Core view: 1H deduction for nonprofit falls short of expectations

Tielong Logistics released its semi-annual report, achieving revenue of 7.08 billion yuan (yoy +2.2%) and net profit of 0.284 billion yuan (yoy -11.4%) in 2024. Due to the decline in transaction prices in the regional market where the stock real estate projects are located, 1H deducted the real estate inventory value by 0.087 billion yuan. Excluding this matter, 1H deducted non-net profit of 0.371 billion yuan (yoy +15.7%), which is lower than our expectations (0.398 billion yuan). Non-net profit increased, and main Internet box business volume and single box revenue increased. By business, 1H gross profit of railway special container/railway freight and port logistics/supply chain management business changed +27.1/-9.5/ +24% year-on-year, accounting for 66/25/ 8% of total gross profit. Considering the pressure on commodity demand and the impairment of real estate inventory in the first half of the year, we adjusted the 2024/2025/2026 net profit forecast to 0.47/0.59/0.65 billion yuan (previous value: 0.54/0.6/0.68 billion yuan). We took Wind's agreed industry-weighted average of 16x 2024E PE (previous value: 17x 2024EPE) and gave a target price of 5.80 yuan (previous value: 6.99 yuan). Maintain an “increase in holdings.”

Railway special containers bucked the trend, and box turnover efficiency remained high

The revenue and gross profit of the 1H railway special container business increased by 20.8% and 27.1% year on year, and gross margin increased 1.47 percentage points year on year to 29.7%. The company sent 0.9563 millionteU in 1H, up 10.6% year over year. Considering that the number of special containers held at the end of March '24 reached 0.118 million, an increase of 11.8% over the same period in '23, while container usage fee revenue increased 10.1% year-on-year, indicating that container turnover efficiency remained high.

In terms of single box revenue, the average revenue of special boxes increased by 9.2% year-on-year to 1,371 yuan/box, which may be related to the optimization of the box structure and the increase in overall logistics share. Dry bulk containers and liquid tanks account for 70% and 20% of the company's special container holdings. Although supply is affected by commodity demand, the advantages of efficient and convenient container transportation stand out. In the context of “transit to rail” and “fragmentation”, the railway special container business bucked the trend.

The profit decline of Shaba Line and Lingang Logistics is mainly due to weak demand+fierce competition. Shaba Railway and Lingang Logistics faced sluggish market demand and fierce competitive pressure. The 1H Shaba Railway completed 26.34 million tons of shipments, a year-on-year decrease of 5.7%. The net profit of Tielong Yingkou Industrial 1H, a subsidiary of the main operating entity in the Lingang logistics business, fell 11% year-on-year to 0.034 billion yuan. The Dalian cold chain logistics base invested and built by the company was put into actual operation in 2021, and the occupancy rate is still low. The cold chain business is still losing money. The subsidiary Tielong Cold Chain 1H24 recorded a loss of approximately 0.037 billion yuan (1H23: loss 0.038 billion yuan). Overall, the 1H revenue and gross profit of the railway freight and port logistics business decreased by 13.3% and 9.5% year on year; due to the decline in the port trade business, gross margin increased by 0.86pp to 20.81% year on year.

Supply chain profit share declined further

The company sold 4.68 million tons of commodities such as iron ore, coal, and coke in 1H; revenue reached 5 billion yuan, up 1.25% year on year; gross profit increased 24% year on year, and gross margin increased 0.18pp to 0.97% year on year.

The net profit of China Railway Tielong (Yingkou) Guomao 1H, a subsidiary of the supply chain business operator, increased 8% year-on-year to 0.032 billion yuan. The share of supply chain gross profit has gradually declined from 12% in 2021 to 8% in 1H24.

Risk warning: Special container growth is slowing down, the rental rate of cold chain logistics parks is low, demand on the Shaba Line is weak, and assets are depreciating.