Brief comment on performance

On October 30, 2023, Sheng Hang released the third quarter report of 2023. 2023Q1-Q3 achieved an operating income of 880 million yuan, an increase of 42.7% over the same period last year, and a net profit of 120 million yuan, down 13.5% from the same period last year. Of this total, Q3 achieved an operating income of 300 million yuan, up 34.3% from the same period last year, and a net profit of 30 million yuan, down 35.5% from the same period last year.

Business analysis

The scale of the business has expanded and revenue has increased compared with the same period last year. 2023Q3's revenue growth compared with the same period last year is mainly due to the expansion of business scope and scale. The company continues to acquire ships to expand its capacity. According to past announcements, the number of domestic and foreign trade ships controlled by 2023H1 has reached 37 (including those that have been purchased but not put into operation), with a total capacity of 279200 deadweight tons, an increase of 39% over the beginning of the year. In addition, the company has three ships under construction with a total capacity of 15000 deadweight tons, including 3720 deadweight tons of oil and chemical tankers (capacity replacement), 5050 cubic meters of liquefied petroleum gas carriers (non-ethylene carriers) and 7450 deadweight tons of chemical carriers.

Q3 gross profit margin decreased compared with the same period last year, while the expense rate increased compared with the same period last year. 2023Q3 achieved a gross profit margin of 31.8%, a year-on-year drop of 3pct. In terms of expense rate, the expense rate of 2023Q3 during the period was 15.4%, an increase of 1.1pct over the same period last year, of which the sales rate was 0.4%, down 0.1 pct from the same period last year; the management expense rate was 7.1%, down 0.1 pct from the same period last year; the R & D expense rate was 2.1%, down 0.8 pct from the same period last year; and the financial expense rate was 5.8%, up 2.1pct from the same period last year. The investment income of 2023Q3 Company was-9.303 million yuan, down 365.7% from the same period last year. Due to the decline in gross profit margin from the same period last year, the expense rate rose from the same period last year, and the superimposed investment income fell sharply. 2023Q3's parent net profit rate was 9.6%, down 10.4pct from the same period last year.

Chemical ships buy three and sell two, and Underford's energy development will be combined. The company announced on October 19 that it intends to purchase one domestic chemical ship and two foreign trade chemical ships from Fenghai Shipping, with a total purchase price of RMB 199 million. In order to optimize the asset structure of foreign trade chemical ships and improve the overall operational efficiency of the foreign trade chemical fleet, the company announced on October 30 that its second-class wholly-owned subsidiary intends to sell 100% ownership of two foreign trade chemical ships. the transaction prices are US $11.79 million and US $23.015 million respectively. On September 8, the company announced that it planned to acquire 2% of Underford Energy Development, which increased to 51%, with a consideration of 5 million yuan. After the completion of the acquisition, Andford Energy Development will be included in the company's consolidated statement. The above changes will further expand the size of the company's business and increase the source of performance.

Earnings forecast, valuation and rating

Taking into account the weak demand so far this year, the company's 2023-2025 net profit is forecast to 180 million yuan, 270 million yuan, 360 million yuan (the original 220 million yuan, 310 million yuan, 400 million yuan). Maintain a "buy" rating.

Risk hint

Chemical industry fluctuation risk, safety operation risk, policy regulatory risk, M & A lower-than-expected risk, shareholder and director high reduction risk.