The company is a leading third-party cross-border chemical supply chain service provider in China, and is ranked 7th among the “Top 100 Chemical Logistics Companies” by the China IoT. The company's business is mainly based on cross-border chemical logistics supply chain services. 2023H1 accounts for 65% of revenue. At the same time, the company also provides customers with services such as warehousing, road transportation, and supply chain trade. The company's endogenous extension continues to expand its business scale. In 2023, the company successively completed acquisitions of Ningbo Yongshunan, Shaoxing Changrun Chemical, Hongsheng Logistics, and Tianjin Ruibolong. Benefiting from rising international shipping prices, the company's revenue and net profit CAGR reached 41% and 35% respectively in 2017-2022.

International shipping prices declined in 2023. 2023Q1-Q3's revenue was 1.8 billion yuan, down 24% year on year, and net profit was 140 million yuan, down 42% year on year.

Demand for chemical logistics is broad, and stricter industry regulations are increasing the leading effect of the market. On the demand side, China's petroleum refining capacity continues to improve. The compound growth rate of refining and chemical production capacity reached 2.9% in 2012-2022, accounting for a global share of 16.9% in 2022. The huge chemical market has spawned demand for logistics transportation. It is estimated that in 2023, the corresponding market for third-party logistics of hazardous chemicals in China will exceed 750 billion yuan. On the supply side, the industry landscape is very fragmented, with CR100 accounting for only 7%. After many hazardous chemical accidents have occurred, the approval of storage qualifications has been drastically tightened. In a situation where the development of the region can already be basically satisfied, the government will not approve new construction. The rapid parkization and centralization of the chemical industry has also contributed to the gradual elimination of small and unregulated hazardous logistics enterprises. High-quality enterprises are expected to further increase their market share through mergers and acquisitions.

Adhere to mergers and acquisitions to accumulate scarce resources, and achieve steady revenue growth by “volume compensation”. Through mergers and acquisitions, the company has obtained fully qualified scarce hazardous chemical storage resources, transportation capacity resources and development land, and has completed the logistics service network layout for major domestic chemical entry and exit ports such as Ningbo, Jiaxing, Shanghai, Qingdao, and Tianjin. Currently, the storage area is 75,000 square meters, a land reserve of nearly 300,000 square meters, and its own fleet of 292 vehicles. It is expected that with the release of production capacity of Yongtaiyun Tianjin (27,000 square meters of hazardous chemicals warehouse, 101,000 square meters of storage land resources), Ningbo Yongshunan (111 transport vehicles), and Shaoxing Changrun Chemical (27,000 square meters of storage land resources), the company's various business volumes are expected to continue to grow in the future to drive revenue growth.

The company's net profit for 2023-2025 is estimated to be 180 million yuan, 300 million yuan, and 370 million yuan, respectively, and the corresponding EPS is 1.72 yuan, 2.89 yuan, and 3.54 yuan, respectively. Referring to the industry average valuation, the company was given 11 times PE in 2024, corresponding to a target price of 32.25 yuan. The first coverage gives a “buy” rating.

Risk warning

Risk of falling freight rates beyond expectations; risk of fluctuations in the chemical industry; risk of safe operation; risk of policy regulation; risk of mergers and acquisitions falling short of expectations.