JIAYOU INT’L LOGISTICS(603871)：ANCHORING ASSETS AT CORE NODES TO EXPAND CROSS-BORDER LOGISTICS BUSINESS

　　Core views:
　　Jiayou promotes the integration of social resources by investing in core logistics assets. Thanks to business expansion, the Company achieved a net profit CAGR of 33% over 2016-19. Jiayou’s coal supply chain business may recover amid rebounding traffic at Ganqimaodu Port. By expanding its business footprints to whole-way logistics, the Company’s gross profit has surged from Rmb30/t to Rmb100-150/t. Considering incremental contracts, we expect the gross profit of Jiayou’s supply chain business to double in 2023. The Company’s cross-border multimodal transport business contributes major gross profit increments, with China-Mongolia logistics business accounting for 60%, and Africa’s logistics business revenue increasing by 48% YoY in 2021. The Casa Project, invested and constructed by Jiayou, is the core logistics resource of mining belt in Congo (DRC) and may become profitable in the future-likely to contribute Rmb170mn to the attributable net profit (ANP) in 2025-and further boost the Company’s business growth in Africa. Zijin Mining’s shareholding may create a synergy to increase Jiayou’s net profit by Rmb260mn-390mn under neutral assumptions. We apply 22x 2022E PE to arrive at a 1-year target price of Rmb26 and initiate coverage with a “BUY” rating.
　　Abstract:
　　A globalized cross-border logistics service provider with an estimated 40% net profit CAGR in the next three years. Jiayou is a leading cross-border logistics service provider in China. Emerging from cross-border project logistics and mineral products logistics between China and Mongolia, the Company has now expanded to supply chain trade. At the early stage of its development, Jiayou began to invest in key logistics nodes to construct core assets such as bonded warehouses and customs supervision sites. Apart from first-mover advantage in terms of efficiency and cost, Jiayou has optimized and replicated the China-Mongolia logistics business model to Central Asia, Africa and other regions. Today, it has business footprints at land ports as Ganqimaodu, Erlianhaote, Horgos and Sakania. Thanks to its business expansion, Jiayou’s earnings are growing rapidly. If the Covid-19 impact is excluded, the Company’s 2016-19 net profit CAGR would come in at 33%. Considering the recovery of China-Mongolia port traffic and Jiayou’s surging business in Africa, we expect the Company’s net profit CAGR to reach about 40.2% in the next three years. At the end of 2021, Zijin Mining became the second largest shareholder of Jiayou. In this way, they may form an in-depth business partnership in Africa.
　　By expanding its business footprints to whole-way logistics of coal supply chain, Jiayou’s gross profit has surged from Rmb30/t to Rmb100-150/t. Moreover, the gross profit of the Company’s supply chain business may double in 2023. Due to Covid disruptions in Mongolia, Jiayou’s China-Mongolia logistics business volume declined significantly in 2021, with its revenue from coal supply chain falling by 62.8% YoY. However, the Company promptly seized the opportunity of Mongolia’s insufficient transport capacity to actively integrate the supply chain services from Mongolian mines to Chinese end users. Thanks to an extended service chain and short-term freight increase, the GPM of Jiayou’s coal supply chain business increased by 18.1ppts in 2021. We estimate the gross profit of the Company’s half-way coal supply chain business to be about Rmb30/t, and expect the Company’s gross profit in this regard to surge to Rmb100-150/t after it extends to whole-way logistics. In 2021, Jiayou signed a new whole-way coal supply chain contract (with an annualized volume of 4.5mt). Taking into account the recovery and growth of its original half-way supply chain business, we expect the gross profit of the Company’s supply chain business to double in 2023 over 2021.
