Financial data showed a high growth rate
The company achieved operating income of 1.38 billion yuan in the first half of 2023, up 64.0% year on year; cumulative net profit of 255 million yuan, up 88.2% year on year in the first half of the year. Among them, energy logistics (Hongnao Railway, Liugou Logistics Park) achieved net profit of 149 million yuan; net operating cash flow was 588 million yuan, up 163.6% year on year; net operating cash flow was 588 million yuan, up 8.8% year on year. The gross margin of the main business increased by 8.2 pct to 42.4% year on year.
The Linha Link Line project alleviated the long-term transportation bottleneck, and finally showed a new business pattern. On June 26, 2023, Guanghui Logistics's Linha Link Line project was approved by the autonomous region. The subsequent commissioning and production of the project, combined with the addition of 8 Linha Railway stations from the end of last year to the first half of this year, will allow the opening and operation of the station. The Linha Railway may be able to handle additional foreign traffic volume of Jiangha coal. The opening of the North Corridor can ease the tight capacity problem of the Lanxin Railway. The Lanxin Railway still needs to operate a considerable number of passenger trains. On the other hand, in the first half of the year, China-Europe trains operated a total of 8,641 trains and sent 936,000 TEUs, an increase of 16% and 30%, respectively, over the previous year. Both aspects may have a certain squeezing effect on the capacity of the Lanxin Railway, so the opening of the North Corridor is of great significance.
Furthermore, the joint operation of the Lanxin Railway and the Linha Railway can help the company to manage sales in more detail. Considering that Ningxia currently has many coal chemical projects, there is a potential gap between coal supply and demand, so the Linha Railway may be mainly shipped to the Ningxia region. In the end, the company's operations may present a pattern of “Lanxin Railway - Guangyuan Logistics Base” and “Linha Railway - Ningdong Logistics Base”.
Progress in the Malang coal mine, completion and opening of the Nao Railway to traffic, or paving the way for increased traffic volume According to the announcement issued by Guanghui Energy on August 2, 2023, the Malang Coal Mine has obtained a capacity replacement commitment letter and a project code for the national online approval and supervision platform for investment projects. In the future, approval procedures may be further promoted. If the mine is put into operation later, it may bring additional coal shipments to the Hongnao Railway.
The Nao Railway is expected to be put into operation in September 2023. The project, along with the Hongnao Railway, runs through the two major coal bases in Hami and Zhundong. It is expected that after completion and opening to traffic, it may provide a certain amount of cargo for the Hongnao Railway.
Profit forecast and valuation: Originally, we predicted the company's net profit forecast of 11.47/18.87/2,670 million yuan for 2023-2025, but considering risks such as insufficient number of wagons and containers, we adjusted the company's net profit for 2023-2025 to 815/14.04/2,221 million yuan. The PE corresponding to the closing price on August 30, 2023 was 9.11/5.29/3.34 times, respectively, maintaining the “buy” rating.
Risk warning: the completion time of the Nao Railway was slower than expected; demand fell short of expectations due to slower than expected coal chemical production in Ningxia; the completion time of the logistics bases in Guangyuan and Ningdong was slower than expected; the completion time of the Linha Link Line was slower than expected; the Linha Railway renovation could not be completed on schedule; the insufficient number of wagons and containers made it impossible to meet the needs of increased traffic volume; coal prices fell beyond expectations