The company's recent situation
Company's recent updates: Shanghai Xingtong Wanbang Shipping Co., Ltd. officially started construction of the first 13,000-ton duplex stainless steel chemical tanker at Zhoushan Ningxing Shipbuilding Co., Ltd., and the ship is scheduled to be delivered in early 2025. The company said that the ship that started construction this time is one of the two new ships launched after Xingtong Holding Xingtong Wanbang, and is an important step for the company to speed up the iterative renewal of capacity.
reviews
The capacity scale expanded as scheduled, and the company maintained its leading position under the trend of industry consolidation. The company announced that by the end of 2023, the company's various types of bulk liquefied dangerous goods vessels had a total capacity of 384,900 DWT (33 ships), of which domestic trade capacity accounted for about 75% (27 ships) and about 25% of foreign trade capacity (6 ships); the company's coastal inter-provincial chemical capacity accounted for 14.22% of the total market capacity (+2.12ppt); including the 13,000-ton chemical tanker built this time, with a total capacity of 101,000 DWT. We believe that the company will continue to work hard on both sides of the new capacity review and market mergers and acquisitions to expand its fleet size at an appropriate pace, stabilize its leading position, and gradually increase its market share.
Since this year, coastal chemical tanker freight rates have picked up month-on-month under year-on-year pressure, and demand recovery is still underway. As of mid-March, we estimate that the average freight rate of coastal chemical tankers has declined year-on-year since this year, but there has been a recovery from 4Q23. We believe that domestic chemical transportation demand is still recovering. We believe that the recovery in demand falls short of expectations or will have a certain impact on COA prices in 2024, but the company is expected to maintain a high share of COA contracts and term leases as a leading industry leader.
Profit margins improved month-on-month in the fourth quarter, and the year-on-year decline narrowed. Looking ahead, we are focusing on the run-in between domestic trade demand and foreign trade business. 4Q23 The company's gross margin was -3.1 ppt/+5.4ppt to 34.5%, and the net profit margin was -0.8 ppt/+5.2ppt to 21.2% month-on-month. The year-on-year decline narrowed, and the month-on-month decline picked up somewhat. We think it was affected by the traditional peak season in the fourth quarter. By region, the gross margin of domestic business in 2023 was 5.58ppt to 36.05% year-on-year, higher than the gross profit margin of the newly launched overseas business of 24.95%. We think in the future, we need to pay attention to: 1) the recovery of domestic trade demand this year; 2) The company has entered the foreign trade water transport industry since the end of 2022, and we need to observe the run-in effects as capacity increases.
Profit forecasting and valuation
Considering the uncertainty of demand, we cut our 2024 profit by 9% to $303 million, and initially introduced 2025 to $364 million. The current stock price corresponds to 13.0 times/10.8 times the 2024/2025 price-earnings ratio, maintaining the industry rating. Considering the decline in the overall valuation of the hazardous chemicals logistics sector, we lowered the target price by 7.6% to 19.5 yuan/share, corresponding to the 2024/2025 price-earnings ratio of 18.0 times/15.0 times, with 38.9% upside compared to the current stock price.
risks
The growth rate of upstream chemical production declined, and the company's new ship launch schedule fell short of expectations.