Description of the event

Xiamen International Trade Disclosure Report for the Third Quarter of 2023: In the first three quarters, the company achieved operating income of 407.2 billion yuan, a year-on-year decrease of 0.9%; realized net profit of 1.87 billion yuan, a year-on-year decrease of 19.4%; in the third quarter, the company achieved revenue of 128.81 billion yuan, a year-on-year decrease of 6.8%, and net profit of 290 million yuan, a year-on-year decrease of 44.8%.

Incident comments

Q3 performance was under pressure due to multiple factors. 2023Q1-3, the commodity supply chain management industry is facing new challenges due to external circumstances such as weakening market demand, tense geographical situation, and large exchange rate fluctuations. The company focuses on strategic development, actively promotes business model upgrades, optimizes business strategies, strictly manages risk control, and maintains the resilience of business development. In 2023Q1-3, the company achieved operating income of 407.2 billion yuan, down 0.9% year on year; net profit was 1.87 billion yuan, down 19.4% year on year. In 2023Q3, the company achieved net profit of 290 million yuan, a year-on-year decline of 44.8%, mainly due to the complex and severe international external environment during the reporting period, domestic demand still insufficient, losses in some investment projects held by the company, and losses in some types of supply chain management business due to market conditions.

The inflection point of stock replenishment is approaching, and demand is slowly improving. Along with the gradual elimination of upstream inventories, in August, China's nominal inventory of finished industrial products and actual inventory growth rates were 2.4%/5.6%, respectively. The actual inventory growth rate continued to decline month-on-month, and the inflection point of active inventory replenishment was approaching.

2023Q3, Nanhua Metals/Energy/Agricultural Products Index was +16.3%/+1.6%/+3.7% year-on-year, up +5.3%/+10.1%/+9.7%, respectively. Commodity unit prices improved month-on-month under a weak recovery in demand.

Accelerate the expansion of international business and continue to develop new categories. 2023Q3, the company's international layout has shown new results, actively lays out key logistics nodes, enhances core control over the supply chain, and provides comprehensive services to upstream and downstream partners in the industrial chain.

2023Q3, the company established a platform company in Dubai, UAE to expand the Middle East market, set up an ITG-STS joint venture in Singapore to carry out maritime forwarding business, set up Indonesian Derun Shipping Company to carry out domestic trade and shipping business in Indonesia, and set up new offices in Chile, Turkey and Thailand to expand metal supply chain business. The company continues to develop new business categories, develop new rare earth materials business, promote natural gas business through strategic cooperation with Foshan Energy, and Indonesian subsidiaries obtain local coal management qualifications.

The valuation is at an all-time low, and the dividend rate is quite attractive. Guomao Holdings, the controlling shareholder, increased its holdings of the company through centralized bidding transactions on the Shanghai Stock Exchange. The cumulative increase in holdings was not less than 50 million yuan and no more than 100 million yuan, demonstrating confidence in long-term development. The company continues to implement industrialization, internationalization and digitalization strategies and steadily promotes the construction of key digital projects. The health technology business will continue to promote the upstream and midstream medical device business layout and create a new growth pole. As upstream commodity inventories are removed, the industry is gradually entering a replenishment cycle. At the same time, economic expectations are gradually warming, which is expected to drive a recovery in commodity demand. It is estimated that the company's net profit from 2023-2025 will be 22.7/30.4/3.72 billion, respectively, and the corresponding PE will be 6.6/4.9/4.0X, respectively, reaffirming the “buy” rating.

Risk warning

1. Commodity prices fluctuate greatly;

2. Bad debt losses increase risk;

3. Risk of exchange rate fluctuations.