3Q24 earnings fell short of our expectations

The company announced 3Q24 results: revenue of 5.82 billion yuan, +52% year over month, +23% month on month; gross profit of 0.56 billion yuan, +4% year on month, +14% month on month; net profit to mother 0.17 billion yuan, -21% year on year, +24% month on month. 3Q24's profit was slightly lower than our expectations, mainly due to: ① fluctuating shipping prices and pressure on agency business profits; ② the company promoted the layout of overseas outlets, increasing upfront investment costs and expenses; ③ 3Q23 sold 25% of Jiacheng International's shares, resulting in a high return on investment base for the current period.

Development trends

The direct customer strategy continues to gain strength, and the layout of overseas outlets is progressing in an orderly manner. ① Since 2024, the company has established and operated new overseas outlets in Kazakhstan, Brazil, Chile, Colombia, Nigeria, etc., to strengthen territorial service capabilities. ② Continuously improve product stability and coverage. The shipping business uses the headquarters contract capacity cooperation model, while air freight consolidates the dominant core capacity of European and American routes and enhances product portfolio capabilities.

If freight rates return to a stable range, we expect the company's unit profit to recover. Considering that the company has provided “package price” full-chain logistics services for some direct customers, large fluctuations in freight rates since 2024 have put pressure on the company's costs in the short term. Since July, SCFI freight rates have gradually declined (as of October 18, 2024, SCFI's American-Western and European fares have decreased by 42% and 64% respectively from their highs in early July); if future freight rates return to a stable range, we expect the company's pricing and cost management capabilities to improve, and single-box profits are expected to recover.

The company promises a dividend ratio of not less than 60%, and the dividend ratio provides supporting income. According to previous announcements, the company's annual dividend for 2023-2025 is not less than 60% of the current year's distributable profit; when there are no major capital expenditure arrangements for the year, when profit distribution is carried out, cash dividends should account for at least 80% of the current profit distribution. Assuming a 60% dividend ratio, we estimate that the company's dividend rate in 2024 may be 4.4%, providing a certain supporting income.

Profit forecasting and valuation

Considering the increase in freight rate fluctuations in recent years and the pressure on profits caused by the company's layout of overseas outlets, we lowered our net profit in 2024 by 38.6% to 0.592 billion yuan, and introduced net profit of 0.661 billion yuan in 2025. The current stock price corresponds to the 2024/2025 price-earnings ratio of 13.6 times/12.2 times. Maintaining an outperforming industry rating, due to increased freight rate fluctuations and pressure on the company's profits, we lowered our target price by 28% to 7.20 yuan, which corresponds to 15.9 times the price-earnings ratio of 2024 and 14.3 times the price-earnings ratio of 2025. There is room for an increase of 17.1% compared to the current stock price.

risks

The company's direct customer revenue fell short of expectations; shipping price fluctuations; international trade frictions; overseas demand fell short of expectations.