(report producer/analyst: Guosen Securities Gao Sheng Jiang Ming)
Company profile
Company history and business profile
Company was established in 1997 and operates domestic coastal refined oil transportation business and related agency business. In June 2002, with the approval of the Ministry of Transport, it obtained the operating qualifications for the transportation of refined oil and bulk chemicals between domestic coastal, Yangtze River and Pearl River water systems.
Since 2008, the company's fleet size has been continuously expanding and was listed on the Shanghai Stock Exchange motherboard in March 2022. As of 22H1, the company's chemical ship capacity accounted for about 9.67% of the industry, and the transportation volume accounted for 10.4% of the industry, ranking first.
Company is a typical private family business. The actual controller Chen Xingming holds 28.26% of the company's shares. His children Chen Qilong, Chen Qide and Chen Qifeng hold 2.10% of the company's shares respectively. The family holds a total of 34.56% of the company's shares.
The current actual controller Chen Xingming is the chairman of the company, Chen Qilong serves as the company's vice chairman and general manager, Chen Qide and Chen Qifeng serves as the company's directors and deputy general managers respectively, and the Chen Xingming family has actual control over the company.
Liquid dangerous goods water transportation: a high entry threshold for growth industry
Industry demand has expanded rapidly with the development of my country's large-scale refining and chemical industry
Liquid dangerous goods are mostly related products of the petroleum and refining industry.
Liquid dangerous goods include crude oil, refined oil, liquid chemicals, liquefied petroleum gas (LPG) and liquefied natural gas (LNG), etc. In recent years, global refining and chemical production capacity has shown an overall growth trend. According to BP data, global refining and chemical production capacity has increased from 93.87 million barrels per day in 2010 to 101.95 million barrels per day in 2020, with an annual compound growth rate of 0.83%. The continued expansion of global refining and chemical production capacity has promoted the continuous expansion of the global liquid dangerous goods trade scale and stimulated the booming development of the liquid dangerous goods shipping industry.
The domestic refining and chemical industry has the world's leading development speed, and the liquid hazardous chemical logistics market scale continues to expand.
In recent years, as my country has started the quality upgrade of the petrochemical industry through integrated refining and chemical construction, the number of large refineries of tens of millions of tons in China has been increasing, and the petroleum refining capacity has been rapidly improved.
According to BP data, my country's refining and chemical capacity increased from 12.32 million barrels per day in 2010 to 16.69 million barrels per day in 2020, with an annual compound growth rate of 3.08%, significantly higher than the global average growth rate.
Sino Petroleum and Chemical Corporation Economic and Technical Research Institute released the "2021 China Energy and Chemical Industry Development Report" predicts that in the 14th Five-Year Plan, the domestic refining capacity will be 110 million tons, and the total refining capacity will be close to 1 billion tons/year, which is expected to surpass the United States to become the world's largest refining capacity.
Most of my country's refining and chemical bases are located in coastal provinces, and water transportation also meets the needs of low cost, environmental protection and safety in bulk transportation.
From the perspective of bulk liquid chemical production, in order to improve the structural problems of backward overcapacity and insufficient advanced production capacity left by the rapid development of my country's refining industry before the 13th Five-Year Plan, the National Development and Reform Commission issued the "Petrochemical Industry Planning and Layout Plan" in 2015, planning Shanghai Caojing, Zhejiang Ningbo, Guangdong Huizhou, Fujian Gulei, Dalian Changxing Island, Hebei Caofeidian, and Jiangsu Lianyungang as seven major petrochemical industry bases, which initially laid the basic layout of downstream large refining and chemical bases. With the construction of new large refining and chemical integration bases such as Zhoushan Green Petrochemical Base and Meizhouwan Petrochemical Base in the past two years, the layout of refining and chemical bases in my country's petrochemical industry has become increasingly perfect. The connection between upstream and downstream chains of
and the mismatch between supply and demand in the off-site areas have caused a large amount of water transportation demand.
by region, North China is the main production area of primary chemicals in China; East China is both the main production area of primary chemicals and the main production area of chemicals for fine processing and consumption; South China is the main production area of chemicals for fine processing and consumption.
is based on the significant regional differences between the supply and demand sides of the bulk liquid chemical market. In addition, the large refineries in my country are all located in coastal areas, and water transportation has unique advantages over roads and railways, which has generated huge demand for water transportation of bulk liquid chemicals.In addition, the top-level vigorously promotes the conversion of water to road and railway, which has also boosted the market demand for water transportation of hazardous chemicals in my country in recent years.
Domestic refining and chemical bases are still in full swing, and water transportation demand is expected to continue to increase.
Under the leadership of Hengli Petrochemical and Zhejiang Petrochemical, the industry has entered a production expansion cycle since 2019. Zhongke Refining, Sinochem Quanzhou , Huizhou CNOOC/Shell, Hainan Refining, Gulei Refining, etc. have all expanded their production capacity between 2020 and 2021.
Shanghai Shipping Exchange data shows that Yantai Wanhua 1 million tons ethylene device , Qianhai Group Yihong Petrochemical 15 million tons refining, Huajin Petrochemical 15 million tons refining, Xizhongdao (Central Petroleum Corporation) 15 million tons refining, and Sinopec ’s large-scale refining projects in Caofeidian and Shanghai Caojing bases are expected to be completed and put into production in the next three years.
At the same time, under the European energy crisis, the closure of a large number of refineries has brought about a significant improvement in the status of my country's refining and chemical industry in the world, and "going out" may open the ceiling for the industry.
