Core view: Profit in '23 is in line with forecasts, special box growth is improving, and other businesses are weak
Tielong Logistics released its annual report. In 2023, it achieved revenue of 14.7 billion yuan (yoy +22%), net profit to mother of 471 million yuan (yoy +39%), and deducted non-net profit of 444 million yuan (yoy +44%), in line with the January 30 performance forecast. Profit increased sharply, mainly due to: 1) a sharp increase in profit from special containers; 2) Real estate inventory impairment losses of 99 million yuan were calculated in '22, and the performance base was low. By business, the gross profit of railway special container/railway freight and port logistics/supply chain management businesses changed +37.3/-11.9/ -25.6% year-on-year, accounting for 60/31/8% of total gross profit. Due to the loss reduction in the cold chain business falling short of expectations, we adjusted the 2024/2025/2026 net profit forecast to $54/6.0/680 million yuan (previous value:
5.7/6.2 billion). We gave a target price of 6.99 yuan based on 17x 2024E PE (Wind's agreed industry average). The previous target price of $7.03 was based on 1.3x 2023E PB. The impact of the pandemic on the profits of comparable companies has been eliminated, PE is back to comparability, and we are using PE valuation instead. Maintain an “increase in holdings.”
The competitiveness of railway special containers has improved, and gross profit has increased significantly
The revenue and gross profit of the railway special container business increased by 33.7% and 37.3% year on year in '23, and gross margin increased 0.7 percentage points year on year to 25.5%. In terms of traffic volume, special box shipments increased by 3.07% year on year to 1.76 million TEU, special box holdings increased 8.7% year on year to about 113,000, and the number of special box turnover decreased slightly year on year. In terms of single box revenue, the average revenue of special boxes increased 29.7% year-on-year to 1192 yuan/box, which is similar to 2021. It may be related to the optimization of the box structure, the increase in overall logistics share, and the high level of transportation demand. Railway passenger traffic recovered sharply in '23, and cargo capacity was more tight than during the pandemic.
As a professional transportation company under China Railway Group, the company's advantages in booking resources are prominent. Combined with the adjustment of preferential policies for enterprises to bring their own open top boxes in April 23, the market competitiveness of the company's special box products has improved.
The volume of bulk goods in the Shaba Line has declined, and supply chain profits have declined
Revenue and gross profit from railway freight and port logistics business decreased by 13.0% and 11.9% year on year in '23, and gross margin increased by 0.2 pp to 17.0% year on year. Affected by the economic environment, the Shaba Railway faced downward pressure on the volume of bulk materials, and the shipping volume (57.28 million tons) decreased by 3.7% year-on-year. The profit of Lingang Logistics grew steadily, and the net profit of the subsidiary Tielong Yingkou Industrial increased 11.5% year-on-year. The cold chain business is still losing money. The subsidiary Tielong Cold Chain recorded a loss of about 86 million yuan in '23 and a loss of 71 million yuan in '22. Sales volume and revenue in the supply chain business increased 39% and 30% year over year, but gross profit decreased by 25.6% year on year, and gross margin fell 0.5 percentage points year on year to 0.65%, mainly due to the decline in coal and iron ore prices since '23.
The development of railway containers is accelerating, in line with “transit to rail” and multimodal railway containers, benefiting from transport structural adjustments such as “transit to rail” and multimodal transport. The development of the company's special box business is accelerating. The board of directors has approved the box building plan. The company expects to invest 1.43 billion yuan to purchase about 34,900 special boxes, an increase of about 31% over current holdings. In '24, 1Q's payment of special container transportation service fees to China Railway Group increased 16% year over year (related transaction report), indicating that special box revenue may have maintained a relatively rapid growth rate.
Risk warning: The development of special containers falls short of expectations, the rental rate of cold chain logistics parks is low, and the Shaba Line falls short of expectations.