The company announced its results for the first quarter of 2024:2024Q1 achieved operating income of 390 million yuan, +14% year over year, gross profit of 120 million yuan, +1% year over year, gross profit margin of 32%, a year-on-year decrease of 4 percentage points. Net profit to mother was 77 million yuan, the highest in history, +0.6% year over year, net interest rate to mother was 20%, down 3 percentage points year on year; net profit without return to mother was 77 million yuan, +0.9% year over year.

2024Q1's fleet size continues to grow: According to the company's official account, 1) In terms of new ship operations, in early February 2024, two foreign trade chemical tankers, Xingtong Kaiming and Xingtong Kaisheng, were officially put into operation. The DWT was 12000 and 13,000, respectively. They were both dual-phase stainless steel chemical tankers. Among them, Xingtong Kaiming's first flight operated a route from Korea to China; Xingtong Kaiseng carried acetic acid products from Celanis, a top 500 US company, and carried a route from China to India. 2) In terms of new ship construction, construction of Xingtong Wanbang's first 13,000-ton dual-phase stainless steel chemical tanker began at the end of March 2024, and is scheduled to be delivered in early 2025; in early April 2024, the construction contract for Xingtong Wanbang's second 13,000-ton dual-phase stainless steel chemical tanker was signed; in late April 2024, the company's first 25,900 DWT methanol dual-fuel chemical tanker “Xingtong Sea Lion” successfully started construction and is expected to be launched in March 2025.

The company's capacity continues to increase, and the domestic trade chemical tanker market share is steadily increasing: 1) In 2023, the company added 7 new domestic trade ships (including 6 additional ships acquired by China Shipbuilding Wanbang), with a capacity of 48,000 dwt, further consolidating its leading position in the industry. By the end of 2023, the company had 27 domestic trade vessels with a capacity of 287,800 DWT, including a total of 20 coastal inter-provincial chemical vessels (excluding the provincial ship “Xingtong 7”), with a capacity of 212,200 DWT. Domestic trade's share of shipping capacity continues to increase. The company's liquid chemical transportation capacity accounted for about 12% of the total market capacity in 2022, 13.85% for 2023H1, and 14.22% in 2023. The market share has steadily increased, and the core competitiveness has continued to be strengthened. 2) Increase in the scale of LPG transportation. In 2023, the LPG ship “Xingtong 359” (5200m3) was successfully put into operation. By the end of 2023, a total of 3 LPG ships had a total of 11,500 DWT. 3) The international transportation layout is progressing rapidly. By the end of 2023, the company operated 6 foreign trade vessels, with a capacity of 97,200 DWT, to serve customers around the world in a parallel model of charter and term lease. In 2023, a total of 4 chemical ships, the “XT DOLPHIN”, “XT HONESTY”, “XT PROGRESS”, and “XT PEACE”, were successfully put into operation, with a capacity of 70,400 DWT. In 2024, the company plans to put into operation 3 stainless steel chemical tankers (“XT BRIGHTNESS”, “XT PROSPERITY”, and “XT EXPLORATION”), with a capacity of 38,000 DWT.

Investment advice: 1) Profit forecast: We keep the company's 2024-2026 net profit forecast unchanged at 3.1, 380 million yuan, and 450 million yuan, respectively, and the corresponding PE is 13, 11, and 9 times, respectively. 2) Target price: We believe that the business model of chemical tanker companies is clear. As an industry leader, the company is expected to achieve growth beyond the industry by continuously increasing its market share. Considering supply-side controllability and the company's future performance growth rate (we expect a compound net profit growth rate of 21% in 24-26), the company is given 20 times PE in 2024, corresponding to a one-year target market value of 6.3 billion yuan. The company has disclosed a plan to issue A-shares to specific targets (no more than 1,124 billion yuan). After considering this part of the impact (i.e., market value of 5.417 billion yuan), it is expected that there will be 16% space compared to the current target price of 17.73 yuan, maintaining the “recommended” rating.

Risk warning: The risk of macroeconomic fluctuations and capacity expansion falls short of expectations.