The performance in 2019 fell short of market expectations
Tielong Logistics announced its 2019 results: operating income was 16.37 billion yuan, up 5% from the same period last year; net profit from home was 450 million yuan, down 10% from the same period last year, corresponding to a profit per share of 0.35 yuan; deducting non-net profit was down 9% from the same period last year. 4Q's operating income was 4.3 billion yuan, up 19% from the same period last year, and its net profit was 70 million, down 34% from the same period last year. The performance was lower than expected, mainly due to the poor external environment of the freight business.
Railway special container business: the delivery volume was 159 million TEU, an increase of 22% over the same period last year; revenue was 1.73 billion yuan, an increase of 23% over the same period last year; gross profit was 320 million yuan, an increase of 15% over the same period last year; gross profit margin decreased 1ppt over the same period last year.
Railway freight and port logistics business: arrival and delivery volume is 55.79 million tons, up 3% from the same period last year; revenue is 2.38 billion yuan, down 2% from the same period last year; gross profit is 370 million yuan, down 16% from the same period last year; gross profit margin is lower than the same period last year 3ppt, profit and gross profit margin decline is mainly due to freight decline and active price reduction to increase.
Entrusted processing trade business: sales of commissioned processing steel 3.63 million tons, an increase of 12% over the same period last year; revenue of 11.8 billion yuan, an increase of 4% over the same period last year; gross profit of 220 million yuan, an increase of 32% over the same period last year, and a slight increase of 0.4% in gross profit.
Real estate business: due to strengthening marketing and speeding up the elimination, the income was 340 million yuan, down 9% from the same period last year; the gross profit was 70 million yuan, up 5% from the same period last year.
Trend of development
In 2019, the company's freight business was negatively affected by trade war and weak demand. Looking ahead, due to the impact of the epidemic on coal and MTR transport demand continues to be weak, in the short-term impact on freight and special box logistics business, we think that the annual growth is still under pressure.
The gross margin of the special box business has recorded double-digit growth in the past three years, which proves that the logic of the special box as the driving force of the company's performance is gradually being realized. As the special box business has certain barriers to entry, we are optimistic about the long-term development of the business in the future.
Profit forecast and valuation
Based on the relatively unfavorable external environment under the influence of the epidemic, we lowered our profit forecast for 2020 by 37% to 340 million yuan (- 26%YoY) and introduced a profit forecast of 420 million yuan (+ 24%YoY) for 2021. The current share price corresponds to 19.1 times 2021 / 15.4 times earnings.
Maintain a neutral rating, but due to the earnings downgrade, we lowered our target price by 15.0% to 5.22 yuan corresponding to 20.2 times 2020 price-to-earnings ratio and 16.3 times 2021 price-to-earnings ratio, which is 5.9% upside from the current stock price.
Risk.
The development of special container business is not as expected.