Since the global impact of the new crown epidemic in 20 years, global oil consumption has always been at a low level. Sluggish demand and rising oil prices have led to a continuous decline in profits of refineries. After five years, it has triggered a wave of closures in European refineries. At present, the Antwerp refinery in the United Kingdom has stopped processing crude oil, the UK's Grangemos may seal two units, and the French Grandpuits refinery will also permanently stop crude oil processing business.
Under this background, the market share of domestic refineries has been effectively increased. On the one hand, it has reduced the dependence of my country's chemical products on the outside. On the other hand, since it will take time for the refinery to restart, my country's refineries are expected to seize the market during this period and their competitiveness will be greatly improved.
According to the results, the demand for coastal chemical transportation in 21 has begun to show an accelerated increase, and the future may be more promising with energy refining pattern. In the whole year of 21, my country's inter-provincial chemical transportation volume was about 36.5 million tons, an increase of 10.6% year-on-year, returning to the trend of double-digit growth.
Since 2018, domestic refining and chemical bases have been put into production, my country's coastal chemical transportation demand has still entered the fast lane. However, due to the high dependence of my country's petrochemical products on the outside, domestic chemical transportation companies do not yet have the foundation to follow refining and chemical companies to go overseas and enter the international market. With the transfer of refinery production capacity in Europe and the United States, the demand for chemical transportation is expected to increase at an accelerated pace.
The competitive landscape of the industry continues to improve, and the concentration of the head has increased
21st century, the water transportation of liquid hazardous chemicals has gone through 3 development stages:
Barish development period (before 2006): Before 2006, domestic coastal bulk liquid chemicals had not yet formed a complete regulatory system, and the industry showed a development trend of disorderly expansion, and the number of ships and capacity scale grew rapidly, but the scale of enterprises and ship tonnage were generally small.
At this stage, my country's integrated refining and chemical development is still in its infancy, the overall foundation of the petrochemical industry is relatively weak, the demand for water transportation of bulk liquid chemicals is limited, and the industry is disorderly competition and overcapacity are serious.
Supply and Demand Repair Stage (2006-2018): In 2006, the Ministry of Transport issued a document stating that the approval of new domestic coastal cross-provincial shipping capacity will be suspended within a certain period of time; subsequently, in order to strengthen market management, the Ministry of Transport has successively issued a series of control policies on new capacity and approval of new operators, which effectively curbed disorderly competition in the industry and continued to improve the level of industry standardization.
At this stage, affected by the rapid increase in the terminal demand for chemicals in my country, my country's refining and chemical industry has been stimulated to flourish. Large-scale refining and chemical integration projects represented by Fujian United Petrochemical have been put into production one after another, and the intensive level of my country's petrochemical industry has been continuously improved. With the gradual upgrading of downstream refining and chemical equipment and technology, the market supply and demand structure has gradually improved. After 2016, domestic coastal inter-provincial chemical ship capacity has transitioned from a significant excess of supply to a relatively balanced supply and demand.
booming period (2019 to present): has been completed and put into production during the 13th Five-Year Plan period, and industry demand has continued to expand, while the growth of supply is relatively limited due to policies, and the domestic market is showing a tight transportation capacity in the short term.
Take 2019 as an example. When Zhejiang Petrochemical Refining and Chemical Base was put into production, there was a clear supply and demand in the industry. The Ministry of Transport approved the capacity of 3 large ships to meet Zhejiang Petrochemical's urgent transportation needs, adding two new batches of capacity indicator quotas this year for the first time in many years. The current industry barriers are reflected in both policy and scale, and the industry Matthew effect is expected to increase day by day.
Policy 1 (Access Policy): Domestic trade water transportation restricts foreign investment access, and business requires qualification licenses, while the barriers to water transportation of hazardous chemicals are higher. For domestic trade water transportation, according to the " Domestic Water Transport Management Regulations ", enterprises engaged in domestic water transportation should own ships that are suitable for the scope of their business areas, and the ships should hold the issuance of " Ship Business Transport Certificate ", "Ship Ownership Registration Certificate", " Ship Nationality Certificate ", " Ship Inspection Verification Certificate " and other certificates.
. Since hazardous chemical water transportation involves chemical safety, the requirements are stricter. If you apply for the transportation of inter-provincial chemicals and refined oil on the coast, the capacity of your own inter-provincial chemical ships and refined oil tankers shall not be less than 5,000 gross tonnes.
Liquid dangerous goods shipping companies must establish safety management system in accordance with relevant national regulations, and must obtain a certificate of compliance with the liquid dangerous goods safety management system (DOC certificate) issued by the maritime department covering the types of ships they operate. In addition, in order to meet the strict screening standards for large customers, liquid hazardous goods carriers need to pass a series of international safety certifications.
The international safety transportation evaluation standards for domestic chemical ships participating in include CDI inspections of the Chemical Distribution Association (CDI), SIRE inspections of the Petroleum Company International Maritime Forum (OCIMF), etc. In addition, there are quality management system review (MR) and OCIMF's liquid cargo ship management and self-assessment (TMSA) for chemical transport companies' own management systems.
Policy 2 (Supply Regulation): In terms of supply, the Ministry of Transportation has limited annual new total capacity indicators according to "total quantity regulation, selection of the best", and only industry enterprises with high ratings in the comprehensive review of new capacity can obtain new capacity.
