Incidents:

On April 19, 2024, Jiacheng International released the 2023 Annual Report and a pre-increase in results for the first quarter of 2024:

In 2023, the company achieved operating income of 1,225 million yuan, a year-on-year decrease of 4.10%, completed net profit of 164 million yuan, a year-on-year decrease of 3.96%, and completed deducted net profit of 157 million yuan, a year-on-year decrease of 4.43%.

Among them, the company achieved operating income of 258 million yuan in 2023Q4, a year-on-year decrease of 19.29%, a year-on-year decrease of 24.21%; completed net profit attributable to mother of 0.04 billion yuan, compared with the same period last year of 2008; net profit deducted from non-return to mother of -0.04 billion yuan, compared to 190 million yuan in the same period last year.

In 2024Q1, the company expects to complete net profit of 0.65 to 73 billion yuan, an increase of 50%-70% over the previous year; completed deducted net profit of 0.60-68 million yuan, an increase of 50.75%-70.75% over the previous year.

Investment highlights:

Reversing the impact of credit impairment losses, the 2023 performance achieved steady growth in 2023Q4. The company achieved operating income of 258 million yuan, a year-on-year decrease of 19.29% and a year-on-month decrease of 24.21%, mainly affected by the boom in the home appliance industry. The company's traditional e-commerce festival distribution business in the fourth quarter fell short of expectations. After Jiacheng International Port was fully consolidated and put into use, the company's financial expenses were greatly increased due to the need for interest on convertible bonds. The financial expenses ratio for the full year of 2023 reached 1.06%, an increase of 1.13 pcts over the previous year. At the same time, the company accrued credit impairment losses of 44 million yuan in 2023, an increase of 28 million yuan over the previous year. Ultimately, the company completed net profit of 164 million yuan to mother in 2023, a decrease of 3.96% over the previous year. If the impact of credit impairment losses is not taken into account, the company completed net profit of 192 million yuan in 2023, an increase of 12.33% over the previous year.

The rapid elimination of new production capacity contributes to the increase. We are optimistic about the company's growth attributes, Jiacheng International Card's cross-border storage resources. It benefits from cross-border e-commerce dividends, and the rapid removal of new production capacity contributes to the company's performance growth. Due to the full operation of Jiacheng International Port and the company's addition of new export logistics services for world-renowned large-scale cross-border e-commerce platform companies, the company expects to complete net profit of 0.65 to 73 billion yuan in 2024Q1, an increase of 50%-70% over the previous year. Furthermore, by the end of 2023, the Jiacheng International (Hainan) Multi-functional Digital Intelligence Logistics Center (estimated total area of 213,300 square meters) has completed capping work and is about to be completed and put into use. It will mainly be used for duty-free logistics services, and the company's warehousing production capacity continues to expand.

The company has provided nearly one million square meters of warehousing services to the world's top four platform companies. In the future, it will continue to provide modern warehousing services to cross-border e-commerce platform companies on a large scale, and extend it to air trunk line transportation services and customs services, and is optimistic about the company's growth characteristics.

Profit forecast and investment rating Based on the latest annual report data, we introduced the 2026 profit forecast. Jiacheng International's revenue for 2024-2026 is estimated to be 1,530 billion yuan, 1,757 billion yuan and 1,960 million yuan respectively, and net profit to mother is 281 million yuan, 325 million yuan and 375 million yuan respectively. The corresponding PE for 2024-2026 is 12.87 times, 11.12 times and 9.64 times, respectively.

The cross-border e-commerce logistics boom is rising, and the rapid removal of new production capacity contributes to growth. The 2024 performance is expected to usher in significant growth, maintaining the “increase” rating.

Risks indicate risks caused by unstable international trade situations; cross-border e-commerce falling short of expectations; cross-border e-commerce overseas policy risks; risks of falling short of expectations in warehouse operations; risk of warehouse capacity utilization falling short of expectations; risk of high customer concentration and a single sales brand; risk of fluctuating sentiment in the home appliance industry; and information system risks.