Core views:
It is a leading domestic chemical shipping company, and profits are growing rapidly as production capacity expands. The company relies on its own ships for liquefied chemical transportation services. Among them, domestic trade chemical transportation is the company's main business, and foreign trade chemical transportation has become a new engine for revenue growth. Domestic trade and foreign trade chemical transportation contributed 614 million yuan and 313 million yuan in revenue respectively in 2023, accounting for 49.65% and 25.27%. In the long run, the company's profit growth is highly correlated with the pace of production capacity investment. The compound growth rate of the company's net profit in 2019-2023 was 40.52%.
Domestic trade: Supply is short of demand and production is used to determine sales, leading dividends are growing steadily. Domestic trade chemical transportation is heavily supervised by the Ministry of Transport. There are only two forms of additional capacity: approval from the Ministry of Transport and the withdrawal of old ships from capacity replacement. Demand growth has led supply for a long time. As a leading enterprise, the company has obvious advantages in terms of approved additional capacity, capacity purchase and construction costs, and network scale effects. While the industry is in short supply, it has been able to achieve steady growth through production and marketing.
Foreign trade: Lay out foreign trade to enjoy cyclical dividends, and unleash potential to build a second curve. Foreign trade chemical shipping is currently in an upward boom range due to insufficient investment in its own supply and spillover from the bull market for refined oil products. In 2022, the company began to lay out the foreign trade market. With the rapid expansion of production capacity in the short to medium term, the company is expected to fully enjoy the upward cycle dividends. Looking at refineries moving eastward and adding domestic chemicals to overseas in the long run, there is plenty of room for growth in foreign trade business. In the future, with the full release of the volume and price growth potential of the foreign trade business, the company is expected to usher in a second growth curve.
Profit forecasting and investment advice. EPS is expected to be 1.14, 1.41, and 1.69 yuan/share in 24-26, respectively. Optimistic about the combination of domestic and foreign trade, the rapid expansion of production capacity brings growth opportunities to the company. The company was given a 24-year PE valuation of 15 times, corresponding to a reasonable value of 17.10 yuan/share, covered for the first time, and gave a “buy” rating.
Risk warning: risk of demand fluctuations, capacity expansion falling short of expectations, capacity regulation policy risks, ship safety operation risks, and large fluctuations in fuel prices.