[Core Conclusion] Short-term demand pressure has led to a relatively low valuation, and the investment is relatively cost-effective. The company's net profit for 24-26 is estimated to be 326/4.19/522 million yuan, and the corresponding EPS is 0.71/0.91/1.13 yuan. We believe that the valuation of the company is higher than that of comparable companies, which is reasonable. From the perspective of changes in the company's historical valuation cycle, demand pressure has caused the current valuation to be relatively low, and there is a certain degree of undervaluation. Using the average of 25% and 50% quantiles of the historical expected PE, that is, 24.6 times PE, as a reasonable valuation of the company, the corresponding target price is 17.42 yuan. First coverage, giving a “buy” rating.
[Report Highlights] We believe that the valuation pressure caused by insufficient short-term demand is an opportunity to improve the cost effectiveness of investment. Based on an analysis of the expansion path, we determine that the company's high growth is sustainable. Combined with PE-band, we believe that the company is currently likely to be undervalued, and the investment value is high.
[Main logic] The company's petrochemical warehousing business has high barriers and is supported by medium- to long-term demand growth. Characteristics such as strict supply-side supervision, scarce resources, large upfront investment, and long construction cycles have built high barriers to the industry.
The concentration of the industry is low. About 86.4% of enterprises share less than 1.2% of the tank capacity market, but there is basically no competitive relationship between companies that are more than 100 kilometers away. In the medium to long term, economic recovery and the gradual commissioning of major refining and chemical projects, combined with an increase in the water transport penetration rate, will drive demand growth in the industry.
Both of the company's main businesses have maintained rapid development and are high-quality assets with a high growth rate. In 2023, the revenue growth rate of the terminal storage tank business is about 23% (accounting for more than 88% of revenue), and the gross margin is expected to remain around 55% in the medium to long term; the growth rate of the chemical warehouse business is about 42%. As chemical warehouses under construction are gradually put into operation, it is expected to maintain rapid growth in the medium to long term.
The company is a leader in the industry. The “mergers and acquisities+high leverage” expansion method has achieved good results, is sustainable, and has manageable financial risks, and is expected to continue to drive high growth in the future. In 2023, the total tank volume market share was about 11.5%, making it the industry leader. Since its listing in 2018, about 84% of the company's new holding capacity has been obtained through mergers and acquisitions, so the balance ratio reached 68.3% in 2023. We believe this is due to the supply-side characteristics of the industry. According to our estimates, the company's expansion method is sustainable and the financial risk is manageable. Judging from the company's overall revenue growth and the operating performance of the acquired enterprises after the merger and acquisition, the company has strong enabling capabilities, and the merger and acquisition results are relatively good.
Risk warning: demand continues to fall short of expectations; the pace of commissioning of mergers and acquisitions or self-built chemical warehouses falls short of expectations; risk of hazardous chemical storage accidents; financial risks due to high leverage; assumptions and profit forecasts fall short of expectations.