Xingtong Co., Ltd. announced its 2024 quarterly report, and its performance improved from month to month. In the first quarter of 2024, Xingtong Co., Ltd. achieved operating income of 386 million yuan, a year-on-year increase of 13.64%, net profit to mother of 79 million yuan, an increase of 0.87% over the previous year, and net profit after deducting non-return to mother of 77 million yuan, an increase of 0.91% over the previous year. It is worth noting that since 2023Q4, the company's performance has continued to recover, and all 2024Q1 indicators have achieved month-on-month growth.
Xingtong's domestic trade chemical transportation capacity continues to expand, and its leading position is stable. In terms of domestic trade chemicals, in 2023, the company added 7 new domestic trade ships (including 6 additional ships acquired by China Shipbuilding Wanbang), further consolidating its leading position in the industry. By the end of 2023, the company had 27 domestic trade ships with a capacity of 287,800 DWT, including 20 coastal interprovincial chemical ships (excluding the provincial ship “Xingtong 7”). The capacity of domestic trade shipping capacity continued to increase, with a market share of 14.2%.
From zero to one, the foreign trade business is expected to become Xingtong's second growth point. 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 “XTDOLPHIN”, “XTHONESTY”, “XTPROGRESS”, and “XTPEACE”, 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 (“XTBRIGHTNESS”, “XTPROSPERITY”, and “XTEXPLORATION”), with a capacity of 38,000 DWT.
Domestic trade chemicals and water transportation have high barriers, and a recovery in demand is expected to quickly drive a recovery in prosperity. Domestic trade chemical transportation is strongly supervised by the Ministry of Transport. There are only two forms of additional capacity approved by the Ministry of Transport and the withdrawal of old ships from capacity replacement. Demand growth led supply for a long time, but the weak performance of domestic petrochemical operating rates in 2023 caused freight rates to fluctuate. As domestic demand recovers, the increase in the petrochemical operating rate is expected to quickly drive up freight rates. As a leading enterprise, Xingtong has obvious advantages in terms of being approved for additional capacity, capacity purchase and construction costs, and network scale effects. It has achieved excellent results of No. 1 in capacity reviews for many years. The Matthew effect is expected to gradually be reflected as the boom increases.
Risk warning: domestic chemical operating rate continues to be sluggish, industry supply approval liberalization, safety accidents, etc.
Investment advice:
Considering that the operating rate of the domestic chemical industry chain is still low, and the industry's transit distance has declined due to the improved layout of refining and chemical projects, the 2024-2025 performance forecast was lowered from 37/4.7 million yuan to 3.2 billion yuan, and the 2026 performance forecast was introduced. The corresponding PE valuation was 13.5/10.9/9.4X, maintaining the “buy” rating.