If the new capacity indicator is not obtained, the ship owner can only obtain new capacity through capacity updates, that is, "refund one and make up one" or "refund one and make up one", and the scale of the new capacity shall not be higher than 150% of the scale of the withdrawal capacity.
In addition, benefiting from the "Special Management Measures for Foreign Investment Access in Free Trade Pilot Zones (Negative List) (2019 Edition)", domestic water transport companies must be controlled by China. Foreign investors shall not operate or rent Chinese ships or cabins to operate domestic water transport business and their auxiliary businesses in disguise; without the approval of the Chinese government, water transport operators shall not use foreign ships to operate domestic water transport business.
Thanks to the above policies, the industry's capacity has expanded in an orderly manner, while the capacity withdrawal is relatively positive, and the number of ships has grown slowly.
In terms of the number of ships, the total number of ships in the industry has only a small net increase in the past decade. According to data from the Ministry of Transport, the industry had 261 ships at the end of 2012, and at the end of 2021, the data was only 284 ships, and the net increase was only 23 ships. According to data from 52Hz of oil and chemicals, as of the end of 2021, there were only 276 coastal liquid chemical ships with domestic trade transportation qualifications and actually operated domestic trade transportation within the year. The reason behind this is that the new capacity needs to be approved before it can be launched, and the number is relatively limited. The ship owners are also more active in withdrawing old ships. Taking 2021 as an example, in 21, the industry added 17 new capacity in 21, but the capacity withdrawn at the same time was as high as 16, which brought about a low growth in the industry's capacity. In terms of scale of
, the phenomenon of the industry's ship capacity structure developing towards large shipments since 2017 is more obvious, which is expected to bring about a decrease in operating cost of per unit .
Although the industry's capacity growth is not obvious, since 2017, the proportion of large ships with a load of more than 5,000 dwt in the new capacity indicator has increased significantly, bringing about a significant increase in total tonnage. As of the end of 21, the industry's capacity has reached 1.289 million tons, which is significantly faster than the number of ships.
average single-ship capacity increased from 3,800 dwt in 2012 to 4,500 dwt in 21 years. A larger ship type means a stronger scale effect. While meeting customers' transportation needs for larger batches of goods in a single time, the unit cost of is expected to show a significant decrease in .
downstream petrochemical customers are all large in scale, with relatively diverse transportation demand, and have high requirements for the scale of transportation companies.
Downstream large petrochemical enterprises have many types of products, large output and transportation demand, and the refining and chemical bases are distributed in multiple areas and there are many transportation routes. Therefore, high requirements are placed on the capacity scale, number of ships, transportation efficiency, route coverage network of transport enterprises. Only industry enterprises with a certain capacity scale, a reasonable capacity structure, and a complete transportation network to form an economies of scale can meet their safe, diverse and timely transportation requirements and needs.
In addition, enterprises with economies of scale have stronger capacity scheduling capabilities, can improve market coverage, obtain more customer resources, and connect with larger-scale freight demand.
Ship dispatch is the main task of shipping companies' business management, and the main content is to arrange and supervise the execution of voyages. Shipping companies generally have multiple business segments, and various departments work together to ensure the completion of ship transportation tasks and ensure the normal operation of the company.
Ship scheduling is an important production and operation link that is related to the economic benefits of fleet transportation, overall structural optimization, and thus affects the competitiveness and survival and development capabilities of enterprises.
A reasonable ship scheduling plan can reduce operating costs, maximize the utilization of customer resources, increase the heavy load rate, and help enterprises achieve cost reduction and efficiency improvement.
The smooth implementation of each voyage, keeping the cargo to the destination with quality, quantity and on time, is the key to enhancing the competitiveness of shipping companies. As for the current industry structure, due to strict indicator control, new entrants are unable to participate in capacity approval without their own fleets, so they cannot build new coastal chemicals and refined oil fleets, and the probability of new competitors appearing in the industry is already small.
. Shipowners who already have a certain scale in the industry will also be differentiated. Leading companies can continue to expand their fleet size to increase their market share through the approval of new capacity every year. The capacity scale of a single ship is expected to gradually increase, bringing cost-side optimization, and their advantages over second-tier ship owners will continue to expand.
Although the current competitive landscape of the industry is still relatively scattered, the trend of concentration towards the head has begun.
As of 2021, the top six ship owners have only controlled less than 30% of the industry's transportation capacity. Among them, Xingtong and Shenghang, as the industry leader, have controlled about 18.34% of the industry's transportation capacity, and small chemical shipping companies still dominate the industry. However, benefiting from the preferential distribution of capacity and the reflection of scale effects, the competitiveness of the leading ship owners and the concentration of the industry are constantly increasing. During 2019-2021, the proportion of CR2 transportation volume increased from 14.9% to 22.6%.
Company Business Analysis
Company is the first market share coastal liquid hazardous chemical water transportation service provider
Company has occupied a leading position in the field of coastal liquid hazardous chemical water transportation.
As of September 2022, the company has a total of 20 bulk liquid chemical ships, refined oil, and liquefied petroleum gas ships, with a total capacity of 200,300 dwt, including 13 bulk liquid chemical ships and a capacity of 135,300 dwt.
According to statistics from oil chemical 52HZ, in the first half of 2022, there were 269 liquid chemical ships operating normally on domestic coastal domestic trade routes, with a total load of 1.383 million load tons. At the end of the first half of the year, the company's liquid chemical capacity accounted for about 9.67% of the total market capacity, ranking as a leading position in the country.
