Description of the event
With 2024Q1, the company achieved operating income of 2.0 billion yuan, an increase of 26.0% over the previous year; the company achieved net profit of 310 million yuan to mother, an increase of 51.9% over the previous year.
Incident comments
Mongolian coal's business volume has increased rapidly, and short-term freight rates have been sluggish. 2024Q1, the average daily traffic volume at Ganqimaodu Port was 933 vehicles/day, an increase of about 9.4% over the previous year. The average short market price of 2024Q1 was 115 yuan/ton during the period, down about 63.3% year on year, and the price of main coking coal fell back to suppress short market prices. However, the company supported the growth of Mongolian Coal's business performance with the Mongolian Coal General Cooperation contract.
The CASA project climbed rapidly and boosted the profitability of the African business. The 2023Q1 Casa Port is still in the trial operation stage. Traffic volume climbed rapidly after the official operation of the 2023H2 port, and the year-on-year increase in 2024Q1 traffic volume boosted the profits of the dry port project.
Business volume grew significantly, and Q1 results exceeded expectations. 2024Q1, the company's gross profit increased by about 90 million to 350 million yuan over the same period last year. The increase in the company's profit mainly comes from: 1) the rapid increase in the company's Mongolian coal business volume, which supports a high increase in trade business in the main coking coal supply chain; 2) the high increase in traffic volume at Casa Port, which increased the profits of dry port projects. 2024Q1, the company's sales/management/R&D/finance expense ratio was +0.03pct/-0.32pct/+0.07pct/+0.10pct, and management cost control was good. Ultimately, the company's net profit to mother increased by 100 million to 310 million yuan year-on-year.
The acquisition is progressing smoothly, and profits are expected to continue to grow. In October 2023, the company's subsidiary plans to acquire 80% of BHL's shares, which is expected to strengthen the construction of transportation networks in highways, ports and ports. In February 2024, Jiayou International acquired 20% of the shares in the Mongolian mine KEX and signed a long-term coal cooperation agreement with MMC to ensure a stable supply of coal. As of 2024Q1, the company has completed the overseas investment filing procedures for the acquisition, and the acquisition project is expected to be successfully implemented.
New projects are being prepared one after another, and capital expenditure is rising. 2024Q1, the company's capital expenditure was 150 million yuan, an increase of 202.6% over the previous year, mainly for construction expenses for the DiLolo project and the Sakania project in Zambia. 2024Q1, the company's net operating cash flow was 100 million yuan, a year-on-year decrease of 59.1%, mainly due to an increase in procurement of coking coal.
The basic logistics network continues to be deepened, and the second curve is growing at an accelerated pace. Considering the subsequent merger of the BHL fleet and the completion of the KEX acquisition, it is expected that profits will continue to increase. Along with the expansion of production capacity in the Democratic Republic of the Congo (DRC) mines, traffic volume is expected to continue to increase, and projects such as superimposed bonded warehouses will continue to be implemented, and business growth in Africa can be expected. The company's net profit for 2024-2026 is estimated to be 13.3/15.7/1.79 billion yuan, and the corresponding PE is 13.4/11.3/10.0X, respectively, maintaining a “buy” rating.
Risk warning
1. Demand for Mongolian coal fell short of expectations;
2. The production capacity of the African Casa project fell short of expectations;
3. The risk of geopolitical fluctuations.