Description of the event

Xiamen International Trade's 2024 mid-year report: In the first half of 2024, the company achieved operating income of 195.21 billion yuan, a year-on-year decrease of 28.2%, and net profit of 0.84 billion yuan, a year-on-year decrease of 46.9%; in the second quarter of 2024, the company achieved operating income of 98.33 billion yuan, a year-on-year decrease of 33.7%, and net profit of 0.43 billion yuan, a year-on-year decrease of 49.0%.

Incident comments

Weak demand puts pressure on revenue, improving quality and efficiency and deepening internal strength. In the first half of 2024, the company achieved a 28.2% year-on-year decline in revenue, mainly affected by weakening demand in the bulk market and falling prices in some major business categories. Specifically, the operating volume of metals and metal minerals/energy chemicals/agriculture, forestry, animal husbandry and fishery was -32.9%/-35.3%/-8.8%, respectively, and revenue was -27.5%/-36.0%/-11.3%, respectively. The company continuously optimizes the customer structure and actively expands the category structure. In the first half of the year, the company added and expanded Changxie resources in iron ore, coal, crude oil, timber, etc.; strengthened the industrial chain layout, with more than 200 cooperative customers, accounting for more than 90% of industrial customers; expanded the photovoltaic aluminum profile processing business, continued to develop new business categories and high value-added categories in mature business segments, and actively laid out new types of resources such as natural gas, quartz sand/stone, etc., to create a new growth curve. In the first half of the year, the current gross margin of the company's main business categories bucked the trend. The current gross margin of metals and metal minerals/energy chemicals/agriculture, forestry, animal husbandry and fishery periods increased by 0.17 pct/0.99 pct/0.92 pct, respectively.

Health Technology's revenue increased rapidly, and overseas sales expanded at an accelerated pace. The company's health technology business achieved revenue of 0.559 billion yuan, an increase of 91.39% over the previous year. Pelt Medical, an overall solution provider for minimally invasive surgery under the health technology business, strengthened research and development of new products in the first half of the year, obtained initial registration certificates for 5 new products; actively developed the “Belt and Road” and BRICS markets, expanded the European and American markets, and established sales networks in more than 80 countries and regions. During the reporting period, Pelt Healthcare achieved operating income of 0.31 billion yuan, an increase of 33.7% over the previous year, of which overseas revenue accounted for more than 45%; achieved net profit of 66.84 million yuan to mother, an increase of 108.3% over the previous year, and achieved a rapid increase in revenue and profit.

Foreign exchange losses dragged down expenses during the period, and the main business operations stabilized. In the first half of the year, the company's expenses increased by 0.93 billion yuan year on year. Among them, financial expenses increased by 0.79 billion yuan year on year due to the increase in exchange losses due to the company's foreign exchange purchase price difference. Furthermore, net investment income for the first half of this year decreased by 0.59 billion yuan in the first half of this year due to the transfer of some shares in Guomao Futures and Qirun Capital and shares in major financial businesses during the same period last year. Excluding the profit impact of the transfer of Guomao Futures control rights and shares in financial subsidiaries in the same period last year, the company's net profit to mother fell 35.36% year-on-year in the first half of the year.

The operating foundation is solid, undervalued, and dividends are high. The company has comprehensive risk control management coverage, runs through key nodes in the entire business chain, and continuously iterates on its multi-dimensional risk control management capabilities. At the same time, the company formulated a strategic plan for international development, established an international development department, and strengthened the guarantee mechanism for international business development, focusing on the “Belt and Road” countries and RCEP countries. During the reporting period, the company established a new Vietnamese platform company, which mainly expanded the steel business, established a new German office, and actively expanded the new energy business. The company's net profit for 2024-2026 is estimated to be 1.86/2.08/2.21 billion yuan, respectively, and the corresponding PE is 7.2/6.4/6.0X, respectively, maintaining a “buy” rating.

Risk warning

1. Commodity prices fluctuate greatly;

2. Increased risk of bad debt losses;

3. Risk of exchange rate fluctuations.