The company's fleet structure is characterized by large-scale, high-end, and high-speed .
In terms of large-scale, the largest chemical ship capacity in the company's fleet has reached 44,997.4 dwt, and the largest refined oil tanker has reached 49,962 dwt. The proportion of ships above 5,000 dwt is more than 86%. The large-scale ship can effectively cater to the large-scale freight demand generated by the gradual completion and commissioning of downstream petrochemical industry bases, and promote the reduction of transportation costs.
In terms of high-end development, in order to further improve the cargo adaptability of the ship, the company has newly built ships using duplex stainless steel cargo holds. Among them, "Xingtong 6" and "Xingtong 56" put into operation in 2019 are among the few single-cargo single-pump duplex stainless steel high-end chemical ships in domestic coastal transportation. The company's existing stainless steel ship types account for nearly 30%, which can effectively meet the transportation needs of high-end customers of fine chemical products. In terms of the new rate, as of June 30, 2021, the average age of the company's chemical transport ships was 8.52 years, which is at a lower level compared with the average age of 10.90 years (as of June 30, 2021) of my country's coastal inter-provincial transport chemical ships (including chemicals and oil-based dual-purpose ships)
The company has strong overall competitiveness. With the support of funds, the main business is expected to further consolidate
Relying on its excellent security management system, business scale and management level, the company has won the first place in the review of new capacity, and its capacity has been continuously expanded.
The results of the new capacity review organized by the Ministry of Transport each year are an important indicator for evaluating the competitiveness of enterprises. The review requires a comprehensive review of the relevant qualification compliance, safe and green development, law-abiding integrity and service status, production and operation performance of the applicant, and put forward high requirements for the business scale, management level, safety records, and honest operation of the industry and enterprises.
Since the Ministry of Transport adopted the macro-control policy for transport capacity, from 2012 to the present, the company has obtained a total of 95,500 new capacity in chemical ships, accounting for 22.32% of the new capacity in the market during the same period, ranking first in the industry and ranked first in the four new capacity reviews in 2019, 2020 and 2021.
The company's route network is complete and can meet customer needs in all aspects.
's route network takes the main domestic coastal port groups such as the Bohai Rim, the Yangtze River Delta, the southeast coast, the Pearl River Delta and the southwest coast, as well as the main port groups in the lower reaches of the Yangtze River and the Pearl River Basin as nodes. It radiates to the major domestic chemical industry bases such as East China, the Yangtze River Delta, the Bohai Bay, the Pearl River Delta, and the Pearl River Delta. It can access the main water systems in the coastal areas of the country and the Yangtze River, the Pearl River basin. While providing more customers with safe, environmentally friendly and high-quality transportation services, it can flexibly arrange and coordinate ship capacity according to the saturation of the business, optimize the transportation network and maintain a low no-load rate, provide customers with efficient services, and help increase the company's market share and reduce operating costs.
company loss rate is significantly lower than that of general contracts, saving costs and creating value for customers.
bulk liquid chemicals have volatile and permeable properties. During transportation, the general contract terms stipulate reasonable losses of 2‰-3‰, and the excess will be borne by the transportation company.
Company effectively guarantees ship performance through refined management of ship equipment, sealing maintenance of key facilities such as pipelines and hatches, and information systems, so that the company's cargo loss rate is at a low level. During the 2019-2021 period, the company's average cargo loss rate was 0.47‰, 0.28‰, and 0.24‰, respectively, showing a continuous downward trend, reducing cargo losses for customers to 4352.68 tons, 6581.21 tons, and 9704.85 tons, respectively.
Relying on the company's strong competitiveness, the company is deeply bound to domestic customers, and customer resources have also become one of the company's core competitiveness.
Company has established long-term and stable strategic cooperation relationships with large petrochemical companies such as Sinopec, Fujian United Petroleum, Zhejiang Petrochemical, China National Offshore Oil Corporation , CNOOC Shell, Hengli Petrochemical, China Aviation Oil Corporation , and has obvious customer resource advantages.
The shipping service of the company has become an indispensable supply chain link in customers' daily production. Therefore, the company's customers have extremely strong stickiness, which has laid a good foundation for the sustainable development of the company's business.
21, the revenue contributed by the company's top five customers accounted for as much as 71.65%.
Company successfully logged into the secondary market in 2022 and raised 990 million yuan, mainly for the expansion and upgrading of chemical fleets and refined oil fleets.
According to the company's IPO fundraising and investment project and subsequent modifications to the fundraising and investment project, the company plans to purchase 1 12,500 tons of stainless steel chemical ship, 1 5,500 dwt stainless steel chemical ship, purchase 1 27,000 dwt domestic trade chemical ship, purchase 1 27,000 dwt foreign trade chemical ship, build 1 13,000 dwt foreign trade chemical ship, 1 50,000 tons of MR finished oil tanker, and build 2 new stainless steel chemical ships (transport capacity of 8,000 dwt and 7,450 dwt respectively) to replace the company's existing two ships (6,517 dwt "Xingtong Oil 59" and 4,993.4 dwt "Xingtong Oil 69").
This will bring the company a growth in chemical ship capacity of 89,000 tons (49,000 tons domestic trade, 40,000 tons foreign trade) and a growth in refined oil capacity of 50,000 tons. Further consolidate the company's capacity scale advantages, and the advantages of high-end will also make the company's fleet more in line with the transportation needs of fine chemicals.
