Incident: In the first half of 2024, the company achieved operating income of 101.201 billion yuan, up 10.19% year on year; net profit of 16.87 billion yuan, up 1.87% year on year; net income after deducting 16.82 billion yuan, up 1.81% year on year; basic EPS was 1.05 yuan/share, up 1.94% year on year; plans to distribute a cash dividend of RMB 0.52 (tax included) per share to all shareholders, with a dividend rate of 49.20%.

Comment: Gross margin increased significantly from month to month, and performance increased significantly from month to month. Mainly benefiting from the positive trend in the shipping market and the continuous rise in market freight rates, the company achieved revenue of 52.931 billion in 24Q2, up 18.97% and 9.66%, respectively, achieving gross profit margins of 27.16%, and 5.12 and 7.77pcts, respectively, and achieving gross profit of 14.377 billion yuan, with year-on-month increases of 46.61% and 53.59%, respectively.

However, mainly due to a year-on-year decrease in interest income and net exchange income, net income from financial expenses decreased by 2.65 billion to 0.777 billion, and the cost ratio increased by 7.18 pcts to 3.05% year over year during the period. The company's 24Q2 operating profit/total profit/net profit/net profit/net profit attributable to mother increased by 6.21%/6.31%/4.32%/7.23%/7.09%, respectively. Among them, net profit attributable to mother and net profit without return to mother increased by 49.74%/50.14% month-on-month to 10.115/10.096 billion, respectively.

Freight volume increased year-on-year, and capacity is expected to continue to grow. 24H1, mainly benefited from the 9.34% year-on-year increase in the Group's freight volume (COSCO SHIPPING 12.67%), and the company's container shipping business achieved revenue of 97.477 billion, up 10.41% year on year. Although equipment and cargo transportation costs increased 22.74% year on year, it mainly benefited from the 0.98% and 10.70% year-on-year decreases, gross margin increased 1.37 pcts to 22.86% year on year, and the profit margin before interest and tax fell 2.14 pcts year on year to 21.39% year on year, net profit year on year. It fell 2.68% to 16.331 billion (COSCO SHIPPING increased 14.82% year-on-year to 10.175 billion). Among them, freight volume across the Pacific, Asia, Europe, other countries, and mainland China increased by 8.47%, -14.87%, 12.90%, 9.11%, and 30.23% year-on-year respectively, achieving route revenue of 160, 136, 14.7, 11.5, and 5.8 billion, which increased 36.56%, 9.91%, 1.58%, -5.57%, and 0.35% year-on-year respectively. At the end of 24H1, the company held 29 new shipbuilding orders. In August, the company ordered 12 new methanol dual-fuel container ships, and the total capacity is expected to continue to grow.

Throughput increased year-on-year, and terminal revenue grew steadily. 24H1, mainly benefiting from the 8.19% year-on-year increase in total throughput of COSCO SHIPPING ports (8.03%/8.23%). The company's terminal business achieved revenue of 5.091 billion, an increase of 4.95% year-on-year. Among them, Europe, Asia Pacific, other international, and mainland China achieved revenue of 22.7, 0.26, 0.02, and 2.54 billion, respectively, up 0.52%, 15.89%, 10.74%, and 8.13% year-on-year, gross margin decreased slightly by 0.29pct year-on-year to 29.39 %

Profit forecast: In 2024-2026, the company is expected to achieve operating income of 226.3/193.9/194.2 billion yuan and net profit to mother of 40.905/22.107/22.112 billion yuan, corresponding to PE 4.89/9.04/9.04 times PE. Covered for the first time, a “gain” rating was given.

Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, changes in the global geopolitical landscape have exceeded expectations, and profit forecasts and valuation models have fallen short of expectations.