Company announcement 2023 semi-annual report: 1) Operating revenue: 23H1 achieved revenue of 271.9 billion yuan, an increase of 2% over the previous year; of these, 23Q2 achieved 148.3 billion yuan, a year-on-year decrease of 5%, mainly due to factors such as weakening market demand and falling prices of some commodities. The comprehensive gross profit margin of the 2023H1 supply chain management business combined with futures profit and loss was 1.5%, down 0.35 percentage points from the previous year. 2) Net profit: 23H1 achieved 1.58 billion yuan, a year-on-year decrease of 12%, and a year-on-year net interest rate of 0.6%, a year-on-year decrease of 0.1 percentage points; of these, 23Q2 achieved 8.4 billion yuan, a year-on-year decrease of 23%, and a year-on-year net interest rate of 0.6%, a year-on-year decrease of 0.1 percentage points. Since some real estate projects were still settled in the same period in '22, it is expected that the year-on-year decline in profits in the main supply chain business will be less than apparent.

By business, 23H1's supply chain business, financial services, and real estate revenue was 2696, 2.2, and 70 billion yuan, respectively.

1) Supply chain business: 23H1 achieved revenue of 269.6 billion yuan, an increase of 2.9% over the previous year, accounting for 99% of revenue. Among them, the scale of trade along the “Belt and Road” was nearly 50 billion yuan, an increase of more than 30% over the previous year. By category, revenue from metals and metal minerals, energy and chemicals, agriculture, forestry, animal husbandry and fishing was 134.5 billion, 789 billion yuan, and 47.6 billion yuan, respectively, with a year-on-year ratio of +2.5%, +13.5%, and -2.7%; the volume of goods handled by the company increased by more than 20%, 30% and 70%, respectively. At the same time, the company deployed 300,000-ton floating oil storage tankers in the Strait of Malacca, accelerated the expansion of direct users of marine fuel oil, continued to increase its local market share in Singapore, and oil sales volume increased by more than 150%.

2) Finance and real estate: As the company transferred some of its shares to Guomao Capital, the scope of the merger changed. Financial business revenue fell 12.7% year-on-year, accounting for 0.8% of the company's total revenue; while the company gradually withdrew from the real estate industry, remaining residential real estate projects, including Xiamen Guomao University and Xiamen Guomao Jingyuan, stopped adding real estate development projects, and real estate revenue fell 95%.

We continue to be optimistic about the gradual implementation of the company's transformation logic as a leader in the bulk supply chain and the value increase brought about by the company's strategic focus.

1) Stability and sustainability: From significant optimization of profit structure, customer structure, and product structure after transformation. With domestic demand weakening and commodity prices falling in the second quarter, the company achieved an increase in core category share with strict risk control, steady management, and platform advantages, and reflected the resilience of the main supply chain business profits. We expect the company's performance in the second quarter to be superior to that of the industry.

2) It has growth potential. We previously proposed a “vertical traffic+horizontal monetization” investment research framework: a) Revenue side, steady growth in vertical traffic: pattern dividends, concentration of leading shares, and expansion of new categories. For example, the company continues to expand emerging business categories, such as graphene and wood chips; in the field of new energy, the company focuses on the supply chain operation of the “battery industry chain” and the “photovoltaic industry chain” to develop new energy materials industries such as biomass fuel, rare earth materials, and rare metals. b) On the profit margin side, quality and efficiency are improved, and horizontal monetization capacity continues to increase: high profit margin category expansion+logistics layout brings high turnover, cost reduction and efficiency, and high profit margin integrated project operation and rich benefits. c) We observe that the company is further developing expansion paths through industrialization, internationalization, and digital layout. In terms of industrialization, the company has achieved business expansion and resource capacity expansion through the acquisition of many enterprises; in terms of internationalization, for example, the company set up an Indonesian platform company to expand cotton, cotton yarn, polyester staple fiber, etc., and also cooperated with foreign steel mill terminals such as Malaysia Donggang Group Co., Ltd. and Great Wall Steel Indonesia Co., Ltd.; in terms of digitalization, 23H1's integrated supply chain business collaboration platform “Guomao Cloud Chain” has accumulated more than 40,000 orders, with a turnover of over 16 billion yuan.

Investment suggestions: 1) Profit forecast: Based on commodity demand being weaker than expected, we slightly adjusted our profit forecast for 2023-2025 to an estimated return to net profit of 31.7, 38, 4.5 billion yuan (the original forecast was 3.3, 39.5 billion yuan, 4.58 billion yuan), corresponding EPS of 1.43, 1.71, and 2.03 yuan, respectively, and the corresponding PE was 5, 4, and 4 times, respectively. The company increased its dividend ratio to about 40% in 22 years, corresponding to the current dividend rate of more than 8%. As a target of undervaluation and high dividends, we believe that once market expectations for the economy warm up, the company will have strong allocation value that can be attacked and defended. 2) Investment advice: Give the company 8 times the predicted profit for 2024, with a target market value of 3.4 billion yuan. At the same time, after considering the impact of the company's proposed increase (that is, the current market value plus the proposed issuance of 3.7 billion yuan), the expected space is 51% compared to the current market value, corresponding to the target price of 11.19 yuan, with an emphasis on “strong promotion” ratings.

Risk warning: Demand for commodities has dropped sharply, and the economy has declined.