Introduction to this report:
The company's 2024 mid-year report is basically in line with expectations. The LNG transportation business is expected to improve in the second half of the year. The upgrading and renovation of the Verbenge Wharf and overseas projects are progressing smoothly, and growth can be expected.
Key points of investment:
Maintain the “Overweight” rating and maintain the target price of HK$5.33. The Company's 2024 interim results were generally in line with expectations, maintaining the Company's 2024-2026 EPS forecast of HK$0.54, 0.56, and 0.59, maintaining the “increase” rating and target price of HK$5.33.
The 2024 mid-year report results were generally in line with expectations. In the first half of 2024, the company's main revenue was HK$0.331 billion, +7.29% year on year, and net profit to mother was HK$0.685 billion, -7.90% year over year, mainly due to exchange losses and the decline in investment income of domestic oil terminal companies. The company announced an interim dividend of HK$0.1 per share in 2024, the same as the previous year, with a payout ratio of approximately 36%.
Overseas warehousing business is growing at a high rate, and the investment income of the six terminals declined year on year. By sector, ① Huade Petrochemical handled 7.39 million tons of crude oil, +23.58% year over year, delivered 5.99 million tons of crude oil, +3.45% year over year, and segment performance of HK$0.161 billion, +17.27% year over year. ② The six subsidiary terminal companies had a throughput of 0.1 billion tons, -4.76% year-on-year, and an investment income of 0.363 billion yuan, or -11.46%, mainly affected by the slowdown in domestic crude oil import demand. From January to June 2024, the country imported 275.48 million tons of crude oil, or -2.3% year-on-year. At the same time, the slight depreciation of RMB against the Hong Kong dollar dragged down investment income. ③ Overseas warehousing: Fujairah achieved an investment income of HK$0.06705 billion, +34.67% YoY, and Vesta achieved an investment income of HK$0.01617 billion, or +60.10% YoY. ④ Investment income from the LNG transportation business was HK$0.05942 billion, -8.10% year-on-year, mainly due to the failure of an LNG ship at the end of 23, resulting in leasing losses and increased repair costs.
The LNG transportation business is expected to improve in the second half of the year, and Verbena Wharf and overseas projects are progressing smoothly.
In terms of terminal business, the Verbenzhou Wharf Terminal naphtha handling upgrade project is progressing smoothly according to schedule, and will further increase Huade Petrochemical's revenue scale after completion. In terms of LNG transportation, the LNG ship that failed at the end of 23 resumed normal operation in June 2024, and the sector's profit contribution is expected to improve in the second half of the year. In terms of overseas warehousing, Fujairah's project to connect the port's oversized tanker terminal is nearing completion. After completion, it can improve storage tank turnover speed and operational flexibility, and raise profit levels. At the same time, we are actively promoting a new terminal connection project between VTA, a wholly-owned subsidiary of Vesta in Belgium, and the port of Antwerp, which will increase VTA's berth capacity.
Risk warning: 1) Risk of changes in the macro environment and industry policies. 2) Risk of geopolitical events. 3) Project construction falls short of anticipated risks.