1H performance is basically in line with market expectations
Tielong Logistics announced 1H20 results: operating income 8.788 billion yuan, year-on-year + 13%; return to the mother net profit of 259 million yuan, year-on-year-2%, corresponding to EPS 0.20 yuan. The net profit of 2Q is-17% compared with the same period last year, which is lower than + 14% of 1Q, which is basically in line with market expectations.
(1) Railway special container business: container shipping volume reached 650,000 TEU, year-on-year-11.53%; operating income 670 million yuan,-17% year-on-year; gross profit 112 million yuan,-31% year-on-year, gross profit decreased 3ppt.
(2) Railway freight transport and port-adjacent logistics business: under the "transit railway" policy, the company actively promotes the return of bulk goods to railway transportation in the region. The arrival volume of the Sha-Ba line is 32.31 million tons, + 23% compared with the same period last year; operating income is 1.272 billion yuan, + 10% year-on-year; gross profit is 242 million yuan, + 16% year-on-year; gross profit margin is up 1ppt.
(3) commissioned processing trade business: billet sales volume 1.68 million tons, year-on-year-1%; operating income 6.701 billion yuan, + 22% year-on-year; under the influence of the new income criteria, some transportation and miscellaneous expenses are transferred from sales expenses to operating cost accounting, resulting in a gross profit of 58 million yuan,-47% year-on-year; gross profit margin reduced 1ppt.
(4) other: the operating income of railway passenger transport business is 22 million yuan,-2% compared with the same period last year. The operating income of the real estate business was 103 million yuan,-54% year-on-year, and the gross profit was 23 million yuan, down 56% from the same period last year.
Trend of development
With the smooth return to work and the return of road freight to the railway after the resumption of work, we expect 2H to maintain steady growth.
Special box business is still the focus of long-term attention. The trend of "transit iron" and "loose change set" continues, and there is a lot of room for growth in the multimodal transport industry. In the early stage, the company laid out in advance and purchased special boxes. We suggest that we should pay attention to the profit release of the special box business.
Profit forecast and valuation
As the company's railway freight transport was less affected by the epidemic than we expected, and the benefits of the "public transfer railway" appeared, we raised our 2020 profit forecast by 29% to 436 million yuan (- 4%YoY) and 2021 profit by 8% to 451 million yuan (+ 4%YoY). The current share price corresponds to a price-to-earnings ratio of 17.3 times 2021 / 16.7 times earnings. To maintain a neutral rating, based on earnings adjustment, we raise the target price by 15.0% to 6.00 yuan corresponding to 18.2 times 2020 price-to-earnings ratio and 17.1 times 2021 price-to-earnings ratio, which has 4% upside compared to the current stock price.
Risk
The development of special container business is not as expected.
