The bulk supply chain management industry is developing well. Macro level: Downstream demand for commodities is mainly related to manufacturing, real estate, and infrastructure. Under countercyclical policy adjustments, investment amounts in China's manufacturing, real estate, and infrastructure sectors are expected to improve, thereby driving demand growth for commodities such as iron ore, coal, and non-ferrous metals. The Western Securities Macro Group predicts that investment in China's fixed assets, manufacturing, and infrastructure sectors will grow by 5%, 6.5%, and 9.5% respectively in 2024, up 2 pct, 0.5 pct, and 1.5 pct respectively from 2023; at the enterprise level: leading companies in the large supply chain management industry will expand through integrated industrial chain services and industrial investment.

Xiamen International Trade - Focus on the main supply chain business, divest real estate business, and downplay financial business. The company has become one of the leading large-scale supply chain management enterprises in China, ranking in the top four A-share supply chain management companies in terms of revenue. The company gradually divested the real estate business, downplayed the financial business, and focused on large-scale supply chain management business. Although the company is a state-owned enterprise, employee equity incentives are positive.

Higher revenue growth and steady risk control bring better ROE returns. The company's revenue and profit scale is relatively leading in the supply chain management industry, and its market share has maintained a steady upward trend. The revenue growth rate and market share growth rate in the past 6 years are at a high level in the industry. Since commodities have the characteristics of large cyclical fluctuations, establishing a complete risk management and control system is of great significance to commodity supply chain management enterprises. From the perspective of credit impairment and asset impairment losses as a share of revenue, which is a key indicator for evaluating risk control capabilities, Xiamen Guomao is at a low level in the industry and is relatively stable; although Xiamen Guomao's ROE is not at the highest level compared to comparable companies, it has maintained a good return of 9%-12%. Judging from the trend of the past 3 years, the company's ROE has remained above 10%, showing a steady upward trend.

The first coverage gives an “gain” rating. We expect the company's 2023-2025 EPS to be 1.19/1.75/2.05 yuan/share, respectively, and the 2023-2-22 stock price corresponding PE will be 6.35/4.29/3.68 times, respectively. Comparable to the company's 2024 PE average value, 4.63 times. Considering the company's relatively leading revenue and market share growth rate, good ROE returns, and the company's strategy of divesting the real estate business and further focusing on the main business of the large supply chain, we believe the company should enjoy a certain valuation premium. We gave the company 5 times PE in 2024, corresponding to a target price of 8.77 yuan. Covered for the first time, a “gain” rating was given.

Risk warning: sharp fluctuations in commodity prices, increased risk of credit impairment losses, geopolitical conflicts impacting the bulk supply chain business, falling short of expectations in the company's health technology business, and risk of exchange rate fluctuations.