Events:

Bonded science and technology released its three-quarter report in 2020, with operating income of 1.368 billion yuan, down 19.44% from the same period last year; net profit of 192 million yuan, up 6.48% from the same period last year; and net profit of 151 million yuan, down 11.80% from the same period last year.

Benefiting from the return of textile service orders, Q3 single-quarter deduction non-performance growth rate became positive over the same period last year. The company's Q3 realized operating income of 642 million yuan in a single quarter, down 17.44% from the same period last year, but realized a net profit of 82 million yuan, an increase of 24.66% over the same period last year, and 72 million yuan after deducting it, an increase of 7.89% over the same period last year.

We speculate that the decline in operating revenue is mainly due to the reduction in the scale of the company's low gross margin trading business. however, the increase in net profit reflects that the more profitable warehousing industry has benefited from the continued increase in overseas Christmas consumer demand, the stagnation of manufacturing capacity caused by the epidemic and other factors to achieve further growth at a high base.

East China ethylene glycol inventory is still high, Q4 net profit period, the annual deduction non-performance is expected to reach an all-time high!

As China's control of the COVID-19 epidemic is better than that of most developing countries with lower labor costs, some overseas textile and clothing orders are diverted to China, the industry as a whole is in a high boom stage, and then the demand for ethylene glycol has increased. Superimposed this year, Q1 domestic affected by the epidemic, the start of construction has been delayed, the ethylene glycol inventory in Zhangjiagang area is still high. As of October 22, the ethylene glycol inventory in Zhangjiagang area was 709000 tons, compared with about 296000 tons in the same period last year. We believe that the inventory data are resilient, and the company's liquefied warehousing industry is expected to continue to contribute considerable profits in Q4. The commodity e-commerce platform is also expected to benefit from the high boom in domestic manufacturing.

Part of the land use rights of the subsidiary Foreign Service Company has been collected and stored by the government, which is expected to contribute 4 million yuan to the net profit in 2020. The people's Government of Jingang Town, Zhangjiagang City decided to purchase and store the land (covering a total area of 35046.20 square meters) of the bonded Logistics Park in Jingang Town, Zhangjiagang City, which is located in Jingang Town bonded Logistics Park in Zhangjiagang City in the north, Yangtze River North Road in the east and Hong Kong Road in the west, with a transaction consideration of 54.9935 million yuan. This collection and storage does not involve the placement and relocation of foreign service companies, and will not have a significant impact on the normal production and operation of foreign service companies. This collection and deposit is expected to increase the net profit of the company belonging to the shareholders of the listed company by about 4 million yuan.

Investment advice:

The demand for imported ethylene glycol warehousing has improved year-on-year due to the return of textile and clothing orders brought about by the COVID-19 epidemic, as the global epidemic is not yet clear, and orders from the manufacturing industry are often sustainable. we think that the company's ethylene glycol warehousing main industry is expected to enter a high prosperity stage with the domestic textile and clothing industry chain. The forecast of the company's net profit from 2020 to 2022 is raised from 1.20,1.70 and 183 million yuan to 2.23,2.66 and 283 million yuan, corresponding to the PE valuation of 18.35,15.34,14.41x. However, due to the lack of progress in the judgment of related lawsuits such as the Changjiang International forged Company Seal case, the company still faces the potential risk of asset impairment and maintains its "overweight" rating.

Risk hints: COVID-19 epidemic impact exceeded expectations, legal risks, safety accidents, domestic coal-to-ethylene glycol cost decreased more than expected.