Jiayou International released its 2024 quarterly report, with excellent performance. In 2024Q1, Jiayou International achieved operating income of 2.0 billion yuan, +26.0% year on year, and realized net profit of 310 million yuan to mother, +51.9% year on year, and +8.1% month on month. Throughout 2023, Jiayou International achieved operating income of 7.0 billion yuan, +44.9% year-on-year, and realized net profit of 1.04 billion yuan, or +52.6% year-on-year.
China's imports of coking coal to Mongolia have increased dramatically, and the Jiayou International coal supply chain business has fully benefited. According to customs data, China's imports of coking coal from Mongolia increased 110.6% year on year to 53.93 million tons in 2023, accounting for 12.8 pct to 52.9% year on year. Among them, Ganqimaodu Port imported 36.51 million tons of coal, up 102.4% year on year. In Q1 2024, Ganqimaodu Port imported 9.46 million tons of coal, which continued to increase by 23.1% year-on-year under a high base. The rapid expansion of the scale of coal trade between China and Mongolia supports the company's supply chain business volume. In 2023, the company's main coking coal supply chain trade service revenue increased sharply by 145.9% year on year to 4.43 billion yuan, and gross profit increased 66.4% year on year to 520 million yuan. We expect that as the scale of coal trade in the Central League continues to expand steadily in 2024, the Jiayou coal supply chain business is expected to maintain rapid growth.
Deeply tied to the major customer Mongolia Mining Company (MMC), the core competitiveness of the China-Mongolia business continues to improve. On February 22, the company announced that it plans to use its own capital to acquire 20% of the shares of the coal company KEX from the wholly-owned subsidiary of its major customer MMC and sign a long-term coal cooperation agreement with MMC, agreeing that the company will purchase a total of 17.5 million tons of coal within 10 years. On the one hand, it is expected to provide the company with considerable investment returns. On the other hand, the deep binding with MMC is expected to continue to strengthen the core competitiveness of the company's China-Mongolia business.
The African business is on the right track, and the Central Asian market continues to lay out. We are optimistic that the company will continue to expand its business layout and replicate its business model. The company has achieved good results with the logistics model of the Democratic Republic of the Congo (DRC), Zambia and Angola as the core. In Africa, the company has gradually formed a scale. It has successively invested in the DRC (DRC) Diloro project and the Sakania project in Zambia to open up transportation channels between Sakania Port and Ndola, while also acquiring local African cross-border transportation companies to enhance trunk line transportation capacity. The early Casa project has been fully put into operation, and will use the Sakania Port bonded depot as a node to match fleet resources to create cross-border logistics products and increase market share in Africa. In the Central Asian market, the company announced on January 16 that it signed a memorandum of cooperation with the Uzbek State Railway Company to lay the foundation for cooperation on subsequent projects. We believe that the company's “combination of weight and weight” asset layout model and the business model that locks in logistics needs through trade and infrastructure are highly replicable, and we are optimistic that the company will continue to increase its performance growth points through cross-regional expansion.
Risk warning: geopolitical risks; demand for coking coal in China falls far short of expectations; safety incidents, etc.
Investment advice:
Looking ahead to 2024, the scale of coal trade between China and Mongolia is expected to expand further. Jiayou's African highway project is also on track. The African market is expanding smoothly, and as the investment project progresses, Jiayou's performance is expected to grow rapidly. Considering that the scale of coal trade between China and Mongolia has increased beyond our expectations and that the production process of the CASA project has exceeded our previous expectations, Jiayou International's 2024-2025 net profit forecast was raised from 10.4/1.35 billion yuan to 13.1/1.53 billion yuan, and introduced a profit forecast of 1.67 billion yuan for 2026, corresponding to the PE valuation of 14.2/12.2/11.1 times, maintaining a “buy” rating.