The company disclosed its full-year results for 2023. The company's annual revenue reached 25.881 billion yuan, down 12.88% year on year; net profit to mother reached 4.837 billion yuan, down 4.92% year on year. Affected by the decline in dry bulk market and container transport market, the revenue of the dry bulk carrier fleet and container transport fleet decreased year on year. At the same time, the tanker transportation market rebounded, and the tanker fleet revenue increased significantly year on year. By business, the net profit of the oil transportation business was 3,083 billion yuan, a sharp increase of 249.18% over the same period last year. Net profit from the bulk transport/forwarding/roll-over business reached 899/8.73/266 million yuan respectively, or -58.21%/+206.43% over the same period last year. With dry dispersion and shipping dragging down the company's performance, the company's oil transportation business clearly contributed to the increase in performance in 2023. We are optimistic that the company's oil dispersion will improve in two cycles this year and maintain the company's holdings increase rating.
Key points to support ratings
Higher crude oil exports from the US Gulf and Russia, and higher oil freight rates contributed to the increase in performance. The company's annual tanker business achieved gross operating profit of 3.837 billion yuan and net profit of 3.083 billion yuan. Net profit increased by 249.18% compared with last year. The large year-on-year increase in performance was mainly due to a marked increase in the international crude oil transportation market, and global demand for tons and nautical miles of crude oil increased 6.8% due to a sharp increase in exports from the Atlantic region to Asia. According to Clarkson data, the average TCE value for TD3C routes from January to December 2023 was 35,459 US dollars/day, up 111% year on year, VLCC daily TCE increased 64% year on year, and Aframax increased 50% year on year. On the other hand, although some shipowners have placed large orders for Suezmax tankers and VLCC tankers since last year, the current share of global tanker handheld orders in the fleet is still low over the past 30 years. At the same time, the company's overall operating performance was higher than market performance. In 2023, the company's VLCC tankers operating in the spot market performed fairly evenly in the four quarters, with an immediate average daily TCE close to 50,000 US dollars.
The overall distribution boom was under pressure in 2023, and profitability declined. The company's distribution business achieved annual revenue of 7.108 billion yuan, a year-on-year decrease of 39.55%, net profit of 899 million yuan, a year-on-year decrease of 58.44%, a year-on-year decrease of 5.539 billion yuan, a year-on-year decrease of 22.16%, and net profit of 883 million yuan, a year-on-year decrease of 58.21%. In terms of bulk transportation, the dry bulk market was generally sluggish throughout the year. The average BDI was only 1,378 points, down 28% year on year. The company's fleet achieved an average daily TCE of about 17,000 US dollars, and the annual bulk cargo fleet achieved gross operating profit of 1,314 billion yuan and net profit of 899 million yuan. In terms of shipping, due to weakening demand compounded by new ship deliveries, the average spot freight rate for main routes has dropped significantly, falling below the same period in 2019. The average CCFI from January to December fell 66% year on year, and the profitability of the company's shipping fleet declined markedly.
Looking ahead to the future market, the oil transportation supply and demand pattern will continue to improve in 2024. The medium- to long-term oil freight rate center is expected to increase, and consolidated transportation is waiting for economic recovery to drive up demand. Over the past year, the prices of used ships and new shipbuilding assets have continued to rise steadily. In 2024, under multiple influencing factors such as the expansion of crude oil export trends in the Atlantic Ocean and the US Gulf to Asia, the lengthening of Russian and European shipping trade, and the Red Sea situation, we expect the growth in demand for crude oil tons and nautical miles in 2024 to continue the 2023 trend. Meanwhile, in 2024, due to ship deceleration due to emission reduction measures such as EEXI and CII, and the temporary departure of ships from the market due to energy-saving modifications (EST) and the installation of desulfurization towers, etc., the supply of fleet capacity will shrink. Exports in the US Gulf and Russia will rise in the medium to long term, and the oil freight rate center is expected to increase when orders for new ships are limited. With slow economic recovery and weak demand in 2023, LCL's performance was sluggish, and 2024 is expected to pick up with the global macroeconomic recovery.
valuations
The company's distribution business dragged down the company's performance in 2023. In 2024, we are optimistic that the company's oil dispersion cycle will contribute to the company's performance flexibility. We adjusted our previous profit forecast. The company's net profit forecast for 2024-2026 is 69.52/77.40/8.434 billion yuan, an increase of 43.7%/11.3%/9.0% year-on-year, and EPS is 0.85/0.95/1.04 yuan/share, corresponding to PE 10.3/9.2/8.5 times, maintaining the company's growth rating.
The main risks faced by ratings
Demand for oil transportation fell short of expectations, fuel prices rose sharply, and demand for bulk and consolidated transportation fell short of expectations.