The diversification of categories and regional expansion are expected to further open up growth space
enter the field of crude oil and liquefied petroleum gas transportation, realizing category expansion.
In the comprehensive review of the transportation capacity regulation of inter-coastal inter-provincial bulk liquid hazardous cargo ship transportation market in 2021, the company ranked first in the market, and obtained new capacity of chemical ships, liquefied petroleum gas ships (non-ethylene) and crude oil tankers, among which 10,700 dwt of chemical ships were obtained, 65,000 dwt of crude oil tankers, and 4,350 cubic meters of new capacity of liquefied petroleum gas ships (non-ethylene) were obtained.
passed the comprehensive review of new capacity, and the company entered the fields of crude oil transportation and liquefied petroleum gas transportation. Regionally, the company has begun to plan both domestic and foreign trade operations.
In 2022, the company established three wholly-owned subsidiaries, "Xingtong Hainan", "Xingtong Hong Kong" and "Xingtong Kaiyuan Airlines Co., Ltd.", to prepare to build/purchase chemical ships and enter the foreign trade market.
Although the company is still centered on domestic trade business at this stage, the foreign trade business layout aims to exert synergy. As the large refining and chemical production capacity is gradually realized, the company is expected to set production based on sales, and targeted to meet the incremental transportation demand brought by downstream customers to overseas after the self-sufficiency rate of major domestic petrochemical products has been increased.
Financial Analysis
Operating income and profit
The company focuses on its main business, and chemical ship operation is the company's main source of income.
19-20 The proportion of chemical transportation revenue of chemicals accounted for as high as 90% of the company's revenue, and showed a high growth trend, with a growth rate of nearly 30%. In 21, the company's chemical business still achieved nearly 30% growth, but due to the significant increase in the company's refined oil transportation business revenue, the proportion of chemical transportation business revenue decreased to 80.49%.
The company's profit growth rate is faster than revenue growth.
The freight rates of the coastal chemical water operation industry are relatively stable, and it is difficult to increase profits by raising prices. Therefore, the way shipping companies increase their own profits mainly lies in both management and scale effects.
In terms of management, increasing the heavy load rate through the matching of back and forth cargo and reducing the idle capacity rate as much as possible through ship scheduling can effectively improve its own profit level; in terms of scale, large ships have lower unit cargo costs than small ships, and when the freight rates are stable, the profits are richer than small ships. In recent years, the company has implemented the strategy of large shipment development, and the gross profit margin has steadily increased. According to the horizontal comparison of
, the company's gross profit margin is also ahead of its peers. Currently, the listed/proposed listed companies in China that are engaged in coastal liquid cargo and water transport companies include COSCO Shipping, China Merchants Nanyang Oil Company, Shenghang Co., Ltd., Haichanghua and Xingtong.
From the perspective of gross profit margin performance, Xingtong shares have relatively obvious advantages. There are two reasons behind it. One is that the company is engaged in domestic chemical trade in chemicals and the competition landscape is relatively good. Therefore, the company's gross profit margin is better than that of Haineng, Nanyou, Haichanghua and other companies; the other is that the company's transportation capacity is larger and newer, so it also has certain advantages over Shenghang.
Capital structure and debt repayment ability analysis
Combined with the company's balance sheet, the company's return on assets continues to lead the industry.
As of the end of 2021, the company's ROE was as high as 25.82%. Judging from the three factors of DuPont, with the company's asset scale in recent years, the company's net profit margin has continued to improve, but the decline in asset turnover rate and equity multiplier has caused a certain drag on ROE. We believe that due to the relatively radical expansion of the company's current production, the probability of a sharp rebound in the short term is not high. However, after the company's expansion rate decreases, with the increase in capacity utilization, the company's ROE is expected to achieve a significant increase, and its leading advantage compared with its peers is expected to expand.
The company has solid assets, low debt-to-asset ratio, and has the ability to leverage with .
19-21, the proportion of the company's fixed assets and projects under construction (mostly ship assets) was relatively high, reaching a level of nearly 70%. At the same time, due to the company's strong profitability and relatively few interest-bearing liabilities, the ratio of tangible assets to liabilities was 1.4, 1.7, and 2.2, respectively, showing a continuous improvement trend and the risks were relatively controllable.
Thanks to this, the company's debt-to-asset ratio is relatively low. At the end of 2021, the company's debt-to-asset ratio has dropped to 30.75%, and has continued to decline in recent years, laying a solid foundation for future leverage expansion.
Cash flow analysis
0The company's cash collection ratio is high, and it has certain bargaining power for the upstream and downstream. During the period 2018-2021, the cash received by the company in selling goods and providing services was always greater than or equal to the company's operating income, reflecting that the company has not been squeezed because its size is significantly smaller than that of downstream companies. On this basis, the company's operating net cash flow is stronger than profit, which also reflects the company's strong bargaining ability to upstream and downstream and its business's cash recovery ability.
operating efficiency analysis
2021, the company's total asset turnover rate was 0.5, inventory turnover rate 30.0, accounts receivable turnover rate 14.6, accounts payable turnover rate 8.9, and the corresponding turnover days were 720.0/12.0/23.4/30.3 days respectively. Although the short-term total asset efficiency has slightly decreased due to the expansion of asset scale, it can better reflect the company's daily operations and the inventory, receivable and payable turnover rates for upstream and downstream bargaining rights have been significantly improved in recent years.
profit forecast
premise assumptions and related calculations
Our profit forecast is based on the following assumptions:
1. Capacity scale
A. Static capacity scale at the end of the year
As of the end of August 2022, the company's hand capacity scale has reached 200,000 decimal tons. Together with Fenghai 32 and Fenghai 35 acquired by Xingtong 729 Transfers and Guhe Company, we expect the company's hand capacity scale to reach 267,000 decimal tons by the end of 22 years.
