Xingtong Co., Ltd. announced its 2024 mid-year report, with excellent results in the Q2 single quarter. 2024H1's revenue was 0.772 billion yuan, up 23.56% year on year, and net profit to mother was 0.18 billion yuan, up 31.56% year on year.

Among them, 2024Q2's revenue was 0.387 billion yuan, up 35.35% year on year, and net profit to mother was 0.103 billion yuan, up 71.31% year on year. Profit in a single quarter reached a record high.

The “1+2+1" strategy is progressing steadily, and the volume of foreign trade business is driving a new round of growth. In the first half of the year, 2 new 10,000-ton foreign trade chemical tankers built by Xingtong were put into operation, with a capacity of 0.0252 million dwt, further expanding the company's market share and competitiveness in the field of international chemical transportation, and supporting the growth of the company's operating data. According to the ship construction plan, a total of 3 ships will be put into operation in the second half of 2024 (domestic trade capacity 0.0112 million dwt, foreign trade capacity 0.013 million dwt), 4 ships will be put into operation in 2025 (domestic trade capacity 0.026 million dwt, foreign trade capacity 0.0518 million dwt), and 2 ships will be put into operation in the first half of 2026 (foreign trade capacity 0.0518 million dwt), which is expected to drive the introduction of new capacity The company's performance continues to grow.

Xingtong's business structure improved markedly in the first half of the year, leading to a recovery in profit margins. In the Q2 quarter, Xingtong's gross margin reached 40.92%, up 8.76pct year on year. There are two main reasons. First, 2024H1's share of offshore charter revenue fell 10.4 pcts to 3.5%, and the decline in the share of low-margin business led to a recovery in the company's profit margin; second, the Red Sea crisis led to an increase in global chemical foreign trade freight rates, which led to an increase in the company's foreign trade business profit margin. Judging from the business structure, the company's current rental capacity is 0.1839 million DWT, accounting for 44.85% of the company's total capacity. Most of the long-term rental customers are leading companies, and performance stability is highly guaranteed.

Equity incentives demonstrate confidence in growth. At the end of the first half of the year, Xingtong announced the 2024 employee stock ownership plan (draft). The transfer price was 7.38 yuan/share, and the scale was no more than 4.2 million shares, accounting for about 1.50% of the total share capital. The first unlocking period performance assessment target: Based on operating income/net profit/freight volume in 2023, one item of the 2024 operating income/net profit/freight volume growth rate is not less than 25%. Second unlocking period performance assessment target: Based on operating income/net profit/freight volume in 2023, one item of the 2025 revenue, net profit, and freight volume growth rate is not less than 35% (target value is 50%).

Risk warning: Domestic chemical operating rates continue to be sluggish, industry supply approval liberalization, safety accidents, etc. Investment suggestions:

Xingtong Co., Ltd. is a leading hazardous chemical transportation company. As the company's “1+2+1” strategy progressed, its performance ushered in the second growth pole. Considering the Red Sea incident or foreign trade price support, and the steady, moderate and positive development of the domestic economy, the 2024-2026 performance forecast was raised from 0.32/0.4/0.46 billion yuan to 0.34/0.42/0.48 billion yuan. The corresponding PE valuation was 11.8/9.6/8.3X, maintaining the “superior to the market” rating.