Key points of investment
The net profit of the parent company fell 12% in '22, but the profit of the new acquisition of Hongnaosan Railway Company increased dramatically 1) Looking at the company's existing traditional main business: property leasing was affected by the epidemic and the expropriation and transformation of Wushi, and the corresponding gross profit declined by 47.4% year-on-year to 142 million yuan; although carry-over revenue from the commercial housing sales business increased 19.0% year-on-year to 3.750 billion yuan in '22, due to different carry-over projects, gross margin fell 18.7 pts to 25.7% year on year, and the same profit contribution decreased.
2) Judging from the company's strategic entry into the new main business: the energy logistics service business benefited from the volume of Hongnao Railway. Revenue increased 17.8% year-on-year to 1,182 billion yuan in '22, while gross margin benefited from a year-on-year increase of 6.0 pts to 41.4% due to scale effects. The annual net profit of Hongnaosan Railway Company, the business operator, surged 351.4% year on year to 205 million yuan, and net interest rate surged 13.4 pts to 17.9% year on year.
3) Based on the combined effects of the above factors, the company's net profit to the mother fell 12.4% year-on-year to 542 million yuan in '22; after excluding the expropriation subsidies of the Mercure Logistics Park and the net profit and loss from the merger of enterprises under the control of the Hongnao Railway Company from the beginning of the period to the merger date, the net profit of the non-return mother fell 45.3% year-on-year to 280 million yuan.
Net profit after deducting non-return to the mother in 23Q1 surged 709.3% year-on-year
Benefiting from the growth in energy logistics service business and real estate profits in the first quarter, the 23Q1 company achieved net profit of 184 million yuan, a sharp increase of 151.7% over the previous year; net profit after deducting non-return to the mother was 149 million yuan, a sharp increase of 709.3% over the previous year. The company's performance increased rapidly in the first quarter of 2023 after the optimization of epidemic prevention. Our analysis excludes real estate and other business profits, and energy logistics profits may have increased significantly year-on-year.
Energy logistics cargo volume: significant growth and strong certainty
1) On February 22, an open-pit coal mine in Inner Mongolia collapsed on a large scale. Due to safety supervision considerations, expectations for coal exports from Xinjiang will increase further.
2) Looking at the latest situation, in 23Q1, the outbound traffic of the Jiangxi Coal Railway increased 21.1% year-on-year to 14.259,500 tons, while Guanghui Energy's overseas coal sales increased 30.9% year-on-year to 6.911 million tons. The short-term trend of coal supply and transportation in Xinjiang is improving.
3) Looking at the annual level, coal will continue to drive the release of high-quality production capacity at the industry level, achieving an annual transport volume of more than 88 million tons of coal. The group-level Guanghui Energy announcement expects to receive 3,222 billion yuan in transactions related to Guanghui logistics and transportation services in 23, an increase of 176.4% over 2022. It is estimated that the target traffic volume of the Hongnao Railway in 2023 may increase significantly.
We believe that macro-level policies promoting coal exports from the top down, increasing production in the Naomao Lake mining area at the microlevel plus adding new coal sources after the opening of the Nao Railway in the future, combined with “open car+container” shipping and peer-to-peer special trains in the operating model, will drive the company's energy logistics business to continue to increase in volume.
Energy logistics freight rates: still low, with conditions for price increases
1) There is room: The NDRC has approved the maximum freight rate of 0.40 yuan/ton/ton/kilometer for the Hongnao Railway. Currently, the actual freight rate is 0.225 yuan/ton/kilometer, and there is still a large amount of unused space.
2) Capable: For the Zhundong mining area, after the opening of the Jiangnao Railway, we estimate that the cost of the entire Hongnao line is about 27 yuan/ton lower than the original Wujiang-Lanxin line, and the corresponding price increase capacity is 0.035 yuan/ton/km (range 15.6%).
Profit forecasting and valuation
Without considering the increase in freight rates for the time being, we expect the company's net profit to the mother in 2023-2025 to be 1,158 billion yuan, 1,656 million yuan, and 2,251 billion yuan respectively. Corresponding PE was 10 times, 7 times, and 5 times respectively, and the compound profit growth in 22-25 was about 61%. Earlier, due to market concerns about limited growth in the company's traffic volume, stock prices were adjusted. We continue to be optimistic about the realization of the company's value space and maintain the “buy” rating under the major trend of coal export transportation in China.
Risk warning: coal prices fell beyond expectations; the increase in coal production in Xinjiang fell short of expectations; the operation of the Hongnao Line fell short of expectations; and the construction progress of the Nao Railway fell short of expectations.