Key points of investment:
Reiterating the long-term logic of increasing the unit price of brand overseas visitors, brand overseas logistics discourse is weighted back domestically, and the local logistics industry is hopeful that the European and American development path will be replicated by 3-5 companies with a market capitalization of 3-5 billion dollars. In the traditional trade context, FOB trade is the main focus, and Chinese foundries do not have the ability to choose cross-border logistics service providers. Overseas brands and overseas cross-border logistics companies have enjoyed the dividends of China's entry into WTO globalization. The stock prices of overseas freight forwarding giants such as DSV and Dexun Logistics (KNIN) have increased by a compound of 15%-22% over the past 20 years, and their market capitalization has reached the range of 200-300 billion dollars. Cross-border logistics companies in China are expected to grow together with Chinese brands. Benchmarking the development experience of European and American freight forwarders, as logistics discourse in the incremental market returns to Chinese brands, it is hoped that 3-5 companies with a market capitalization level of 100 billion will appear.
In the context of mass delivery of large container ships, loading rates have declined, freight forwarding discount rates with direct passenger resources have increased, and profit margins have expanded. In the supercycle stage, aggressive freight forwarders increase the amount locked in, and the freight difference becomes incremental profit, but in the phase where freight costs decline, the higher price length becomes a risk point. Overseas freight forwarder stock prices are not always strongly correlated with consolidated freight rates. The freight forwarding industry is a capacity wholesaler, and falling freight rates during periods of oversupply will increase freight forwarding discount rates. (1) In the phase where PMI and freight prices fall due to demand shocks, freight forwarder stock prices and freight prices fall at the same time. (2) The demand shock ended, freight rates were sluggish due to the impact of capacity delivery, and freight forwarder stock prices were gradually decoupled from freight rates. In 2023, the demand shock ended, and shipping prices basically fell back to pre-pandemic levels. Stock prices of leading freight forwarders such as Sinotrans, Dexun, and DSV are expected to repeat the decline in freight prices from 2010 to 2016, and the pace of rising stock prices.
When supply-side factors cause freight rates to decline, shipping companies' loading rates drop, freight forwarders' bargaining power increases and obtains excessive “discounts,” and freight forwarder stock prices are decoupled from freight rates.
Equity incentives will be implemented next year, and the exercise of rights requires support for profit release. In November 2021, the company once again issued a draft equity incentive plan. The 2021-2023 ROE will not be less than 10.25%, 10.5%, and 10.75%, and at the same time not lower than the average for the same industry. According to estimates of exercise rights requirements, the company must obtain a net profit of at least 3,815 billion yuan in 2023.
Slow is fast, and performance resilience has been verified. In 2023 H1, Kuehne+DSV's net profit declined by 47% and 30%, respectively.
Net profit from China's foreign transport to parent fell 7%. The correlation between China's export performance and freight rates is less than that of overseas targets. Higher passenger unit prices and strong business resilience are the core reasons why the decline in China's export performance is less than that of overseas standards. Affected by declining expectations and falling freight rates, freight forwarding prices peaked in July 2021, leading freight forwarder stock prices were in sync, and KNIN (KNIN) and DSV bottomed out and rebounded in November 2022. The strength of the rebound in Sinotrans stock prices has lagged behind that of overseas
The digital strategy continues to advance, and the era of tight space is over. Digital platforms are expected to improve external competitiveness and internal management efficiency. The company's digital logistics e-commerce platform, Yunyitong, successfully completed Series A financing of over 100 million yuan. Yunyitong focuses on digital full-link service products and online and offline integrated service models, forming a new digital logistics model with previous products, middle platforms, and back channels as the main elements, modeled after online products, online service platforms, and offline links.
Investment analysis opinion: The company fully verified the resilience of the freight forwarding business in the first quarter and raised its profit forecast. It is estimated that the company's net profit for 23-25 was 3.97 billion yuan, 4.10 billion yuan, and 4.30 billion yuan (the original forecast was 3.76 billion, 3.87 billion yuan, and 4.04 billion yuan), corresponding to 10/9/9 times PE. Considering that recent stock price adjustments have reflected expectations of changes in the external environment, the company's PE level is lower than that of comparable cross-border logistics companies. Based on the medium-term dividend rate of 48.37%, the corresponding dividend rate is 4.8%. Under the segment valuation method, the company has a reasonable market value of 55.8 billion yuan, has a lot of room for improvement compared to the current one, and maintains a “buy” rating.
Risk warning: The global economy is declining, leading to a continuous decline in international trade volume and demand; the competitive pattern of contract logistics has further deteriorated.