Incidents:
On June 12, 2024, the company issued an announcement: it intends to split its subsidiaries Sinotrans Transportation and China Merchants RoRo, restructure and go public. After this spin-off is completed, the company's shareholding structure will not change. Antong Holdings will become the controlling shareholder of Sinotrans Shipping and China Merchants RoRo; China Merchants Shipping is expected to become the controlling shareholder of Antong Holdings, and China Merchants Group is expected to become the actual controller of Antong Holdings. After this transaction, the company will have dual capital operation platforms for “irregular shipping (oil and gas+dry bulk transportation)” and “liner (container+car roll-over)”.
Focus on the main oil and gas industry and seize upward cyclical opportunities
Demand in the oil transportation and dry dispersion industry is more elastic when the supply of capacity is low in 24-25 years. From January to April 2024, China's imports of crude oil, iron ore and coal were 180, 4.1, and 160 million tons respectively, +1.8%, +7.2%, and +13.1% year-on-year respectively. In May 2024, the global composite and manufacturing PMI were 53.7 and 50.9, +1.3 and 0.6 pcts month-on-month, respectively. Demand is expected to continue to rise in the second half of the year. In the first quarter of 2024, the company's tanker and dry dispersion sectors achieved net profit of 870 million yuan and 357 million yuan respectively, +13.9% and +275.8% year-on-year, and +18.3% month-on-month respectively, verifying that profit elasticity in the upward cycle was excellent.
Build a liner operation platform to give full play to the synergy effect
The company has built a “liner (container+car roll-over)” capital operation platform to help the overall business development.
According to Alphaliner data, as of 2024.6.12, the total capacity of the Antong Holdings+Sinotrans container fleet exceeded 130,000 TEU, ranking in the top 20 in the world. The two are expected to form a differentiated competitive advantage by building an integrated domestic and foreign trade operation system for container transportation. Ro-Ro transportation benefits from rising demand for Chinese automobile exports, and its performance is expected to improve steadily. In the first quarter of 2024, the company's container and automobile roll-over sectors achieved net profit of 100 million yuan and 0.8 billion yuan respectively, which was -51.9% and +116.2% year-on-year respectively.
Profit Forecasts, Valuations, and Ratings
Considering that Sinotrans Shipping's shipping business, China Merchants Ro-Ro's Ro-Ro business, and Antong Holdings are expected to collaborate and complement each other, exert scale effects, and enhance the scale of assets and sustainable development capabilities. In the long run, the company's overall profit level and continued profitability are expected to improve. We expect 2024-2026 revenue of 296.9, 308.8 billion yuan, 32.08 billion yuan, +14.7%, +4.0%, and 3-year CAGR of 7.4%; net profit to mother of 80.2, 84.1, 8.21 billion yuan, +65.8%, -2.3%, 3-year CAGR 19.3%; EPS of 0.98, 1.03, 1.01 yuan/share; corresponding PE is 9.6, 9.2, 9.4 times. The target price of 10.78 yuan was reiterated, and the rating was raised to “buy”.
Risk warning: risk of major changes in the plan; business integration falling short of expectations; global economic recovery falling short of expectations