.