Leading private petrochemical warehousing, steady growth in mergers and acquisitions: The company was founded in 2012. Since its establishment, the company has continued to promote mergers and acquisitions strategies to achieve and consolidate its leading position in petrochemical warehousing. The company focuses on liquid chemical terminal storage tank storage business, chemical warehouse storage business, and has transit and other services, logistics chain management services, and value-added services. It is a leading innovative petrochemical logistics integrated service provider in China. The main terminal storage tank industry contributed 88.0% of revenue and 86.3% of gross profit in 2022. The company lays out the five core economic circles of the Yangtze River Delta region, the Guangdong-Hong Kong-Macao Greater Bay Area, the southeast coastal region, the Bohai Rim Economic Zone, and the Chengdu and Chongqing Shuangcheng Economic Zone, giving full play to the cluster effect and promoting the parallel development of terminal tank storage business+chemical warehouse warehousing business.

With the release of large-scale coastal refining and chemical production capacity and increasing water transport penetration, storage demand is expected to maintain steady growth: petrochemical industry development and geographical imbalance in chemical production and marketing spawn petrochemical warehousing demand. Downstream demand is related to macroeconomics, total demand is stable, petrochemical industry revenue in 2013-2022 CAGR reached 2.8%, and crude oil processing volume has reached 1.7% in 2013-2022. Currently, industry demand is weak, and the operating rate is under pressure in the short term, but differences in production and sales and growth in production segments still support petrochemical warehousing demand. In the medium to long term, major private refining and chemical projects have been put into operation one after another. Considering only some major refining and chemical projects, it is estimated that at least 126 million tons/year of oil refining, 14.7 million tons/year of ethylene, and 10.9 million tons/year of aromatic hydrocarbons will be put into operation by the end of 2026, driving the increase in demand for hazardous chemical storage. In terms of transportation methods, transit water contributed to an increase in the water transport penetration rate. The water transport penetration rate increased from 18% to 22% in 2018-2021. Storage demand is expected to maintain steady growth due to increased production capacity and changes in transportation methods.

Stricter regulations and barriers are being built, and industry concentration is expected to increase: the cutting-edge terminal resources of petrochemical warehousing enterprises and the scale of storage tank construction directly determine the entry threshold of the industry and the competitive strength of the enterprises. Environmental protection policies and safety supervision systems have been promulgated and implemented one after another, industry entry barriers continue to rise, and petrochemical warehousing supply growth is limited. In 2013-2017, the tank capacity growth rate fell from 5% year on year to 0%, and the industry's tank capacity stabilized. Resource growth in coastal terminals is limited, and berths of 10,000 tons and above in coastal ports fell from 6% in 2015 to 3% in 2021. The industry pattern is scattered, and petrochemical warehousing enterprises have significant regional characteristics and are generally small in scale. CR3 is about 15.5%. The company, as an industry leader, has a market share of about 10.4% in 2022. As regulations continue to become stricter, “small scattered and poor” polluting enterprises will face the risk of being shut down and rectified, and industry stocks will also be compressed. It is expected that large-scale petrochemical storage leaders will accelerate industrial layout, and industry concentration is expected to increase.

Capacity expansion and quality service enable terminal storage tank performance: The terminal storage tank business mainly serves domestic and foreign petrochemical product manufacturers, traders and end users. It stores oil, alcohol, liquid alkali and other chemicals. Revenue is mainly determined by tank capacity, rental rate and unit rent. 1) Compared with its listed peers, the company's expansion+internal storage tank capacity leads the way and maintains the pace of expansion. Currently, the operating tank capacity is about 4.39 million meters? , forming networking in core regions such as the Yangtze River Delta. With the gradual implementation of the company's mergers and acquisitions and expansion projects, it is expected that the company's tank capacity will continue to grow steadily; 2) The storage tank rental rate will remain stable for a long time. With the exception of 2022, the storage tank usage rate will fluctuate between 81-86% in 2015-2022. Looking ahead, the production capacity of the Fujian Port Energy Project is declining, and the company's rental rate is expected to rise, and the storage tank rental rate is expected to continue to grow steadily as categories expand and long-term rental customers increase; 3) The company has high-quality terminals, limited regional competition, and scale advantages to build comprehensive warehousing service capabilities. Storage tank unit rent has increased steadily since 2015, and unit rent has increased steadily since 2015, and 2015-2022 unit rent will rise steadily from 30.71 yuan/m? /month increased to 44.83 yuan/m? /month. Looking forward to the future, the company's rent level is expected to rise steadily as regional competitive advantages are maintained and comprehensive service capabilities are steadily improved.

The chemical warehouse storage business has entered a stage of rapid development: integrated chemical warehouse services are still in the early stages of development. It is expected to develop rapidly through self-construction and mergers and acquisitions, and is expected to become the second growth curve in the future. As of July 2023, the company has operated warehouses with an area of 64,900 square meters, mainly Class A and Class B warehouses. The business had revenue of 59 million yuan in 2022, accounting for 4.7%. The gross profit for 2022 was $031 million, with a gross margin of 52.5%.

Compared with the storage tank business, the capacity expansion of chemical warehouses is not limited by terminal resources, and there is broad room for growth.

Investment suggestions: Major private refining and chemical projects have been put into operation one after another. Demand for petrochemical warehousing is expected to continue to grow due to increased production capacity, stricter regulations have raised entry barriers to the petrochemical warehousing industry, the company continues to promote capacity expansion through self-construction and mergers and acquisitions, the core assets of storage tanks and warehouses have increased, and main business revenue has maintained relatively rapid growth. The company's own scale advantage has promoted a steady increase in profitability, rapid growth in performance, and strong certainty. We expect the company's net profit from 2023-2025 to be 3.5/45/5.3 billion yuan, respectively, with a growth rate of 56.7%/29.1%/18.1%. The corresponding PE for 2023-2025 will be 28x/22x/18x, respectively, giving it a “buy-A” rating. The company's business model barriers are high, and profit is expected to maintain steady growth. Since there are no comparable companies with a consistent business scope in the industry, referring to the company's historical PE valuation range of 20x-35x, the 2024 25x valuation is given, and the corresponding target price is 24.81 yuan.

Risk warning: 1) Demand falls short of expectations due to fluctuations in macroeconomic conditions; 2) changes in industry regulatory policies affect the pace of company expansion; 3) jeopardize the risk of chemical warehousing accidents. 4) Assumptions and risk of profit predictions falling short of expectations