The company announced the 2024 mid-year report performance forecast: 24H1 is expected to achieve net profit of 0.75-0.8 billion yuan to mother, an increase of 48%-58% over the previous year. 1) 2024H1 is expected to achieve net profit of 0.75-0.8 billion yuan to mother, an increase of 48%-58% over the previous year. It is estimated to achieve net profit of 0.74-0.79 billion yuan after deduction, an increase of 50%-60% over the previous year. 2) The estimated net profit for 24Q2 was 0.44-0.49 billion yuan, up 45%-62% year-on-year and 43%-59% month-on-month; net profit without return to mother was 0.43-0.48 billion yuan, 48% to 65% year-on-year, and 42%-58% month-on-month. Net profit for 24Q1 was 0.31 billion, up 51.9% year over year.
According to the company's announcement, the main reasons for the increase are: 1) The booming market in China and Mongolia. From January to May 2024, bilateral trade volume between China and Mongolia reached RMB 51.9 billion, an increase of 14.9% over the previous year. The company has explored a highly competitive “resource+trade+logistics” business model to enhance its competitiveness and profit margin. 2) Business development in the African cross-border logistics market kicks off. In the first half of 2024, the traffic flow and freight volume of the Kassa dry port project in the Democratic Republic of the Congo (DRC) increased steadily; after completing the acquisition of well-known cross-border transportation companies in Africa, the company further deepened the layout of the African inland transportation business network and built a transportation network in central and southern Africa integrating highways, ports, logistics nodes and ports. 3) Business continues to grow in the Central Asian market. From January to May 2024, the import and export trade volume between China and the five Central Asian countries reached 259.6 billion yuan, an increase of 14.8% over the previous year; the import and export cargo volume at Khorgos Port exceeded 17 million tons, an increase of 12% over the previous year.
The company's China-Mongolia chassis business+Africa's second-largest growth curve layout is clear. 1) Continue to consolidate the chassis business in China and Mongolia to achieve steady growth. The company's China-Mongolia business continues to deepen and mature, from establishing core port warehousing hub nodes to developing logistics business, to signing long-term associations and investing in mine shares to strengthen logistics business, forming a virtuous circular model where the “warehousing-logistics-long-term association-resources” business is deepened and mutually reinforcing. On the Changxie side, since the company signed a long-term agreement with ETT, Mongolia's largest mine in 2021, it signed a 10-year long-term agreement with Mongolia's second-largest mine MMC in February 2024 to further enhance the company's market competitiveness. In terms of resources, the company took a 20% stake in KEX held by BNS, a subsidiary of MMC, to strengthen its rights to stock and feed back and strengthen the company's logistics strength. 2) Start a large market business in Africa. The company has replicated and upgraded the African market with many years of operating experience at the Sino-Mongolian port. In terms of assets, the company establishes barriers through the construction and operation of border roads and ports.
The Kincasa Project in the Congo is already running as scheduled. The company also obtained the Congolese Kindilolo Road and Port Project and the Sakania Road and Port Project in Zambia in March 2023 and October 2023, respectively. The barriers to competition continue to rise. In terms of general logistics, the company actively lays out inland transportation business in Africa and carries out logistics business such as mineral resources. The company plans to acquire the BHL fleet in October 2023, start its own fleet service from 0 to 1, gradually expand its influence in the region, and gradually improve the logistics landscape in Africa.
Investment suggestions: 1) Profit forecast: Based on the company's business development, we raised the company's 24-26 profit forecast to 1.49, 1.77, and 2.03 billion yuan (the original forecast was 1.3, 1.55, 1.81 billion yuan), corresponding EPS was 1.52, 1.82, and 2.07 yuan, respectively, and the corresponding PE was 12, 10, and 9 times, respectively. 2) Investment advice: We maintain the original valuation method and give the company an estimated profit of 18 times PE in 2024, corresponding to a one-year target market value of 26.8 billion yuan and a target price of 27.4 yuan. It is expected that there is 51% room compared to the current price, and emphasizes the “strong push” rating.
Risk warning: geopolitical risks, economic downturn, etc.