2023Q3 achieved revenue of 128.812 billion yuan, -6.80% year-on-year, and net profit of 287 million yuan, -44.77% year-on-year. The international external environment in the first three quarters was complex and severe, and domestic demand was insufficient. Combined with losses in some investment projects held by the company and losses in some types of supply chain management business, the company's revenue and profitability were under pressure. Despite the poor business environment, the company continues to expand its layout in the fields of new energy and consumer goods, and at the same time actively promotes international layout and digital transformation. We maintain the company's holding growth rating.

Key points to support ratings

Performance was under pressure under market pressure, and Q3 profitability declined. On the macroeconomic side, commodity prices fluctuated sharply in 2023, and commodity demand grew less than expected. Some of the company's supply chain management business lost money due to market conditions. 2023Q3 revenue was 128.812 billion yuan, down 6.80% year on year; revenue for the first three quarters totaled 40,716 billion yuan, down slightly by 0.89% year on year. In terms of profitability, the company's net profit for the third quarter was 287 million yuan, a sharp decrease of 44.77% over the previous year; the total net profit for the first three quarters was 1,866 billion yuan, down 19.35% from the previous year. In the current market environment, the company's supply chain management industry is facing new challenges. Superimposed companies are gradually withdrawing from the real estate business and financial services business. The business model is in a period of adjustment, and later business performance still needs to be waited and seen.

The company actively promotes international layout and digital construction. According to the company announcement, in the third quarter of 2023, the company established a platform company in Dubai in the UAE to expand the Middle East market, set up Indonesian Derun Shipping Company to carry out domestic trade shipping business in Indonesia, invest in ITG-STS joint venture in Singapore to carry out maritime forwarding business, and set up new offices in Chile, Turkey and Thailand to expand metal supply chain business. Meanwhile, in the third quarter, the company continued to promote digital construction and promote the launch of the “Guomao Cloud Chain · Egret Agricultural Protection” and the “China Trade Cloud Chain · Gold Trade Connect” supply chain fintech platform in cooperation with JD. The latter phase covered downstream customers in the pulp and paper industry chain in the first phase, and will cover more diverse industrial chains and customers in the future.

The company continues to expand its strategic layout in emerging business fields such as new energy and consumer goods, and is stepping up the industrialization and upgrading of supply chain management business. According to the company announcement, in the third quarter, the company continued to develop new business categories, develop new rare earth materials business, promote natural gas business through strategic cooperation with Foshan Energy, and the Indonesian subsidiary obtained local coal management qualifications. At the same time, the company has now developed supply chain management business for new energy materials and set up joint ventures to lay out new categories such as fishery products, tea, and wine consumer goods. Overall, the company will continue to focus on the advantages of its main business, improve quality and efficiency through continuous optimization of the supply chain model and development of business areas.

Looking forward to the future, we wait for macroeconomic recovery and the commodity market to gradually stabilize. The company's strategic layout is expected to help the company speed up the business adjustment process and achieve performance recovery. The company's internal growth in the first three quarters was weak under strong downward pressure from the market, but the company's core value was not diminished. In the fourth quarter, the company will continue to implement industrialization, internationalization and digitalization strategies, promote the transformation and upgrading of the “three chain integration” business model of supply chain, industrial chain and value chain, and at the same time continue to promote the business layout of the health technology business in the upper and middle reaches of medical devices, creating a new growth pole. In the long run, the fundamentals of China's economic stability and improvement will not change with policy support, but the complex impact of the external environment remains to be seen. The company has deepened its internal strategic layout, continued to improve the international layout externally, and the digital construction is progressing steadily, with sufficient energy to wait for the market cycle to bottom out and rise. Looking ahead to the fourth quarter and the whole of 2023, the bottoming out of the market cycle is compounded by the release of internal growth in the company, leaving a lot of room for recovery in the company's performance.

valuations

Considering losses in some types of the company's supply chain business, we adjusted the company's net profit from 2023-2025 to 26.27/32.03/3.649 billion yuan, -26.8%/+21.9%/+13.9%, and EPS to 1.19/1.45/1.66 yuan/share, corresponding to PE 5.7/4.4.1 times, respectively, maintaining the company's shareholding growth rating.

The main risks faced by ratings

The global economy fluctuates and the shipping market fluctuates.