Brief performance review

On August 29, 2024, Sinotrans released its 2024 semi-annual report. 1H2024 achieved operating income of 56.368 billion yuan, a year-on-year increase of 17.19%; realized net profit to mother of 1.945 billion yuan, a year-on-year decrease of 11.02%. Among them, 2Q2024 achieved operating income of 32.081 billion yuan, a year-on-year increase of 25.93%; realized net profit to mother of 1.142 billion yuan, a year-on-year decrease of 5.65%.

Management analysis

Freight forwarding and logistics revenue increased, and e-commerce business profits increased. By business: 1) The external turnover of the agency and related business was 35.03 billion yuan, up 22.4% year on year, mainly due to the increase in sub-sector business volume combined with rising freight rates; segment profit was 1.23 billion yuan, which was basically the same as the previous year. The profit of the shipping agent and air freight forwarding business increased, and the profit of the train business declined due to falling prices. 2) The professional logistics business achieved external revenue of 15.214 billion yuan, an increase of 3.02% over the previous year; segment profit was 0.409 billion yuan, down 26.77% from the same period last year, mainly due to lower prices for newly signed service contracts and the rigidity of fixed business costs, which led to a decline in profit levels. 3) The e-commerce business achieved external revenue of 6.23 billion yuan, an increase of 29.7% over the previous year, mainly due to rising air freight rates and an increase in cross-border e-commerce logistics business; segment profit was 0.114 billion yuan, an increase of 29.28% over the same period last year, mainly driven by an increase in business volume. 4) The company achieved investment income of 0.975 billion yuan, -10.4% year-on-year.

The year-on-year decline in gross margin led to a decline in net profit margin to mother. The company achieved a gross profit margin of 5.15% in 1H2024, -1.08pct year-on-year. Among them, the gross margin of the agency business is 1.31pct, the gross margin of the professional logistics business is 1.27pct, and the gross margin of the e-commerce business is +2.29pct year-on-year. The company's sales expense ratio was 0.86%, -0.19pct; the management expense ratio was 2.66%, -0.64pct year on year. The reduction in sales and management expenses was mainly due to the company's continuous promotion of advanced actions to improve quality and efficiency and strictly control costs. Net profit margin was 3.45%, -1.09pct year over year.

The market size continues to expand, and the dividend per share remains the same. 1H2024 continues to expand domestic and foreign market customers, and the revenue of the company's strategic customers and core customers increased year-on-year. The country won bids for new businesses from a number of strategic customers. Overseas and strategic customers drive the construction of an end-to-end resilient supply chain network covering 48 European countries and service coverage in more than 20 Latin American countries. Under pressure on medium-term profits, the company maintained the same dividend per share (0.145 yuan/share) as in the same period last year, with a dividend payout ratio of 54.17%.

Profit Forecasts, Valuations, and Ratings

Considering the pressure on the logistics business, net profit due to mother in 2024-2026 was adjusted to 3.81 billion yuan, 4.39 billion yuan, and 4.83 billion yuan (originally 4.69 billion yuan, 5.03 billion yuan, 5.17 billion yuan).

Maintain a “buy” rating.

Risk warning

There is a risk of large fluctuations in air and sea freight rates, the risk of further worsening competition in the international freight forwarding industry, and the risk of intense competition in the logistics market.