occurrences

The company released its 2024 mid-year report, and achieved revenue of 1.21 billion yuan in the first half of 2024, a year-on-year decrease of 37%; net profit to mother was 0.072 billion yuan, up 7.7% year on year, after deducting non-return net profit of 0.07 billion yuan, up 9.5% year on year. In the second quarter, revenue of 0.55 billion yuan was achieved, down 47% year on year and 18% month on month; net profit to mother was 0.043 billion yuan, up 14.7% year on year and 55% month on month.

Key points of investment

Dry port intermodal transport launched a new business model, and profitability improved markedly (1) Optimized industrial layout: The main reason for the year-on-year decline in 24H1's revenue was the restructuring of the LNG transport trade business, which accounted for a large share of trade, and the shift to the shipping business, which directly affected the decline in sales volume.

(2) Significant increase in profitability: 24H1 sales gross margin of 9.7% and net sales margin of 6.0%, up 4.4 and 2.6 percentage points, respectively, over the previous year, mainly due to port business operations. During the reporting period, the company leased major terminals built by Yulong Port to Shandong Yulong Petrochemical Co., Ltd. The port operation is fully prepared to provide ship berthing and cargo handling services for the Yulong Island Refining and Chemical Integration Project at any time. The subsidiary Yulong Port 24H1 achieved revenue of 58.88 million yuan, net profit of 33.16 million yuan, and net profit of 56%.

(3) The effect of adjusting the company's industrial layout was obvious. On a quarterly basis, Q2 net profit was 0.043 billion yuan, up 15% year on year and 55% month on month; 24Q2 gross profit margin was 11.5% and net profit margin was 8.2%, up 3.3 and 4.0 percentage points from month to month, respectively.

The port business continues to advance. The majority shareholders' bid shows confidence in development. The company announced on August 18 that the majority shareholders intend to issue part of the offer at a price of 8.72 yuan/share to all shareholders of Hengtong shares holding unlimited tradable shares other than Nanshan Group and its co-actors, accounting for 5.00% of the total share capital of Hengtong Co., Ltd. The takeover period is from August 21 to September 19. After the offer is completed, Nanshan Group and its co-actors will hold up to 52.72% of the total share capital of Hengtong Co., Ltd.

Core logic: Benefiting from the Yulong Petrochemical project, the port business is expected to enter the fast track. The company is an important port logistics company under the Nanshan Group. It specializes in LNG transportation and port business. The port business supports the Yulong Island Refining and Chemical Integration Project, the number one petrochemical project in Shandong Province. It has a planned annual production capacity of 40 million tons and a total planned investment of hundreds of billions of yuan. The Yulong Petrochemical project is about to be put into operation, and the company's performance is expected to enter the fast track.

Profit forecasting and valuation

The company's net profit for 2024-2026 is expected to be 0.16, 0.24, and 0.4 billion yuan, respectively, up 33%, 51%, and 69% year-on-year, with a compound growth rate of 50% in 2023-2026. The corresponding PE is 39, 26, and 15 times, respectively, maintaining the “gain” rating.

Risk warning: Yulong petrochemical project falls short of expected risk; risk of LNG price fluctuation.