　　Cross-border multimodal transport business contributes 64%-87% of Jiayou’s gross profit, with China-Mongolia logistics business accounting for 60%, and Africa’s logistics business revenue increasing by 48% YoY in 2021. Cross-border multimodal transport integrated logistics service is the Company’s main source of gross profit, accounting for 64%-87% of its total gross profit in recent three years. Jiayou keeps consolidating its advantages in Ganqimaodu Port, owning 50%+ of the port’s storage capacity. We expect that China and Mongolia will contribute about 60% of the revenue and profit of the Company’s cross-border multimodal transport business. Following the commissioning of OT Mine Phase II, Jiayou’s China-Mongolia mineral products logistics business volume may benefit significantly. The Company has optimized and replicated the China-Mongolia logistics business model to other regions: Its customs supervision site in Horgos was put into operation, which may help improve the logistics supply chain in Central Asia. Its business in Africa is growing rapidly, with revenue/gross profit increased by 48%/45% YoY in 2021; it has invested and constructed the Casa Project, which may promote the local logistics efficiency and lay a foundation for the long-term development of its business in Africa.
　　Jiayou’s PPP projects are the core logistics resource of mining belt in Africa, and may contribute Rmb170mn of ANP in 2025. Zijin’s shareholding may create a synergy to increase Jiayou’s net profit by Rmb260mn-390mn under neutral assumptions. The Kasumbalesa-Sakania Road and Land Port Project invested and operated by the Company, featuring a prominent strategic position, may become profitable in the future. We expect the project to contribute about Rmb170mn of ANP in 2025. Through this project, Jiayou has grasped the core logistics resource of mining belt in Congo (DRC), which may effectively drive the Company’s business growth in Africa. Jiayou has welcomed the strategic shareholding of Zijin Mining, the world’s leading mining company. As of Nov 2022, Zijin held 17.6% equity of Jiayou. Zijin may produce 927kt of copper in Congo (DRC)’s two mines in the future, and may form an in-depth business partnership with Jiayou’s Casa Project. Under neutral assumptions, this may increase Jiayou’s net profit by Rmb260mn-390mn. On Nov 2, Jiayou announced that the strategic investor Zibao Investment (holding 4.6% of equity) promised not to underweight the Company’s holdings before Feb 20, 2025. Meanwhile, Jiayou announced that it would increase the number of repurchased shares, and increased the repurchase fund from Rmb30mn-60mn to Rmb75mn-150mn, demonstrating the confidence of the Company and major shareholders in Jiayou’s long-term development and business earnings.
　　Potential risks: Worse-than-expected Covid-19 impact; downward pressure on the macro economy; geopolitical disruptions; disappointing progress of Casa Project in Congo (DRC); as well as loss of key accounts and possible defaults.
　　Investment recommendation: Jiayou promotes the integration of social resources by investing in core logistics assets. Thanks to business expansion, the Company achieved a net profit CAGR of 33% over 2016-19. Jiayou’s coal supply chain business may recover amid rebounding traffic at Ganqimaodu Port. By expanding its business footprints to whole-way logistics, the Company’s gross profit has surged from Rmb30/t to Rmb100-150/t. Considering incremental contracts, we expect the gross profit of Jiayou’s supply chain business to double in 2023. The Company’s cross-border multimodal transport business contributes major gross profit increments, with China-Mongolia logistics business accounting for 60%, and Africa’s logistics business revenue increasing by 48% YoY in 2021. The Casa Project, invested and constructed by Jiayou, is the core logistics resource of mining belt in Congo (DRC) and may become profitable in the future-likely to contribute Rmb170mn to the ANP in 2025-and further boost the Company’s business growth in Africa. Zijin Mining’s shareholding may create a synergy to increase Jiayou’s net profit by Rmb260mn-390mn under neutral assumptions. We forecast the 2022E/23E/24E EPS to be Rmb1.16/1.49/1.89, corresponding to 17.8x/13.8x/10.9x PE. Using the recent 1-year PE valuations (17.6x/25.1x/19.5x) of comparable companies-CTS Int’l Logistics (603128.SH), Jiacheng Int’l Logistics (603535.SH) and Hichain Logistics (300873.SZ)-as reference and considering the Company’s high profit growth, we apply 22x 2022E PE to arrive at a 1-year target price of Rmb26 and initiate coverage with a “BUY” rating.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。