Brief performance review

On April 26, 2024, Xingtong Co., Ltd. released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved operating income of 386 million yuan, up 13.6% year on year; realized net profit of 77 million yuan, up 0.57% year on year.

Management analysis

The scale of capacity was expanded, and revenue increased year-on-year. 2024Q1's revenue increased 13.6% year on year, mainly due to increased domestic ship revenue and development of international transportation business. The company's domestic trade shipping capacity continued to grow. In 2023, the company continued to carry out capacity construction and mergers and acquisitions. During the year, the company added 7 domestic trade ships, with a capacity of 48,000 DWT, and the annual capacity increased by 20%.

By the end of 2023, the company had 27 domestic trade ships with a capacity of 287,800 DWT.

At the same time, the company vigorously expanded its foreign trade business. In 2023, 4 foreign trade chemical tankers were put into operation, increasing capacity by 70,400 dwt, and the annual foreign trade capacity increased by 262.7%. Due to a significant increase in the company's capacity in 2023, the company's Q1 revenue increased year-on-year.

Q1 Gross margin decreased year over year, and expense ratio decreased year over year. 2024Q1 achieved a gross profit margin of 32.3%, a year-on-year decrease of 4.07pct. The main reason may be that the chemical industry is less prosperous than the same period last year, and freight rates declined year on year. In terms of cost ratio, the 2024Q1 company's cost rate for the period was 6.24%, down 0.90pct year on year, of which sales expenses rate was 0.8%, up 0.07pct year on year; management expenses ratio was 3.69%, down 0.88pct year on year; R&D expenses rate was 0.08%, down 0.02pct year on year; and financial expense ratio was 1.67%, down 0.07 pct year on year. Due to the year-on-year decline in gross margin, 2024Q1's net profit margin was 20.1%, a year-on-year decrease of 2.6 pct.

Stock repurchases continue to advance, and subsidiaries invest in the construction of stainless steel ships. On October 9, 2023, the company announced the repurchase of the company's A shares through centralized bidding, with a repurchase amount of not less than 50 million yuan and no more than 80 million yuan. As of April 26, 2024, the company has repurchased 4.07 million A shares, accounting for 1.45% of the total share capital, and the cumulative repurchase amount reached 63.696 million yuan. On April 8, 2024, the company announced that its subsidiary would invest in the construction of 2 25,900 DWT methanol dual-fuel powered stainless steel chemical tankers, each costing no more than 318 million people. At the end of 2023, the company's foreign trade ship capacity was 97,200 DWT. This investment can increase foreign trade shipping capacity by 53%. Ship construction further optimizes the international fleet structure and enhances the company's competitiveness in the international market.

Profit Forecasts, Valuations, and Ratings

Considering industry sentiment, the company's 2024-2025 net profit forecast was lowered to 340 million yuan and 4.4 billion yuan, and an additional 2026 net profit forecast of 520 million yuan was added. Maintain a “buy” rating.

Risk warning

Risk of market demand falling short of expectations, risk of capacity regulation policies, risk of safe operation of ships, risk of obtaining additional capacity, risk of fluctuating fuel prices, risk of lifting the ban on restricted stocks.