In 2023, we achieved revenue of 1,261 billion yuan, up 45.3% year on year; net profit to mother was 182 million yuan, up 7.68% year on year; of these, Q4 achieved revenue of 384 million yuan, up 51.5% year on year; net profit to mother was 66 million yuan, up 90.5% year on year. 2024Q1 achieved revenue of 378 million yuan, an increase of 29.3% year on year, and net profit to mother was 47 million yuan, an increase of 4.1% year on year.

The overall sentiment in the chemical transportation market weakened in '23, but recovered from the bottom in Q4. In 23, the domestic trade chemical market was affected by the combination of high upstream energy prices and weak downstream demand. The overall freight rate in the first three quarters showed a high and then low trend (21% decline). As a result, the company switched part of its domestic trade capacity to foreign trade, but along with the overall recovery of the chemical industry chain, domestic trade chemical freight rates showed a bottom recovery trend in Q4. Taking Dalian-Dongguan as an example (3000t), freight rates recovered about 10% from the bottom. Freight rates remained essentially balanced in Q1 in '24.

In '23, chemical transportation revenue was 1.14 billion yuan, an increase of 52.8% over the previous year. The gross profit of chemical transportation reached 375 million yuan, an increase of 27% over the previous year, and the gross margin reached 32.8%, a decrease of about 6.6 pcts over the previous month (the gross margin of foreign trade chemical transportation was about 22%, which dragged down the overall gross margin).

In terms of refined oil products, domestic trade and transportation boom improved in '23, and gross margin rose markedly. Revenue from the transportation of refined oil products in '23 was 115 million yuan, an increase of 33% over the previous year. The total shipping volume of the company's domestic refined oil products reached 590,000 tons in '23, an increase of 7.7% over the previous year. The calculated freight rate for a single ton was 195.3 yuan/ton, an increase of about 22% over the previous year. In 23, the domestic refined oil product transportation industry boomed and operated steadily. The gross profit reached 121 million yuan, an increase of 13 million yuan over the previous year. The gross margin was 18.5%, an increase of about 10 pcts over the previous year.

Due to the increase in the size of the fleet and the expansion of financing, the company's three fees increased significantly in '23. Among them, management expenses increased by about 11 million yuan over the same period last year, and financial expenses increased by about 39 million yuan. The company's net profit margin was 15.8%, a year-on-year decrease of 4.1pcts.

24Q1 The company's chemical business continued to improve, and both revenue and gross profit increased by more than 25%. The company's gross profit reached 128 million yuan in the first quarter, up 26% year on year, and gross margin was 33.8%, up about 2 pcts month-on-month and 1.3 pcts year-on-year; the expansion of the company's fleet increased the efficiency of scale. Expenses increased significantly year-on-year. Financial expenses increased by 0.1 billion yuan, R&D increased by about 4 million yuan; 24Q1 net interest rate was 16.4%, up about 0.3 pcts year on year, and decreased by about 2.8 pcts month on month. There was an increase in Q1 ship capacity, but revenue confirmation fell short of expectations. We are optimistic about the release of Q2 results.

Investment suggestions: 1) The bottom of the industry's freight rate has been repaired, and the supply side is still facing strong supervision. Leading companies have obvious expansion advantages, which is expected to form a virtuous cycle of increasing market share; 2) If the acquisition goes well, the company is expected to achieve a leap from Dragon 2 to Dragon 1; 3) The company will continue to explore the foreign trade market and emerging categories of transportation in the future. Although the Q1 performance fell short of expectations, I am optimistic that the Q2 volume scale will continue to increase. The 24/25/26 performance is expected to reach 2.4/29/340 million yuan. The corresponding 24-year performance PE is only 12.2x, maintaining the “Highly Recommended” rating.

Risk warning: Acquisition matters fall short of expectations, sluggish downstream demand, major safety incidents, etc.