Key points of investment

Incident: The company released its 2024 quarterly report. In Q1, the company achieved net profit of 803 million yuan. 24Q1 achieved operating income of 24.287 billion yuan, +8.09% year on year, realized net profit to mother 803 million yuan, -16.05% year on year, and realized net profit without return to mother 731 million yuan, -14.79% year on year.

Financial situation: Affected by rising costs, gross margin decreased by 1.70 pct1) Gross margin situation: The company's operating costs in the first quarter were about 23.036 billion yuan, +10.06% year over year. Affected by the increase in operating costs, the Q1 company's gross profit was about 1,251 billion yuan, -18.72% year over year, gross margin about 5.15%, down about 1.70 pct from the 23Q1 period. 2) Status of government subsidies: The Q1 company received about 478 million yuan in government subsidies related to revenue, mainly government subsidies related to the group's daily operations, +4.56% compared with 457 million yuan in 2023Q1. 3) Investment income: Q1 Company's investment income was about 478 million yuan, slightly -0.94% year-on-year.

Operating conditions: contract logistics +26.4% YoY, air transport channel business +23.2% 1) Professional logistics: contract logistics, project logistics, chemical logistics, cold chain logistics were about 1176.5, 136.1, 77.8 and 262,000 tons, respectively, +26.4%, +9.6%, +11.1% and +22.4% year-on-year respectively. 2) Agency and related business: shipping agent about 3.26 million TEU, +21.2% year on year; air freight channel business about 228,000 tons, +23.2% year over year, including about 55,000 tons of cross-border e-commerce logistics, +34.1% year on year; railway agency about 130,000 TEU, +36.8% year over year. 3) E-commerce business: Cross-border e-commerce logistics was about 79.11 million tickets, -16.8% year-on-year, and logistics e-commerce platforms were about 521,000 TEUs, +9.2% year-on-year.

Freight rate situation: CCFI +18.8% YoY in the first quarter, BAI80 -13.4% 1) Shipping conditions: The CCFI index averaged 1290 points in the first quarter, +18.8% YoY, +51.2% YoY over 23Q4. The SCFI index averaged 2010 points, +107.5% YoY, +84.6% YoY over 23Q4. 2) Air transport situation: The average BAI80 of the Shanghai Pudong outbound air cargo index in the first quarter was 3,935 points, -13.4% year-on-year, and -19.8% month-on-month in 23Q4.

Outlook: Brand overseas helps the company's business volume grow steadily, optimizing the business structure to steadily improve profitability. As a leading integrated logistics enterprise in China, the high growth of China's cross-border e-commerce platforms and the acceleration of brand going overseas have brought the company a period of development opportunities. The business volume is expected to grow steadily. As the company continues to optimize product channel construction and extend the service chain, the gross profit of a single box will continue to increase or drive a steady improvement in the company's profitability.

Profit forecasts and investment advice

After more than 70 years of deep cultivation in the field of international freight forwarding and integrated logistics, Sinotrans has formed a strong professional logistics solution capability, and has a strong position in the industry and a good brand image. In 2024, as shipping and air freight prices return to the normalized range, the company's revenue is expected to be 1180, 1302 and 141.2 billion yuan respectively, and net profit to mother is 44.59, 48.65 billion yuan, and 5,091 billion yuan, respectively. 10.22, 9.37, and 8.95 times, maintaining the “gain” rating.

Risk warning

Risks that global trade growth falls short of expectations; risk of fluctuating sea and air freight rates, etc.