Incidents:

On August 12, 2024, Xingtong Co., Ltd. released its 2024 semi-annual report.

2024H1 achieved revenue of 0.772 billion yuan, 23.6% year on year; net profit of 0.18 billion yuan, +31.6% year on year; net profit without return to mother 0.179 billion yuan, +33.4% year on year; of these, 2024Q2 revenue was 0.387 billion yuan, +35.6% year on year; net profit to mother 0.103 billion yuan, +71.3% year on year; net profit without return to mother 0.102 billion yuan, year on year +76.0% .

Investment highlights:

Strong growth in foreign trade realized, business structure optimization

2024H1's revenue increased rapidly. Looking at domestic and foreign trade, domestic and overseas revenue were 0.48 billion yuan and 0.292 billion yuan respectively, -1.5% and +112.4% year-on-year respectively. Foreign trade became a strong driver of growth.

By business type, the company's own ship charter revenue was 0.548 billion yuan, term rental revenue was 0.198 billion yuan, and outsourced ship charter revenue was 0.027 billion yuan, +35.6%, +46.8%, and -69.1%, respectively. The share of low gross margin outsourced ship leases declined, and business structure optimization combined with high foreign trade boom led to an increase in the company's gross margin. 2024H1 gross profit margin was 36.59%, +2.2 pct year on year, of which Q2 gross profit margin was 40.92%, +8.8 pct year on year.

The domestic trade market accounts for a steady upward trend, and the foreign trade capacity layout creates a second curve

2024H1's domestic chemical shipping capacity accounted for 15.5%, +1.6 pct year on year; foreign trade chemical shipping capacity was 0.1025 million dwt, +125.3% year-on-year. In terms of new orders, the company signed construction contracts for 2 new stainless steel chemical tankers, each 0.013 million DWT, which are scheduled to be delivered and put into operation in 2025. In terms of orders, a new domestic trade chemical tanker “Xingtong 59” and a “Xingtong 17” ship will be built, totaling 0.0112 million dwt, and is scheduled to be put into operation in 2024Q3; the new 0.013 million DWT foreign trade chemical tanker “XT Exploration” is scheduled to carry out foreign trade business in 2024H2. The company has signed construction contracts for 4 0.0259 million DWT methanol dual-fuel stainless steel chemical tankers. Two of them are scheduled to be put into operation in 2025, and the other two are scheduled to be put into operation in 2026 In operation every year.

The growth path is clear, and I am optimistic that the company's value will continue to be realized

In the short to medium term, foreign trade is booming, the domestic trade cycle is bottoming out, and the risk of a sharp downturn on the demand side may have been cleared, and production capacity expansion may have been cleared; in the long run, the trend of tightening domestic trade liquid dangerous goods transportation industry overall supply restrictions and consumption upgrades in compliance demand continues, and Xingtong Co., Ltd. continues to reap benefits as a leading compliance leader; at the same time, as a high-quality support for domestic refining and “going global”, the space for foreign trade is gradually opening up, and long-term value and growth are expected to continue to be realized.

Profit Forecasts and Investment Ratings

We expect that the 2024-2026 operating income of Xingtong Co., Ltd. will be 1.605 billion yuan, 1.941 billion yuan and 2.302 billion yuan, respectively, +30%, +21%, and +19%, respectively; net profit to mother will be 0.346 billion yuan, 0.417 billion yuan and 0.491 billion yuan, respectively, +37%, +20%, and +18%, corresponding to EPS 1.24 yuan, 1.49 yuan and 1.75 yuan respectively; The corresponding PE was 11.4 times, 9.5 times, and 8.1 times, respectively, maintaining the “buy” rating.

Risk warning

Chemical demand falls short of expectations; production accidents; mergers and acquisitions fall short of expectations; major policy changes; overseas market risks and exchange rate risks.