Core viewpoints
Tielong Logistics released semi-annual report that H1 realized revenue of 6.93 billion yuan (yoy+9.94%) in 2023 and net profit of 320 million yuan (yoy+26.14%), which was basically in line with our expectations (332 million yuan). On a quarter-by-quarter basis, the company's 1Q/2Q net profit reached 1.72 billion yuan, an increase of 38 percent over the same period last year. The year-on-year increase in net profit was mainly due to the improvement in special box profits; 2Q net profit decreased compared with 1Q, mainly due to the decline in railway freight and port logistics business volume. From a business point of view, the 1H23 gross margin of railway special container / railway freight transport and port logistics / supply chain management business changed year-on-year + 39.8%, accounting for 29.65% of the total gross profit. Due to the improvement in the profit of the special box, we have raised the company's net profit from 2023, 2024, 2025 to 570, 000. We still raise the target price by 0.6% to 7.03 yuan (the previous price is 6.99 yuan) based on 1.3x 2023e PB (a 15% premium on the weighted average of Wind consensus expectations, as the company's ROE is higher than the average of comparable companies). Maintain "increasing holdings".
The gross profit of railway special box has increased significantly, and the box turnover efficiency has been maintained at a high level.
In the first half of the year, the company's railway special boxes sent 8645 million TEU, an increase of 3.42% over the same period last year. Considering that the number of special boxes at the end of March 23 increased by 6.2% over the same period in 22 years, the box turnover efficiency remained at a high level.
The revenue of 1H23 railway special container business increased by 35.7% compared with the same period last year, of which the revenue from container usage fees increased by 13%. Since the beginning of this year, railway passenger flow has recovered substantially, with the exception of high-speed rail, most railways share passenger and freight lines, and railway freight capacity is even more tense than during the epidemic. As a professional transportation company under the National Railway Group, the advantage of booking resources has been highlighted, superimposed on the adjustment of the preferential policy for the return of open-top boxes provided by enterprises in April this year, and the market competitiveness of the company's special box products has been enhanced. Against this background, the gross profit of the railway special box business increased by 39.83% compared with the same period last year, and the gross profit margin increased by 0.83pp to 28.2%.
Due to the influence of economic factors, the traffic volume of Sha-Ba line has declined.
Affected by the economic environment in the first half of the year, steel prices continued to fall and steel mills reduced production, resulting in a sharp drop in demand for raw materials such as mineral powder and coal, resulting in a 5.1 per cent year-on-year reduction in the arrival and shipment of Sha-Shan Railway (27.92 million tons) compared with the same period last year. The profit of Lingang logistics increased steadily, and the net profit of Tielong Yingkou, a subsidiary, increased by 16.5% compared with the same period last year. Overall, rail freight and port logistics business 1H23 revenue / gross margin fell 10.2 per cent year-on-year, gross profit margin fell 0.11pp to 20.0 per cent year-on-year. The Dalian cold chain logistics base invested by the company was put into operation in 2021, and the cold chain business is still losing money. The subsidiary Iron Dragon Cold chain 1H23 recorded a loss of about 38 million yuan (1H22: a loss of 26 million yuan).
Profits in the supply chain decline due to falling coal and ore prices
The company's supply chain business mainly benefits from the price difference between supply and marketing of raw materials, and the commodity category has gradually expanded from steel and iron ore to coal, coke and other commodities. 1H23 supply chain business revenue increased by 9.67% year-on-year, mainly due to an increase in commodity sales; however, gross margin fell 29.65% year-on-year, and gross profit margin decreased to 0.79% year-on-year, mainly due to the decline in coal and iron ore prices over the past 23 years.
Risk hint: the development of special boxes is not as expected, the rental rate of cold chain logistics park is low, and the Sha-Ba line is not as expected.