Characteristics of the Xingtong Co., Ltd. fleet: leading in scale, new and high-end. 1) The company is a leading liquid chemical shipping company in China. It is mainly engaged in international and domestic water transportation of liquid dangerous goods in bulk, including marine transportation of liquid chemicals, refined oil products, and liquefied petroleum gas (LPG). In 2023, the company achieved operating income of 1.24 billion yuan, a year-on-year increase of 58%; gross profit of 410 million, a year-on-year increase of 26%, gross profit margin of 33%; net profit of 250 million yuan, an increase of 22% year-on-year, and a net profit margin of 20%. 2) The capacity of the company's fleet continued to increase, and the market share of domestic trade bulk liquid chemical shipping capacity increased rapidly, accounting for 14.2% of total market capacity from 4.61% at the end of 2018 to 14.2% in 2023. As of April 2024, the company operated 35 ships with a capacity of 410,000 dwt. Looking at the capacity structure, the subregion: 28 domestic trade ships (accounting for 75% of capacity, same as below), 7 foreign trade ships (accounting for 25% of capacity); by ship type: 15 chemical tankers, 14 oil tankers, 3 refined oil tankers, and 3 liquefied gas carriers, accounting for 53%, 30%, 14%, and 3% respectively. 3) The company's vessels are new and high-end: The average age of the company's fleet is 8.55 years, of which domestic and foreign trade ships are 9.62 years and 4.28 years respectively; by ship type, chemical tankers and liquefied gas carriers are 5.42 and 8.5 years, respectively, and oil and oil tankers are 11.2 years and 11.83 years respectively. According to the company's 2023 annual report, the proportion of old international chemical tankers is currently high, and the supply of newer green high-end chemical tankers is tight, while the company's foreign trade vessels are relatively old. In particular, stainless steel chemical tankers have strong market competitiveness.
Looking at company value from a replacement cost perspective
1. Fleet replacement value estimation: We mainly refer to the new ship price and 5-year used ship price of the corresponding ship type (some ship types refer to 10/15 used ship price), taking into account the factors of tonnage and ship age. The specific calculation method is as follows: 1) Calculate the price per unit of the new ship A, the price of a 5-year used ship unit weight ton B, (A-B) /5 obtains the price difference between the new and old ship in annualized unit DWT; 2) Refer to Xingtong load ton C and ship age D to calculate the DA-age of the new single-load heavy ton ship *Price difference X between old and new single DWT ships, getting the replacement value of the company's ships . According to the above method, it was calculated that the replacement value of the company's fleet was about 5.63 billion yuan, of which the replacement value of domestic trade and foreign trade ships was 4.29 billion yuan and 1.34 billion yuan respectively, accounting for 76% and 24% respectively; by ship type, the replacement value of chemical tankers, oil tankers, liquefied gas tankers, and tankers was 3.16 billion yuan, 1.91 billion yuan, and 360 million yuan, respectively, accounting for 56%, 34%, 4%, and 6%.
2. Company replacement value calculation: On the basis of the replacement value of the fleet, fixed assets are deducted, and the company's replacement value is 5.37 billion yuan plus net assets. The company's current market value (2024/5/22) is 4.4 billion yuan, and the discount rate is 21%. It is still important to note that considering that the new scale of domestic coastal chemical tankers needs to be approved by the Ministry of Transport and has license value, the actual value of the company's fleet may still have room for a premium. The company has won first place in approval for new capacity in recent years, and the ship growth rate is far higher than that of the industry.
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 14, 12, and 10 times, respectively. 2) Target price: We estimate the company's value of 5.37 billion yuan from the perspective of replacement costs. Considering the license value of the company's ship assets, we may or should still receive a premium on this basis. At the same time, 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 (we expect a compound net profit growth rate of 21% in 24-26), assets can increase returns. Therefore, we use the replacement value of 5.37 billion as the target market value, corresponding to the stock price of 19.18 yuan. We expect 21% of the space compared to the current price, and maintain the “recommended” rating.
Risk warning: The risk of macroeconomic fluctuations and capacity expansion falls short of expectations.