In the future expansion of domestic trade capacity, the company has two main ways.
One is to obtain a new quota through capacity approval. Considering that the company has ranked first in the rating for four consecutive years, the company began to expand its categories horizontally in 2021, and after the company successfully went public in 2022, we believe that the company will continue to obtain excellent scores in the future and obtain various capacity indicators every year. We assume that the chemical ship index of 10,000 dwt and liquefied gas ship indicator of 0.55,000 dwt in the next three years.
The second is to acquire market capacity to expand the scale of capacity.
Judging from the current situation, the company's acquisition is still mainly chemical ships. The company has announced that it will complete the acquisition of 54,000 tons of chemical ship capacity in 2022. We assume that the scale of chemical ship capacity acquired by the company from 2022 to 2024 is 54 (including 27,000 tons of foreign trade chemical ships), 40, and 50,000 tons respectively.
Foreign trade chemicals, since international transportation does not require capacity quota, the difficulty of capacity expansion is relatively low, and the main barriers lie in customers and funds. According to the current known information, the company has begun to build two foreign trade chemical ships, of which 12,000 dwt will be put into production in 2023 and 13,000 dwt will be put into production in 2024. In other words, the company will have a foreign trade chemical capacity of 52,000 dwt at the end of 2024.
, as conservative, will not make assumptions about the acquisition of foreign trade chemicals.
B. Effective capacity scale
Considering that the specific time point in the year for the expansion of the capacity scale brought by the acquisition cannot be predicted, but this factor has a great impact on the company's effective production capacity. We assume that its acquired capacity in 2023 and 2024 will be operated for half a year.
In addition, considering the two operating methods of Xingtong Chemicals ship time charter and process charter, and the billing rules of the two operating methods are completely different, the allocation of transportation capacity has also changed significantly. In order to better make profit forecasts, we have further split the company's domestic chemical transportation capacity.
As of the end of 2021, Xingtong's domestic trade capacity of only 52,000 dwt of Xingtong's own chemicals was put into the process rental market, and the rest of the capacity was operated in the form of prospective leases. The main customer is Zhejiang Petrochemical. Considering that Zhejiang Petrochemical's current capacity has been completed, the growth rate of short-term transportation demand may slow down. We believe that from next year, the proportion of ships engaged in process rental business in Xingtong's newly launched production capacity will gradually increase. We assume that from 23 to 24, the proportion of incremental capacity will increase to 50% and 70% respectively.
. Operating income generated by unit capacity
In terms of own chemical capacity rental, from 2019 to 2021, the company's chemical capacity per load tons can generate operating income of 4793.10, 5262.38, and 5161.12 yuan. Considering that the freight rates in the coastal chemical transportation market are relatively stable, and as the company's business scale expands, the matching efficiency of round-trip goods will be improved, and the operating income generated by unit capacity will also increase. We expect that during the 22-24 period, the unit capacity of the company's own capacity rental can generate operating income of 5,000, 5,100, and 5,200 yuan per year.
In terms of chemical capacity rental, the company's revenue from chemical rental in 2021 is around 150 yuan/dollar ton/month. Although the agreements signed by the company are mostly 1-year and 5-year, considering factors such as inflation and price adjustment factors, the unit price of futures rentals may show a slight increase. We assume that the company's unit price of futures rentals will be 155, 160, and 165 yuan/dollar ton/month respectively during the 2022-2024 period.
In terms of out-of-leasing chemical capacity (horse rental), the company's out-of-ownership capacity has expanded rapidly in recent years. The main reason behind this is that Zhejiang Petrochemical has a large demand for futures rental capacity. The company is committed to meeting the needs of downstream major customers, resulting in insufficient available transportation capacity in the short-term. However, we believe that with the slowdown in Zhejiang Petrochemical's demand for the company in 2023 and the gradual release of the company's acquisition and new production capacity, the demand for out-of-ownership capacity will not continue to grow as rapidly as in the past. We assume that the company's out-of-ownership capacity revenue will be 155, 160, and 165 million yuan respectively in 2022-2024.
In terms of refined oil transportation, the company has not yet expanded its refined oil capacity, and the company's refined oil tanker capacity is operated in the form of a prospective lease, which is likely to remain stable. We assume that the annual revenue growth rate of refined oil transportation in the company from 2022 to 2024 will be 5%. In terms of
LPG transportation, LPG transportation business is the company's second growth pole. Its production capacity has been rapidly released in recent years, and the production capacity of LPG ships is relatively scarce. The current unit price of transportation is relatively high. We assume that from 2022 to 2024, the company's LPG ship unit capacity can generate operating income of 12,000 yuan.
In terms of foreign trade chemical ships, the freight rate in the foreign trade chemical ship market is relatively stable, does not have obvious strong cyclicality, and the supply and demand pattern is also relatively good. Considering that the company has just entered a new market, its operating efficiency may be limited, we assume that each unit of effective transportation capacity can bring the company an operating income of 3,000 yuan.
