Incident: China Reserve Co., Ltd. announced its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 67.27 billion yuan, a decrease of 12.4% over the same period of the previous year, achieved net profit attributable to shareholders of listed companies of 790 million yuan, an increase of 22.8% over the same period of the previous year, net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss of 320 million yuan, an increase of 1012.4% over the same period of the previous year, with earnings of 0.36 yuan per share. It plans to distribute a discovery dividend of 1 yuan (tax included) for every 10 shares. Revenue for the first quarter of 2024 was approximately RMB 13.93 billion, down 6.1% year on year; net profit attributable to shareholders of listed companies was approximately RMB 270 million, up 210.9% year on year.
The warehousing business is the core and foundation business of China Storage. The company's warehousing resources are stable. Domestic priority is given to the five major urban agglomerations: Beijing-Tianjin Wing, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing Shuangcheng, and the middle reaches of the Yangtze River. It has a land area of nearly 6 million square meters and an annual throughput capacity of 60 million tons. In recent years, some of the company's storage land or special railway lines and other resources are located in the core area of the city and have been stored by the government due to the needs of urban development plans, which continue to bring high demolition benefits to the company. In 2023, the company's asset disposal revenue was 670 million yuan, and the scale remained stable. Asset disposal revenue contributed about 61% of total profit, which is the main component of the company's profit.
Continue to transform and develop into integrated supply chain services. The company focuses on developing a circular supply chain around the steel, non-ferrous, rubber, plastic and coal industries, and building integrated supply chain service platforms such as China Steel Storage Super and China Storage Easy Nonferrous Metals as the engine, and the ability to control goods as a guarantee to achieve platform-based business development. In 2023, the company's commodity supply chain service revenue was 28.4 billion yuan, down 31% year on year, gross margin increased 0.25pp year on year, and the logistics and trade revenue ratio rose to 1.36. The transformation of the trade business to integrated supply chain services achieved significant results, and the quality of operation improved.
The scale of the smart transportation business has been further expanded. The company uses the China Storage Smart Transport Platform as the core to build a trunk line transportation network covering the whole country, scientifically dispatch logistics resources through large-scale and organizational means, and effectively improve the overall logistics efficiency of society. In 2023, China Storage Smart Transport achieved revenue of 36.14 billion yuan, up 9.2% year on year; 8.68 million orders, up 20.2% year on year; transaction tonnage of 420 million tons, up 36.2% year on year; total profit of 110 million yuan, breaking the 100 million yuan mark, up 76.5% year on year.
Profit forecast and investment advice: We expect the company's net profit to be 9.5 billion yuan, 10.3 billion yuan and 1.15 billion yuan for 2024-2026, respectively, and 6.55, 6.9, and 7.28 yuan for BPS, respectively. Considering the continuous optimization of the company's business in the future and expected to enjoy higher profits, we gave the company 1 times PB in 2024, corresponding to the target price of 6.55 yuan, covered for the first time, and gave it a “buy” rating.
Risk warning: Risks such as poor transformation of trade business, slowing growth of China Reserve's smart transportation business, and lower than expected land transfers.