2024Q2 China Sinotrans performance: Net profit to mother was 1.14 billion yuan, -6% year-on-year, and narrower than the 24Q1 decline (-16%). 1) Revenue side: 2024Q2's annual revenue was 32.1 billion yuan, +26% year over year; gross profit 1.65 billion yuan, +14% year over year; gross profit margin 5.2%, down 0.5 percentage points year over year. 2) Investment income and other income: 2024Q2 investment income was 0.5 billion yuan, -18% year-on-year. Other revenue was $0.53 billion, -10% YoY.

3) Profit side: 2024Q2's net profit to mother was 1.14 billion yuan, -6% year over year; net profit margin to mother was 3.6%, down 1.2 percentage points year on year. Net profit without return to mother was 1.07 billion yuan, which was the same as the previous year. Net interest rate after deduction of non-return to mother was 3.3%, down 0.9 percentage points from the previous year.

By business structure, look at:

1) Freight forwarding: 24H1's external turnover was 35.03 billion yuan, +22.4% year over year; gross profit was 1.7 billion yuan, -3%; segment profit was 1.23 billion yuan, the same as the same period last year. Among them, the profit of the shipping agent and air freight forwarding business increased, and the profit of the train business declined due to falling prices. Among them, shipping agent/air freight agent/railway agent/shipping agent/depot station service revenue was 255/41/5.4/2.6/1.9 billion yuan, +28%/+10%/+13% compared to the same period, and segment profits were 4.8/1.1/0.04/0.28/0.19 billion yuan, respectively, +15%/9%/-68%/+5%/-6%; the cargo volume was 7.45 million TEU/0.53 million tons/0.28 million tons/0.28, respectively million TEU/0.03 million ships/ 11 million tons, +19/ +25%/+30%/+3%/+7%, respectively, year over year.

2) Professional logistics: 24H1's external turnover was 15.214 billion yuan, +3% year over year; gross profit was 1.1 billion yuan, -12%; segment profit was 0.41 billion yuan, -26.8% year over year, mainly due to the reduction in the price of newly signed service contracts and the rigidity of fixed business costs, which led to a decline in profit levels. Among them, contract logistics/project logistics/chemical logistics/cold chain logistics revenues were 119/1.98/0.93/0.28 billion yuan, respectively, +4%/+13%/-7%/-5%; segment profits were 3.4/0.01/0.07/-0.02 billion yuan, respectively, -22%/-87%/+3%/+44% year-on-year; the business volume was 24/3/2/0.4 million tons, respectively.

3) E-commerce business: 24H1's external turnover was 6.13 billion yuan, +29.7% year over year; segment profit was 0.114 billion yuan, +29.3% year over year. Among them, cross-border e-commerce logistics achieved 0.12 billion tickets, -24% over the same period last year.

Focus on shareholder returns to increase the dividend ratio: the dividend ratio increased from 50% at the end of 2023 to 54% in mid-2024. The total dividend for the full year of 2023 was $0.29 per share, and the annual dividend ratio was 49.77%. 2024H1 plans to pay a dividend of 0.145 yuan per share, totaling 1.05 billion yuan in cash. Based on the 2024/8/29 market capitalization of the company's market capitalization of 31.6 billion yuan and an annualized dividend of 0.29 yuan per share, the company's dividend rate in 2024 is 6.67%.

The company comprehensively promotes transformation and reform, and attaches importance to overseas network layout. 1) In terms of system construction, the coverage of the company's customer management system continues to increase, adding nearly 800 new customers; promoting regional integration, promoting integration of professional logistics sectors, further optimizing resource allocation, and strengthening headquarters capacity. 2) In terms of overseas network layout, we work with strategic customers to build an end-to-end resilient supply chain network covering 48 European countries and service coverage in more than 20 Latin American countries to enhance the full-link capabilities of the overseas end; and create overseas localized specialty products.

Investment suggestions: 1) Profit forecast: Considering that domestic logistics are under certain pressure, we adjusted the company's net profit forecast for 2024-2026 to 4.06, 4.36, and 4.66 billion yuan (the original forecast was 4.49, 4.68, 4.92 billion yuan), corresponding EPS was 0.56, 0.6, and 0.64 yuan, respectively, and the corresponding PE was 8, 7, and 7 times, respectively. 2) Investment advice. We gave the company 10 times PE in 2024, corresponding to a market value of 40.6 billion yuan in 2024, and a one-year target price of 5.57 yuan. We expect 29% of the space compared to the current price, and continue to recommend.

Risk warning: external political and economic environment risks, sharp fluctuations in freight rates, and overseas network expansion falling short of expectations.