With the improvement of management efficiency brought about by the company's new efficiency-linked mechanism, 2023Q3's net profit increased by 39.3% to 59 million yuan, basically in line with expectations. Considering the further improvement in the utilization rate of Q4 liquefied storage tanks and the increase in trade proprietary business or the increase in Q4 company's operating income by nearly 25%, factors such as subsidiary financial settlement may be reflected in the cost side, we expect the Q4 company's net profit to be about 40 million yuan, and the annual net profit growth may be about 49%. The change of management mechanism also brings opportunities for extension mergers and acquisitions. Yangshan port application is highly compatible with bonded technology business, and we look forward to the extension expansion to further release the performance flexibility.

The net profit of 2023Q3 company also increased by 39.3% to 59 million yuan, the improvement of management efficiency was transmitted to the revenue side, the financial expenses optimized and hedged part of the management expenses increased, and paid attention to the endogenous and extension growth space brought about by the change of the company's management mechanism. From January to September 2023, the company realized revenue / return net profit of 1.02 billion yuan, which was 52.1% compared with the same period last year. Among them, the return net profit of 2023Q3 Company increased by 39.2% to 59 million yuan. It is expected that the improvement in the utilization rate of liquefied storage tanks and the increase in trade proprietary business contributed to a 40% increase in operating income in the same period, an increase of 39 million yuan in operating costs in excess of Q3, an increase of 11 million yuan in superimposed fees, and a year-on-year increase in net profit in Q3 by 17 million yuan. The implementation of the performance-linked mechanism by the management brings new opportunities for the improvement of the company's management efficiency and the implementation of the long-term strategy. Regardless of M & A projects, we expect the company's net profit to increase by 48.6% to about 240 million yuan in 2023 driven by endogenous growth. We look forward to the extension expansion to further release the company's performance flexibility.

It is expected that the utilization rate of 2023Q4 storage tanks has further risen to about 75 per cent, and the increase in the utilization rate of liquefied storage tanks and the increase in trade proprietary business may boost Q4 company's revenue by nearly 25 per cent. 2023Q3's operating income increased by 40% to 512 million yuan, which is expected to benefit from the increase in the utilization rate of liquefied storage tanks and the increase in trade proprietary business. Among them, we expect the utilization rate of liquefied storage tanks to increase by 10pcts to 70% over the same period last year, considering the transformation and upgrading of some storage tanks. At present, the utilization rate of ethylene glycol storage tanks is close to high. According to Longzhong information, 2023Q3 ethylene glycol import output of about 2.13 million tons, + 20% year-on-year, material relatively high supply & downstream refinery operating rate is still a gap or promote ethylene glycol passive accumulation. Superposition company to increase efforts to purchase goods, actively expand the variety of warehousing, we expect 2023Q4 storage tank utilization is expected to further increase to about 75%. At the same time, the company extends the industrial service chain and expands the coverage area and delivery varieties of intelligent logistics. It is expected that the net profit of 2023Q3 intelligent logistics business is 20 million to 30 million yuan.

The year-on-year growth rate of operating costs of 2023Q3 is lower than that of income 2.5pcts. Considering the financial settlement of Q4 subsidiaries and other factors may be reflected in the cost side, we expect Q4 to achieve a net profit of about 40 million yuan.

The operating cost of 2023Q3 also increased by 37.6% to 394 million yuan, which was lower than the revenue 2.5pcts. In the same period, the company's sales / management / R & D / financial expenses were 0.03 trillion yuan, respectively, and-13.3%, 112.6%, 68.9%, 94.3%, respectively, compared with the same period last year. Management expenses increased by nearly 20 million over the same period last year, becoming the main increment of the expense side, but the financial expenses decreased by 8.52 million compared with the same period last year, partly hedging the pressure of the growth of management expenses.

It is expected that the financial expenses will decline or the private debt of the beneficiary company will mature, resulting in a reduction of 6.43 million yuan in interest expenses.

The realization of the new performance linkage mechanism by the management brings new opportunities for the improvement of the company's management efficiency and the implementation of the long-term strategy, relying on the smooth financing channels of state-owned shareholders, and looking forward to epitaxial mergers and acquisitions to accelerate the growth of the company. In September 2023, the company took an important step in the epitaxial M & A strategy, announcing its intention to acquire a 28.01% stake in Yangshan Shengang (PB is 1.9cm 2.3x). If the acquisition is completed, the company's equity tank capacity will increase by 27.0%. We expect that under the significantly superimposed location advantages of bonded science and technology management, Yangshan Shen Port, which has a capacity of 106.7 million square meters, is expected to increase its ROE to 7.7% to 9.0%, and the synergy effect is expected in the future. In August, the company announced that it would sell some of the assets of the foreign service company at 35.615 million yuan. It is expected that the optimization of the asset structure will turn into the improvement of ROE capability, which will further manifest the characteristics of high rate of return in the warehousing industry.

Risk factors: a sharp decline in economic growth; a sharp decline in the prosperity of the petrochemical industry; petrochemical safety accident risk; M & An integration is less than expected; industry competition intensifies.

Profit forecast, valuation and rating: driven by traditional logistics and intelligent logistics, it is suggested to pay attention to the endogenous and extension growth space brought about by the change of bonded science and technology management mechanism. The company has abundant cash flow, paper cash and asset-liability ratio better than comparable companies (2023Q3 book cash 910 million yuan, asset-liability ratio 27%), relying on the financing channels of state-funded shareholders are smooth, looking forward to epitaxial mergers and acquisitions to accelerate the growth of the company. According to the quarterly report data, taking into account factors such as subsidiary financial settlement or reflected to the cost side, we adjust the annual EPS forecast in 2023-24-25 to 0.20 EPS 0.25 pound 0.27 yuan (the original forecast is 0.21 pound 0.25 pound 0.30 yuan), with reference to the comparable company valuation level (Hongchuan Wisdom 2024E PE 21 times, Wind consensus expectation), considering the company's extension and endogenous growth momentum, give the company 22 times PE in 2024. Corresponding to the target price of 5.5 yuan, maintain the "buy" rating.