Key points of investment:
The upward cycle of foreign trade chemicals and oil transportation resonates, and the boom in foreign trade business is underestimated. Foreign trade freight charges for crude oil, refined oil products, and chemicals are conductive to a certain extent. After the year-on-year boom in the oil transportation and chemical transportation markets began in 2022, the freight rate in the chemical tanker market followed the upward trend, and the latest 1-year rental price increased 62% compared to 2021. Supply side: Currently, chemical tankers account for hand-held orders similar to oil tankers. The aging problem is more prominent. In 2030, the proportion of old ships over 20 years old will reach 50%. Demand side:
Benefiting from the rapid expansion of domestic petrochemical production capacity, sufficient domestic production capacity has forced export growth. Medium- to long-term refineries moved eastward, and oil and chemical transportation changed to a long-term route trade pattern.
Industry beta is superimposed on company α, and the volume and price of foreign trade capacity investment have risen sharply to accelerate the release of profits. On the one hand, the foreign trade business is booming; on the other hand, the company has purchased and delivered new construction capacity one after another in recent years, making it a company with little capacity expansion in the oil transportation sector in recent years. According to the current new shipbuilding delivery plan, the share of foreign trade profits is expected to gradually increase to about 50%.
The total volume of the foreign trade market is greater than domestic trade. Foreign trade sentiment is transmitted to domestic trade, and domestic trade ships leaving the sea drive domestic trade supply and demand patterns to improve domestic demand pressure. Newer domestic chemical vessels meet the conditions for operating foreign trade. Most of the company's self-operated fleet consists of domestic and foreign trade vessels. Currently, the TCE level of foreign trade is higher than that of domestic trade ships. In the first half of the year, the company's 4 ships switched from domestic trade to foreign trade. The increase in single-ship profits also helped ease the conflict between domestic trade supply and demand.
The market value is lower than the replacement cost, and the value of the domestic trade license is undervalued. Domestic trade fleet valuation includes fleet value+license value.
In 2019-2023, the company's chemical tanker evaluation score was ranked first among the participating companies for five years and six times in a row. The value of domestic trade ship licenses has been ignored, and the market capitalization/replacement cost is only 0.59 times. It is significantly underestimated compared to valuations of 1 times or more of the same type, and there is plenty of room for improvement.
Profit forecast: The company's revenue from 2024 to 2026 is expected to reach 1.551 billion yuan, 1.909 billion yuan, and 2.475 billion yuan, with gross margins of 36.43%, 36.07%, and 34.78%, respectively. The company's net profit due to mother in 2024-2026 is estimated to be $3.19, 3.81, and 468 million yuan, respectively, up 26.43%, 19.57%, and 22.69% year-on-year, respectively.
Based on the replacement cost method, the current market value has more than 70% space, giving it a “buy” rating. The company's current replacement cost is 6.902 billion yuan. Compared with companies of the same type, COSCO Marine's replacement cost is 64.171 billion yuan, and the market value to replacement cost ratio is 1.10; China Merchants Shipping's market value ratio replacement cost is 1.08, and CMB is 1.02. Currently, the ratio between the market value of Xingtong shares and the replacement cost is only 0.59. If the market value of Xingtong shares reaches more than 1 times the replacement cost, then there is still room for more than 70% of the company's market value. Furthermore, as ship prices rise, the company's replacement costs are expected to rise further.
Risk concerns: global macroeconomic recession; other unforeseen events; resumption of flights by Suez; European re-procurement of Russian refined oil products and chemicals