In terms of revenue forecast, although the company has purchased foreign trade chemical ship capacity in 2022 and has theoretical operational capabilities, since the production capacity is relatively old, it still needs to be modified. On the contrary, we do not predict the company's revenue in this sector in 2022.
. Gross profit margin assuming
own chemical capacity rental: company's self-operated leasing gross profit margin is relatively stable, with slight changes with oil price fluctuations, which were 54.1%, 57.0%, and 52.7% respectively during the 19-21 period. Considering that the current global oil price is high due to insufficient investment in the petrochemical energy field and the conflict between Russia and Ukraine, we conservatively expect the company's gross profit margins of 22-24 to be 48%, 50%, and 52%, respectively.
Chemical capacity rental: The company's chemical futures rental business has brought about improvements in recent years due to changes in the business structure (carrying out chemical ship schedule business), large-scale transportation capacity deployment, and service model (gradually switching to a model that does not bear port fees and fuel costs). The company's futures rental business (including chemicals and refined oil) has increased from 34.95% in 2019 to 60.4% in 21. As the scale of new shipping capacity decreases in the future, the gross profit margin may gradually stabilize. We expect that the gross profit margin of the company's chemical futures rental business can still be maintained at 60% during the 2022-2024 period.
Out-of-Rent Chemicals Transportation Capacity (Chengsheng): The company's out-of-rent business is mainly a supplement when the company's own capacity cannot meet customer needs. The actual carrier is a shipowner's peer. The gross profit margin of this business is relatively low compared with other businesses. During the 2019-21 period, the company's gross profit margin of this business was 2.9%, 3.9%, and 11.9%, respectively. We conservatively estimate that the company's gross profit margin of this business is 10%, 8%, and 6%, respectively.
refined oil transportation: 2020Q4, the company's refined oil transportation has mainly operated in the form of rent. In 21 years, with the release of large-scale transportation capacity, the gross profit margin has been significantly improved. The company's gross profit margin during the 2019-21 period was 40.7%, 33.2%, and 48.5%, respectively. We expect the company's gross profit margin to be relatively stable in the future, with the gross profit margins of 45%, 46%, and 47% in the 22-24 period.
LPG Transportation: Company’s LPG business is just starting now and the ship size is small. We assume that the gross profit margin in 22-24 will be 40%.
Foreign trade chemical ship: Referring to the gross profit margin of other chemical ship owners, assuming that the company's gross profit margin in 22-24 is 25%.
. Expense rate assumption
company's expenses are mainly concentrated on management expenses. Considering that the management team is relatively stable, assuming that management expenses remain stable, the management expense rate decreases with the expansion of revenue scale Net profit forecast and sensitivity test Based on the above assumptions, we can conclude that under normal circumstances, the company's revenue scale can be realized in 22-24 years to be 8.0/1.14/1.51 billion yuan (+41.3%/+42.8%/32.1%), and the profit scale is 23/34/460 million yuan (+16%/48%/33%). However, considering the uncertainty of capacity expansion, we conducted a sensitivity test on the company's effective capacity.
pessimistic assumption: Considering that the company is currently in the expansion period and the new ship capacity is high, the capacity scale for voluntary withdrawal is limited, the effective capacity scale for that year will not be lower than the static capacity scale at the end of the previous year, and the delivery of new ship orders is highly certain, so the effective capacity scale for 23-24 years will be lowered by 10,000 dwt respectively compared with the neutral assumption.
optimistic assumption: Considering that the company is currently in handful of capital, such as smooth negotiations or rapid mergers and acquisitions, it will form a positive pull on the company's effective capacity growth that year, under the optimistic assumption, we will increase the company's effective capacity scale in 23-24 years by 20,000 dwt respectively compared with the neutral assumption.
Value
Considering that the main method of company's business expansion is mergers and acquisitions, but the time point of the merger and acquisition will have a great impact on the company's revenue and profits. Therefore, the absolute valuation cannot calculate the current intrinsic value of the company, so we use the relative valuation method.
Relative Valuation: In terms of the selection of comparable targets, only Shenghang Co., Ltd. is one of the companies engaged in the same industry as the company in the A-share market. In order to ensure the effectiveness of relative valuation, we chose enterprises engaged in the same industry as Xingtong in terms of target selection. We selected Milkwei (a leader in onshore hazardous chemical transportation and warehousing) and Hongchuan Smart (a leader in onshore hazardous chemicals transportation and warehousing) which are also part of the hazardous chemicals warehousing and logistics industry as comparable targets of the company. To further determine the effectiveness of valuation comparisons, we compared the financial data of Xingtong and comparable companies over the past three years.
Revenue and profit growth: With the start of production of the large refining and chemical base in 2019, Xingtong's revenue and profits have accelerated since 2020. Although the growth rate in 2019 is slow, Xingtong's growth is also better than comparable targets during the 2020-2021 period. In addition, Xingtong's profit growth rate in 21 years is ahead of comparable companies.
ROE level: comparable companies were listed in 2018 and Shenghang Co., Ltd. was listed in 2021. After listing, due to the time required for capacity expansion and the rapid increase in net assets due to IPO, the phenomenon of ROE fluctuation in short-term downward fluctuation. Therefore, Xingtong has obvious advantages over comparable companies during the 19-21 period. However, considering that Xingtong's production capacity is rapidly deployed, we expect that the IPO has a smaller ROE dilution effect on Xingtong, and Xingtong may still maintain its comparative advantage over comparable companies.
