Key points of investment

The company announced its quarterly report for the year 24:24Q3 revenue was 0.9 billion yuan, +125% year-on-year, and realized net profit to mother of 0.17 billion yuan, or +849% year-on-year. The total net profit for the first three quarters was 0.41 billion yuan, +171% year over year.

The freight rate index continued to rise year-on-year

In 24Q3, the BDI index averaged 1871, +57% YoY, BSI averaged 1320, +45% YoY. It is expected that under selected routes and refined operations, the company will continue to achieve excess revenue during the reporting period.

Adapt to changing market trends and maintain rapid capacity introduction

Ship types are becoming more and more comprehensive, creating a leading company in the dry dispersion field: the company purchased 2 Capesize and 3 Panamax dry bulk carriers in Q3. Compared to smaller ships, these two types of ships can transport more cargo at a lower unit cost, and are expected to release strong profit margins against the backdrop of an upward cycle in the dry bulk shipping market.

Capacity structure: According to the company announcement, as of October 2024, the company has 2 Capesize, 3 Panamax, 42 Supramax, and 19 Supramax leases for a long period of time. The capacity scale ranks among domestic dry bulk transportation companies.

In the future, the 2024 peak season can be expected, and the 2025 inflection point will be reached

1) In the traditional peak season of Q4, combined with the implementation of interest rate cuts by the Federal Reserve, the previous demand-side suppression factors are expected to be lifted; 2) The Simandou project is about to be put into operation, and “volume growth is far away” may be a winner in reversing supply and demand.

Under long-term logic, dry bulk shipping still has a basis that exceeds expectations

Supply side: low orders+ageing+high ship prices+tight platforms, compounding new environmental regulations to inhibit effective capacity supply; demand side: 1) domestic demand is supported and structural changes have occurred, or expectations are poor; 2) the industrialization and urbanization process in emerging market countries is accelerating, or relaying to provide new momentum for demand growth. 3) Multiplier effect of distance: Taking bauxite as an example, the increase in exports from long-distance exporters is driving up demand for tons of nautical miles; moreover, in the anti-globalization process, diversification of supply sources causes loss of efficiency and lengthening of transportation distances, which may be a long-term trend. 4) Geopolitical and climate issues frequently disrupt the supply and demand sides of the industry or form favorable catalysts.

Profit forecasting and valuation

Based on market freight rates and the company's performance and capacity size for the first three quarters, the company's profit forecast was raised. The company's net profit for 2024-2026 is estimated to be 0.59, 0.79, and 0.96 billion yuan respectively, corresponding to EPS of 0.64, 0.86, and 1.05 yuan respectively.

The company's operating costs are lower than those of its peers. It has achieved a TCE level far exceeding the market through selected routes and flexible positioning, and is expected to maintain a faster pace of capacity introduction, which is expected to usher in a flexible release of profit and maintain a “gain” rating.

Risk warning

1) Global economic downturn; 2) Large-scale shipbuilding by shipowners, etc.