Sinotrans: the world's leading integrated logistics service provider
Sinotrans is the unified operating platform for China Merchants Group's logistics business. It mainly engages in the three major segments of professional logistics, agency and related business, and e-commerce business. The company is a leader in the field of freight forwarding in China. In '22, the global shipping freight forwarder ranked second and the air freight forwarder ranked eighth. At the same time, as a listed central logistics enterprise, the company has a perfect employee incentive system.
Industry: Focusing on marginal improvements and structural opportunities, cross-border e-commerce logistics ushered in development opportunities. Global economic and trade declined in the past 22 years. Air freight development is under pressure, and freight rates have dropped significantly. However, on the other hand, it is worth noting that the current year-on-year decline in the air cargo market, represented by the Asia-Pacific region, has narrowed and corrected. China's foreign trade container volume is growing at a year-on-year rate, and the trend of marginal improvement is obvious. From a structural point of view, the strong e-commerce development momentum on the overseas retail side is expected to create a new round of development opportunities for China's cross-border e-commerce exports, while cross-border e-commerce logistics is mainly based on the air cargo model, which is expected to drive an increase in the share of air freight lines and overseas warehouse models.
Shipping agent profits have improved, and cross-border e-commerce logistics is expected to grow rapidly. The company has an extensive domestic and international service network and can provide logistics services that reach the world; since 2017, it has successively completed acquisitions of China Merchants Logistics, KLG, etc., further broadening its operating boundaries. 1) In the shipping agency business, although the company's freight forwarding business volume is under pressure, there is a clear trend of improving profitability through business structure optimization and extension of the service chain; 2) In terms of air freight forwarding and cross-border e-commerce logistics, the company continues to strengthen air transport channel construction and build a global route network; it has also increased the global infrastructure layout and improved the product system. The air transport channel business has grown rapidly. The air transport channel business has been affected by low demand and declining freight rates for 22 years. With the rapid growth of emerging cross-border e-commerce platforms such as TEMU and Shein, it is expected to push the company's cross-border e-commerce business back to an upward channel.
Professional logistics establishes business barriers, and the steady operation of Sinotrans DHL increases investment income 1) Professional logistics: the main revenue and profit of the contract logistics sector. In '23, the company seized structural opportunities in the domestic demand market, and contract logistics achieved contrarian growth. We believe that the company has been deeply involved in the freight forwarding industry for more than 70 years and is expected to build a barrier to the company's business by providing customers with customized and specialized integrated logistics services through its perfect domestic network and logistics infrastructure. 2) Sinotrans DHL is the earliest established and most experienced international air express delivery leader in China. DHL and Sinotrans each hold 50% of the shares. Relying on DHL's global network resources and the construction of China's international express delivery service network, the company has achieved steady development over a long period of time, and is expected to continue to contribute to the company's investment income and increase profits.
First coverage, giving a “buy” rating. We expect the company's revenue for 23-25 to be 980, 1056, 113.9 billion yuan, with year-on-year growth rates of -10%, +8%; the company's net profit to mother is 40.43, 43.69, 4.728 billion yuan, year-on-year growth rates of -1%, +8%; corresponding EPS is 0.55, 0.60, 0.65 yuan, and corresponding PE is 11x, 10x, and 9x. Referring to comparable company valuations, the company was given a PE valuation of 12 times in 24 years. The corresponding target price was 7.19 yuan/share, giving it a “buy” rating.
Risk warning: macroeconomic downturn, air and sea freight rates continue to fall, cross-border e-commerce industry growth falls short of expectations, overseas business risks, and credit receivables risks.