Introduction: The global supply chain pattern in the African market in the context of supply chain restructuring is being reshaped. In order to ensure the safety of energy and strategic minerals, the “Belt and Road” countries have become the source countries for China's upstream resources. Jiayou International is a leader in setting up cross-border business in the “Belt and Road” countries. It pioneered the large-scale logistics model based on dry port operations in Mongolia and Africa, that is, it lays out core logistics assets in a forward-looking manner at ports. Along with the rapid expansion of upstream production capacity, it earns money from increased capacity utilization. 1) China-Mongolia model: Continued layout of customs supervision sites in the early stages to open up the service chain. Since 2022, Mongolian coal imports have increased rapidly, and the gross profit of the main coking coal supply chain increased by 207% in 2021-2023. 2) China-Africa model: Taking the lead in building dry port projects and integrating cross-border transportation networks in the Democratic Republic of the Congo (DRC). Currently, the DRC (DRC) mines are entering a production expansion cycle, and the production capacity of dry port projects is expected to climb rapidly. Focusing on the company's African business, this report focuses on estimating the Democratic Republic of the Congo (DRC) logistics space and the growth value of the company's business in Africa by referring to mining production capacity, trade structure, and logistics costs of mining companies in the Democratic Republic of the Congo (DRC).

Democratic Republic of the Congo (DRC): Hinterland of copper and cobalt resources, road blocked and long way to go

The Democratic Republic of the Congo (DRC) is rich in copper and cobalt resources, benefiting from the continuous expansion of mining capacity in the Democratic Republic of the Congo (DRC). In 2023, the Democratic Republic of the Congo (DRC) became the world's largest producer of cobalt and the second largest copper producer. China and the Democratic Republic of the Congo (DRC) adhere to the principle of win-win cooperation and adopt the “minerals for infrastructure” approach for collaborative development. Luoyang Molybdenum Industry and Zijin Mining rank among the top two in terms of copper resources in the Democratic Republic of the Congo (DRC). From 2024-2025, important Chinese mining companies such as Zijin Mining and Luoyang Molybdenum have entered a production expansion cycle in the Democratic Republic of the Congo (Gold) mining projects. The compound growth rate of production is expected to exceed 15% in the next 2 years, driving the continuous rapid increase in demand for cross-border transportation of minerals. However, rail resources are scarce in the Democratic Republic of the Congo (DRC), and road transportation is the main method. Copper concentrate exports mainly reach Durban and Dar es Salaam ports through other countries through Kasumbaleza and Sakania. The traditional Kasumbaleza port has seriously limited the efficiency of vehicle transportation due to poor infrastructure and inefficient operation. The Sakania road project built by Jiayou International has become an important export channel, effectively alleviating the pain points of transportation.

Towards Africa: Major logistics model upgrade, broad room for growth

The CASA project invested and built by the company has opened up a new export channel for the Democratic Republic of the Congo (DRC). In the short to medium term, port traffic volume has risen rapidly, combined fleet acquisitions have contributed to profits, and the performance of the African market has grown rapidly. According to estimates, according to neutral forecasts, the export volume of the Democratic Republic of the Congo (DRC) is 800 vehicles/day. Assuming a fleet profit margin of 15%, the profit contribution of the African market is expected to reach 0.58 billion yuan in 2024. From a medium- to long-term perspective, we are optimistic about the increase in traffic volume due to the volume of minerals released in the Democratic Republic of the Congo (DRC). The size of the company's fleet is expected to continue to increase, and regional highways and ports in Africa will gradually form an integrated integrated transportation network. In the medium to long term, the neutral forecast is that the market share of the fleet will reach 15%, the average daily traffic volume of the CASA project will stabilize at 1,800 vehicles/day, and the profit contribution of the African market will reach 1.77 billion yuan, which is expected to rebuild Jiayou.

Investment advice: Africa's performance is being released at an accelerated pace, and the company can be expected to expand and grow its network is laying out core logistics infrastructure in Mongolia, Africa, Central Asia and other regions to achieve “logistics+trade+resources” collaborative development from point to point. In the China-Mongolia business, the Mongolian coal cooperation signed by the company and MMC in 2024 continues to expand, combined with further improvements in port customs clearance efficiency, which is expected to support the rapid growth of coking coal traffic. The China-Africa business, the volume of production capacity in the Democratic Republic of the Congo (DRC) mines, and the company's logistics assets in Africa continue to be upgraded. Subsequent bonded warehouses for the CASA project will further improve port efficiency. The company acquired Zambia's largest trucking company to integrate cross-border transportation services in central and southern Africa. The Dilolo project and the Sakania project in Zambia are being closely prepared, laying the foundation for the construction of an African dry port cluster network. In the Central Asian business, the company continues to develop cooperation projects, and it is expected that it will fully enjoy the dividends of interconnection in the Central Asian market. The company's net profit for 2024-2026 is expected to be 1.36/1.57/1.79 billion yuan, respectively, and the corresponding PE is 12.3/10.7/9.3X, respectively, maintaining a “buy” rating.

Risk warning

1. Demand for Mongolian coal falls short of expectations; 2. The production capacity of the Casa project in Africa falls short of expectations; 3. Risk of geopolitical fluctuations; 4. Risk of unfounded profit forecasting assumptions or falling short of expectations.