Cash flow: The average cash flow of each company is good. Except for Milkwei's net profit cash content in 21 years, the other targets had a slightly lower net profit cash content during the 21st period, the net profit cash content was greater than 100%.
Based on the above financial data, we believe that the valuation of comparable targets has strong guiding significance and strong comparability for the valuation of Xingtong Co., Ltd. In terms of valuation of
, we found that the average PE multiple of comparable companies in 2023 is 22.1 times, while the PE multiple of Xingtong in 2023 is only 12.5X. Considering that the company has not yet proved its growth with its performance, we take the industry average valuation as anchor and lower it by 10%-15% as the company's reasonable valuation range. From this, we can obtain the company's reasonable valuation range for 2023 of 18.8-19.9X.
downstream demand for the operating industry of hazardous chemical liquid cargo and water has expanded rapidly with the domestic refining and chemical bases put into production, while the industry supply is rigidly restricted, which has gradually emerged in the industry. As the owner of chemical ships with the largest market share in China, Xingtong is expected to continue to obtain expansion indicators in capacity approval.
In addition, the company has abundant cash in hand after its listing, helping the company to quickly increase its capacity through acquisitions. We expect the company to achieve a net profit of 230 million yuan from 2022 to 2024, corresponding to a PE valuation of only 19.9/13.3/10.0X, and there is still a big gap in the valuation level compared to comparable companies. According to the reasonable PE valuation of 18.8-19.9X in 2023, the target price is 42.86-45.40 yuan/share per share.
risk warning
risk of valuation
Due to the inapplicability of the absolute valuation method, we adopted the relative valuation method. We selected hazardous chemical warehousing and transportation companies with the same or similar business as the company, such as Milkwei, Hongchuan Wisdom, and Shenghang Co., Ltd. However, there are obvious differences in the businesses carried out, the areas in which the business are carried out, and the way in which the business is carried out, resulting in different profit performance of each company, and the final valuation system may also be different.
In addition, since the future capacity expansion of the company and comparable companies depends on mergers and acquisitions, and there is great uncertainty in mergers and acquisitions. Whether the acquisition can continue to be successful may become the decisive factor in the company's valuation system, the relative valuation method may be at risk of failure.
Risk of profit forecast
We assume that the company's effective capacity will grow by 16%/34%/25% in the next three years, which includes a large number of mergers and acquisitions. If the company's mergers and acquisitions are less than expected, the company's profit forecast will be less than expected.
Although the company's business has been stable in the past freight rates and gross profit margins, it is not ruled out that the company's unit transportation capacity can decline in the future due to the lower threshold and intensified competition.
The company's journey rental business needs to bear the fuel expenses themselves. If the fuel expenses rise sharply beyond expectations, the company's gross profit margin may decline significantly.
The company's chemical ship is operated through process lease and future lease. Among them, the process lease income and profit are more elastic, while the future lease is more stable. Considering that Zhejiang Petrochemical has completed its production, we assume that the main investment direction of the company's new capacity will change from time lease to process lease from 23 years. However, if the subsequent transportation demand of other domestic refining and chemical companies changes from process lease to term lease, our capacity allocation ratio may be deviated, which will lead to inaccurate profit forecasts.
Operational risk
Safety accident risk: The company is one of the most excellent liquid dangerous goods shipowners with the safety management in China, and has achieved the first place in the capacity evaluation for 4 consecutive times. However, if a safety accident occurs, the company's current industry status may decline rapidly. On the one hand, the occurrence of safety accidents will lead to the loss of the company's advantages in capacity evaluation and the capacity growth is limited; on the other hand, because downstream refining and chemical companies pay more attention to safety, if a safety accident occurs, orders may be transferred to other ship owners.
risk of category expansion: The company has recently obtained LPG and crude oil tanker indicators. Although these two varieties are also in the petrochemical industry chain, they are different from the chemicals and refined oils that the company has operated in the past. The company may have insufficient experience and poor management when it first enters the market.
Risks of regional expansion: The company has recently begun to deploy foreign trade chemical transportation business. Unlike domestic trade, foreign trade transportation does not require a license, and the competition is more intense than in China. The company may have insufficient experience and poor management when entering the market.
Policy risks
The company is located in the domestic trade water operation industry of liquefied products. For example, the future regulatory threshold is reduced, such as the expansion of transportation capacity no longer requires approval, and foreign ship owners can participate in the domestic trade water transportation market, etc. The competition in the industry is likely to intensify significantly, which will affect the company's operations.
Internal control risk
The actual controller controls the risk of improper control. The actual controller of the company and its family members hold 34.56% of the company's equity, which has a substantial impact on the company's major business decisions. If the actual controller uses his controlling position to control the company's overall business decisions and investment plans, dividend distribution policies, personnel appointments and removals through exercise of voting rights or other means, it may have an adverse impact on the interests of other shareholders.
Macroeconomic risk
Currently, global economic growth is weak. If the global economy further deteriorates, it may have a certain impact on the demand for refined oils and chemicals, which in turn affects the operating rate of domestic refineries. If the operating rate of domestic refineries drops sharply, the demand in the related transportation industry will be under pressure.
Other risks
shares unblocking risk: company will usher in the first restricted shares after listing in March 2023, with the number of unblocking being 54 million shares, accounting for 108% of the current current share capital, which may have a certain impact on the short-term trend of the company's stock price at that time.
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Selected report from [Fuanzhan Think Tank]
