Description of the event

Sinotrans disclosed three quarterly results: in the first three quarters of 2024, the company's revenue was 85.87 billion yuan, up 17.9% year on year; net profit to mother was 2.83 billion yuan, down 10.4% year on year; net profit after deducting non-return to mother was 2.59 billion yuan, down 7.1% year on year.

2024Q3, the company's revenue was 29.5 billion yuan, up 18.3% year on year; net profit due to mother was 0.88 billion yuan, down 10.3% year on year; net profit after deducting non-return to mother was 0.79 billion yuan, down 7.8% year on year.

Incident comments

The volume of air and sea freight business grew steadily, and freight rates remained high. 2024Q3, the company's shipping agents/air transport channels/railway agents/shipping agents/depot stations were +3.7%/+1.4%/+56.2%/+8.4%/+19.9% year-on-year respectively. The air and sea freight volume grew steadily, and the number of railway agents increased dramatically. Air and sea freight remained strong in the third quarter. The average price of SCFI freight increased by 212.7% year on year, and the average price of TAC air freight increased by 33.0% year on year.

Contract logistics prices are both weak, and gross margins are under pressure. 2024Q3, the company's contract logistics (including cold chain) /project logistics/chemical logistics volume was -7.0%/+10.5%/+28.7%. Freight demand was weak in the third quarter, contract logistics volume declined year on year, project logistics and chemical logistics segments bucked the trend, and the decline in superimposed service contract prices suppressed profits. The Q3 company's gross margin fell 1.4 pct to 4.3% year on year.

Subsidies and investment returns declined year on year, and cost control was good. 2024Q3, the company's expense ratio decreased by 1.3 pct to 4.1% year on year. All expenses were optimized, and R&D expenses were significantly reduced. 2024Q3, the company's other revenue fell 12.2% year on year to 5.7 yuan, of which government subsidies fell 16.6% year on year to 0.58 billion yuan. The company's net investment income fell 16.0% year on year to 0.49 billion yuan in the third quarter. In the end, the company's deducted non-net profit fell 7.8% year over year to 0.79 billion yuan.

Increased holdings are combined with repurchases, and the dividend ratio is cost-effective. The company continues to deepen the construction of overseas logistics networks, and with strategic customers, promote the construction of an end-to-end resilient supply chain network covering 48 European countries and service coverage in more than 20 Latin American countries, enhance the full link capabilities of the overseas end, create overseas territorial specialty products, and enhance comprehensive competitive strength. The company collaborated with other shipping companies under the China Merchants Bureau to buy back or increase its holdings to enhance investor confidence. The controlling shareholder, Sinotrans Changhang, plans to increase its A-share holdings. The overall increase amount is not less than 0.25 billion yuan, but not higher than 0.5 billion yuan. At the same time, the company plans to repurchase shares and cancel them through centralized bidding transactions. The repurchase amount is not less than RMB 0.27 billion and not more than RMB 0.54 billion. 2024H1, the company's mid-term dividend ratio increased to 54%, corresponding to the 24-year results, with a dividend rate of 5.3% for A-shares and 7.3% for Hong Kong stocks. The dividend ratio is attractive. The company's 2024-2026 performance is expected to be 3.85/4.16/4.47 billion yuan, respectively, and the corresponding PE is 10.2/9.4/8.8 times, respectively, maintaining the “buy” rating.

Risk warning

1. Risk of policy changes;

2. Low expectations for cross-border e-commerce volume growth;

3. Demand for general air freight falls short of expectations.