Xiamen Guomao released the 2023 semi-annual report on August 24, 2023:

In the first half of 2023, the company achieved operating income of 271,890 billion yuan, up 2.17% year on year; net profit due to mother was 1,578 billion yuan, down 12.03% year on year; net cash flow from operating activities was -10.116 billion yuan, compared to -22.91 billion yuan in the same period last year; basic earnings per share was 0.61 yuan, down 12.86% year on year; and the weighted average return on net assets was 6.25%, down 1.59 percentage points year on year.

In the second quarter of 2023, the company achieved operating income of 148.327 billion yuan, down 5.20% year on year and 20.04% month on month; net profit returned to 838 million yuan, down 23.16% year on year and 13.35% month on month; net cash flow from operating activities was 15.840 billion yuan, 3.436 billion yuan in the second quarter of 2022, and 25.957 billion yuan in the first quarter of 2023.

Against the backdrop of pressure from the industry boom, the company's main business maintained a steady business trend. In the first half of 2023, in the face of adverse factors such as weakening market demand and falling prices of some commodities, the company's supply chain management business achieved operating income of 269.630 billion yuan, an increase of 2.93% over the previous year; the comprehensive gross margin margin after combining futures profit and loss was 1.50%. The fluctuation in comprehensive gross margin was less than the fluctuation in commodity prices, maintaining relatively stable profitability. 1) The market share of core categories has been steadily increasing. In the first half of 2023, the company's iron ore business volume exceeded 40 million tons, an increase of more than 20% over the previous year; the steel business volume exceeded 20 million tons, an increase of more than 30% over the previous year; and the coal business volume exceeded 25 million tons, an increase of more than 70% over the previous year. 2) Continued development and expansion of emerging categories. In the first half of 2023, the company developed new categories such as graphene and wood chips, as well as new energy and new materials industries such as biomass fuels, rare earth materials, and rare metals. It is expected to become a new growth pole in the future.

Deepen the layout of the industrial chain in multiple forms and enhance comprehensive service capabilities. 1) In the first half of 2023, the company acquired the Jiangxi Lushan gravel mine project to promote the construction and production of waste gravel mines; acquired Shandong Xingnuo Renewable Resources Co., Ltd. to expand scrap recycling and processing business; signed a new overseas coal import agreement to guarantee and stabilize energy supply; increased the layout of key logistics nodes and established a joint venture to establish Xiamen Qirun Xiehai Shipping Co., Ltd. to enhance the logistics service capabilities of domestic trade shipping business; Guomao Shipping successfully took over a 23,000-ton new oil tanker and intervened in the management of petroleum vessels for the first time. 2) In the first half of 2023, the company relied on 300,000-ton floating oil storage tankers located in the Strait of Malacca to open up the entire oil business chain and accelerate the expansion of direct users of marine fuel oil. The oil business volume increased by more than 150%; increased cooperation with leading polyester companies and high-quality cotton yarn manufacturers, and increased the cotton business volume by more than 100%.

The international business layout is advancing at an accelerated pace, and digital applications empower operations to improve efficiency. 1) In the first half of 2023, the company completed a total import and export volume of 9.50 billion US dollars, an increase of 6.98% over the previous year; the trade scale along the “Belt and Road” was nearly 50 billion yuan, an increase of more than 30% over the previous year; an Indonesian platform company was added, and various business units set up offices in Indonesia, Vietnam, etc.; a joint venture was established to establish Guomao Baohua Shipping Co., Ltd. to lay out the operation and chartering of bulk carriers from Asia to West Africa; cooperated with foreign steel mill terminals such as Malaysia Donggang Group Co., Ltd., and Great Wall Indonesia Steel Co., Ltd. 2) In the first half of 2023, the company's integrated supply chain business collaboration platform “Guomao Cloud Chain” accumulated more than 40,000 orders, with a transaction amount exceeding 16 billion yuan; the supply chain finance project “Guomao Cloud Chain · Jinmao Connect” has helped about 540 enterprise customers obtain a total of 2.8 billion yuan in bank supply chain financial credit lines; the logistics business center “Guomao Cloud Chain · Huitong+” has completed the launch of 11 warehouse storage systems, which can track the logistics and cost management of warehouse business throughout the process.

Profit forecasting, valuation and investment ratings: China's bulk supply chain industry has broad development space. Currently, market concentration is low, and leading companies are expected to achieve strength. We are optimistic about the growth of the company's business scale and market share. Considering the expected recovery in future demand and the gradual optimization of the company's business structure, we maintain previous profit forecasts for the company.

The company is expected to achieve net profit of 31.20, 36.31 and 4.196 billion yuan respectively in 2023-2025, earnings per share of 1.40, 1.63 and 1.89 yuan respectively, and the current stock price of 7.49 yuan. The corresponding PE is 5.3 X/4.6 X/4.0X respectively, maintaining the “buy” rating.

Risk warning: Risk of deterioration in the macroeconomic environment, risk of falling commodity prices, increased risk of bad debts due to receivables, risk of falling short of expectations, risk of business expansion falling short of expectations, risk of untimely updates of information and data used in research reports.