Description of the event

2024Q1, the company's revenue was 24.29 billion yuan, up 8.1% year on year; net profit to mother was 80 billion yuan, down 16.1% year on year; net profit after deducting non-return to mother was 730 million yuan, down 14.8% year on year.

Incident comments

The agency business volume is growing steadily, and air and sea freight prices are showing strong performance. 2024Q1, the company's shipping agent/air freight agent/railway agent/shipping agent/depot station business volume was +21.2%/+23.2%/+36.8%/+2.5%/+11.4%. Among them, shipping volume grew rapidly in the first quarter, geopolitical fluctuations affected supply, and shipping prices rose, driving revenue growth. At the same time, strong demand for cross-border e-commerce is driving rapid growth in air traffic, and air freight rates are showing resilience.

Professional logistics volumes bucked the trend, and insufficient demand weighed on gross profit. 2024Q1, the company's contract logistics/project logistics/chemical logistics/cold chain logistics volume was +26.4%/+9.6%/+11.1%/+22.4% year-on-year. Effective domestic demand was insufficient in the first quarter, and price reduction pressure was transmitted to logistics companies, compounding the low utilization rate of warehousing and suppressing the gross profit margin of professional logistics. However, the company actively developed supplies, and the volume of goods in various professional logistics businesses bucked the trend. In the end, the company's gross profit fell 18.3% year over year to 1.25 billion yuan.

Government subsidies grew slowly, and return on investment remained flat year over year. 2024Q1, the company's other revenue increased 4.6% year on year to 480 million yuan, mainly because government subsidies increased 4.6% year on year, which was lower than the volume growth rate, or due to adjustments to the China-Europe train and cargo charter subsidy policies, which required delays in confirmation. The company's net investment income was 480 million yuan, which was basically the same as the previous year. The Pudong TAC freight rate fell by about 13% year on year in the first quarter. Sinotrans DHL's cargo volume is expected to grow steadily, or effectively hedge against the reduction in emergency surcharges. During 2024Q1, the company's expenses fell by 90 million yuan to 1.06 billion yuan year on year, and various expenses were well controlled. In the end, the company's net profit to mother fell 16.1% year over year to 80 million yuan.

Cross-border transportation is booming, and dividend rates are very cost-effective. Export orders exceeded expectations, and the US real estate cycle and inventory cycle resonated upward, which is expected to drive up shipping agent cargo volume. At the same time, cross-border e-commerce continues to be booming, compounded by supply-side disturbances. The air freight price center is expected to rise, the air freight channel business is expected to increase profits, and DHL's profits are elastic. The company's dividend ratio in 2023 was 50.4%, corresponding to the 2024 results dividend rate of not less than 5.0%. The dividend ratio is very attractive. The company's net profit for 2024/2025/2026 is estimated to be 45.3/47.2/5.04 billion yuan, corresponding PE is 9.6/9.2/8.6X, maintaining a “buy” rating.

Risk warning

1. Risk of policy changes;

2. Low expectations for cross-border e-commerce volume growth;

3. Demand for general air freight falls short of expectations.