1H24 earnings forecast 48-58% year-on-year growth
The company announced 1H24 performance forecast: 1H24's net profit is expected to be 0.746-0.796 billion yuan, up 48%-58% year on year, and 0.77 billion yuan, +53% year on year; 2Q24's net profit is expected to be 0.438-0.489 billion yuan, up 45%-62% year on year, and center is 0.46 billion yuan, up 54% year on year. We think the main reasons for exceeding expectations are:
1) Expansion of Mongolian coal business; 2) Cross-border logistics development in Africa kicked off after integrating the BHL fleet.
Key points of interest
Mongolian coal supply chain business continues to grow rapidly. According to the Bayannaoer Daily, as of June 24, the total import and export volume of goods at Ganqimaodu Port on the Sino-Mongolian border during the year was 20.0563 million tons, an increase of 28.26% over the previous year. The completed cargo volume exceeded 20 million tons 39 days earlier than last year. According to Mongolian coal network data, the average daily traffic volume of 1H24 Ganqimaodu Port increased by 21.7% year-on-year. We believe that the continuous record high import and export volume at Ganqimaodu Port has supported the company's Mongolian coal supply chain business and Ganqimaodu warehousing business to achieve a year-on-year high increase; at the same time, the signing of the company's coal development equity cooperation and long-term coal cooperation agreement with MMC further strengthens the company's core competitiveness in the China-Mongolia cross-border logistics market and enhances profit margins.
Africa's layout is perfect, and the Congolese gold cross-border logistics business is growing steadily. According to data from the General Administration of Customs, from January to May this year, China imported a total of 0.858 million tons of refined copper, anode copper, and its concentrates from the Democratic Republic of the Congo (DRC), an increase of about 29.3% over the previous year. Of these, it imported about 0.541 million tons of refined copper, an increase of 75.8% over the previous year. We believe that the year-on-year increase in copper imports provided a good market foundation for the company's business. According to the company's announcement, in the first half of 2024, the traffic flow and freight volume of the Kassa dry port project in the Democratic Republic of the Congo (DRC) increased steadily. 2Q24 completed the acquisition of the BHL fleet, further deepened the African inland transportation business network layout, established distribution logistics nodes in different countries in central and southern Africa, and increased the cross-border vehicle load rate in various ways. In addition, the African cross-border shipping section also benefited from rising shipping prices.
The performance continues to exceed expectations, and we are optimistic about the company's competitive advantage in the commodity logistics market for a long time. The company's customers are mainly concentrated in industries such as copper concentrates and coking coal. We believe that as Chinese mining companies strengthen their overseas investment layout and demand for cross-border logistics of commodities steadily increases, the company opens up cargo distribution channels in landlocked countries and regions, continuously deepens its business model, consolidates and upgrades the competitive advantages of the China-Mongolia, Central Africa, Central Asia and Latin America regional markets, and provides a guarantee for the long-term growth of the company's performance.
Profit forecasting and valuation
Considering that both Mongolian and African businesses were better than our expectations, we raised our 2024/25 profit by 8.3%/7.5% respectively to 1.52/1.82 billion yuan, up 45.9%/20.3% year over year. Our profit forecast for 2025 did not reflect the increase from the company's Sakania Port in Zambia. The current stock price for 2024/25 is 11.1x/9.2x. The company implemented an increase of 4 shares for every 10 shares in June of this year. We lowered the target price by 28.6% to 22.89 yuan/share to reflect the increase in the company's share capital. The 2024/25 P/E is 14.8x/12.3x, which is 33.1% higher than the current one.
risks
Mongolia's coal imports fell short of expectations, and the consolidation of African business fell short of expectations.