2023Q3 achieved revenue of 13.585 billion yuan, -1.83% year-on-year, and net profit of 290 million yuan, -64.56% year-on-year. Under the macroeconomic restrictions of the complex and severe international external environment, insufficient domestic demand, and the overall decline in commodity prices, the company's revenue and profitability were severely limited, compounded by pressure on downstream customer demand and profitability, and the company's gross profit from commodity operations declined. After the commodity market gradually stabilizes and the risks in the company's agricultural products business are eliminated, the company's performance is expected to pick up, and we will maintain the company's buying rating.

Key points to support ratings

Performance was under pressure under market pressure, and profitability declined markedly in the third quarter. On the macroeconomic side, commodity prices fluctuated sharply in 2023, and commodity demand grew less than expected. Commodity prices showed a downward trend in the first three quarters. The company's gross profit from commodity operations declined sharply due to weak demand from downstream customers. 2023Q3 revenue was 13.585 billion yuan, down 1.83% year on year; revenue for the first three quarters totaled 368.335 billion yuan, down 5.90% year on year. In terms of net profit, the company's net profit for the third quarter was 290 million yuan, a year-on-year decrease of 64.56%; the total net profit for the first three quarters was 1,181 billion yuan, a year-on-year decrease of 46.45%.

The company is actively expanding its market share to withstand cyclical downside risks and vigorously enrich its product portfolio to smooth out cyclical fluctuations.

In the first half of 2023, the number of active customers of the company reached 9886, an increase of 453 over the same period last year. In addition, the company continues to increase the number of manufacturing enterprises and the proportion of service volume. As of the first half of 2023, the number of customers and service volume of manufacturing enterprises remained above 50% and 60% respectively, with the new energy supply chain manufacturing industry accounting for more than 90% of customer service volume. Relying on brand advantages and customer advantages, the company can continue to strengthen its position in the industry and withstand the adverse effects of the downturn cycle with an advantage of scale. The company continues to enrich its commodity portfolio and forge commodity package supply capacity. The company operates a variety of products, including agricultural products, energy and chemicals, metal minerals, new energy products, etc. Currently, the company continues to enrich its product portfolio, dynamically adjust the product composition in line with changes in industry cycles, maintain a balanced and sustainable commodity structure in different cycles, and thus has better growth potential and cycle hedging capabilities. With regard to the risk exposure problem of the agricultural products business in the first half of 2023, the company has now actively adjusted. Combined with expectations, the overall prosperity of energy and chemicals will pick up after economic recovery picks up, and the company's business portfolio is expected to be repaired.

Looking forward to the future, we wait for macroeconomic recovery and the commodity market to gradually stabilize. The company's own customer scale advantage is expected to help the company speed up performance recovery. The company's performance in the first three quarters was weak under strong downward market pressure, but the company's core value was not impaired. We expect that in the fourth quarter, the company will continue to expand its advantages, optimize its business model, and actively expand the number of customers. In the long run, the fundamentals of China's stable, moderate and positive economy will not change with policy support, and commodity market prices are expected to pick up. 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 that the company's agricultural products business is a drag on the company's overall performance, we lowered the company's net profit from 2023-2025 to 16.32/25.61/3109 billion yuan, to -38.1%/+56.9%/+21.4% year-on-year, and EPS to 0.72/1.13/1.37 yuan/share, corresponding to PE 9.0/5.4.7 times, respectively, maintaining the company's buying rating.

The main risks faced by ratings

The global economy fluctuates and the shipping market fluctuates.