Improved export demand is driving increased profits in international freight forwarding and e-commerce logistics businesses, and demand for professional logistics is weak

Sinotrans announced 1H24 results: 1) revenue of 56.4 billion yuan, up 17.2% year on year; 2) net profit to mother of 1.95 billion yuan, down 11.0% year on year. Among them, 2Q net profit was 1.14 billion yuan, -7.1%/+42.3% month-on-month. Profit increased significantly from month to month, mainly driven by improved export demand combined with rising international sea and air freight rates. The company announced an interim dividend of 0.145 yuan per share, with a dividend rate of 54%. The current H/A stock price corresponds to a dividend rate of 4%/3%. The company's freight forwarding and cross-border e-commerce business performed well in the first half of the year, but demand for professional logistics services was weak. Based on the company's performance in the first half of the year and the medium- to long-term global macro uncertainty, we lowered our 24/25/26 net profit forecast 10%/9% to 4.1 billion/4.46 billion/4.71 billion yuan; based on 7.1x/11.5x 24E PE (the company's three-year historical PE average plus 2/1.5 standard deviations, the main reason for the valuation premium is the increase in the company's profitability and dividend ratio), the target price was 4.4 HKD/6.4 (previous value: 4.6 HKD/ 7.1 yuan), reaffirming the “buy”.

International agency and related business: 1H24 sea and air freight volume and profit both achieved a year-on-year increase of 1H 24:1) The company's shipping agency business volume was 7.449 million TEU, +19.1% year over year. The significant increase in throughput was mainly due to improved export demand; operating profit was 0.48 billion yuan, +9.0% year over year. 2) Air freight forwarding business volume was 0.413 million tons, +24.6% year over year; operating profit was 0.11 billion yuan, +8.3% year over year. The air transport business volume increased significantly, mainly because the shipping market was affected by Red Sea detours, there was a shortage of ships, and the influx of some supplies into air transport compounded by improving demand in the cross-border e-commerce market. 3) Shipping agency/depot service business volume was +3.3%/+6.5% year-on-year, respectively; operating profit was 0.28 billion/0.19 billion, +4.9%/-5.8% year-on-year.

E-commerce business grew rapidly, 1H24 profit increased 29.3% year over year

Driven by strong demand in the cross-border e-commerce market, 1H24's e-commerce business achieved revenue of 6.13 billion yuan, an increase of 29.7% over the previous year; operating profit of 0.11 billion yuan, an increase of 29.3% over the previous year. Among them, cross-border e-commerce logistics/logistics e-commerce platforms/physical equipment sharing platforms achieved operating profit of 74 million/ 13 million/ 27 million yuan, +57.6%/+135.7%/-25.6% compared with the same period last year. In terms of investment income, 1H24 received 0.74 billion yuan in investment income from the joint venture company Sinotrans DHL, a year-on-year decrease of 4.8%.

Professional logistics was dragged down by weak demand, and profits declined year-on-year

1H24's professional logistics business revenue increased 3.0% year on year to 15.2 billion yuan; operating profit was 0.41 billion yuan, down 26.8% year on year. Among them, contract logistics/project logistics/chemical logistics/cold chain logistics business volume was +15.1%/+12.2%/+10.3%/-0.9%; operating profit was 0.34 billion/7 million/67 million/-23 million yuan, -21.8%/-85.9%/+3.4%/-39.4% YoY. Business volume increased, but the decline in profits was mainly due to weak demand, and contract prices fell year-on-year.

Risk warning: 1) global economic growth is lower than expected; 2) business volume growth is lower than expected; 3) policy risk.