XINGTONG SHIPPING(603209)：PRIVATE PLACEMENT PLAN ANNOUNCED;UPBEAT ON GROWTH PROSPECTS

　　What's new
　　Xingtong Shipping announced that it would issue up to Rmb1.12bn in shares to no more than 35 specified objects at a price no less than 80% of the average share price over the 20 trading days before benchmark day. General Manager CHEN Qilong plans to subscribe no less than Rmb50mn of shares with cash.
　　Comments
　　Private placement announced; upbeat on multi-business strategy. In addition to strengthening its domestic transport business, Xingtong also plans to expand clean energy transport and international shipping to transform towards becoming an integrated supplier of chemical supply chain services. Among the proceeds from private placement, around Rmb650mn would be used to fund the purchase and construction of four vessels for the domestic and overseas shipping of stainless-steel chemicals, and Rmb175mn would be used to fund two vessels for the domestic shipping of liquefied petroleum gas （LPG）。
　　The firm estimates the internal return of the two projects at 13.2% and 11.8%. The rest of the proceeds would be used to replenish working capital. We think the private placement should help Xingtong expand its shipping capacity and optimize capital structure, easing its financial pressure in the future.
　　Chemical logistics sector recovering since February. The difference between the chemicals price index and West Texas Intermediate （WTI） futures price widened after the Chinese New Year holiday. Companies with a business focus on chemicals may have seen profit margins rebound YTD. Fixed-asset investment in the manufacturing of chemical raw materials and chemical products rose 17.2% YoY in January-February 2023, indicating continued acceleration of capacity expansion at chemicals producers.
　　Capacity utilization ratio of major chemical products recently increased, and rising gross margin of paraxylene （PX） may further drive up output of liquefied chemicals. Moreover, inventory turnover in polyester chemical fiber industry chains is accelerating, while destocking of some products started.
　　Improved petrochemical industry chain in China; new grated refining-chemical project to boost demand for shipping of liquid chemicals. Data from Ministry of Transport shows that domestic chemicals transport volume in coastal regions rose from 26.80mnt in 2018 to 40mnt in 2022, a CAGR of 10.5%. Shipping capacity supply remained stable. As of end-2022, inter-provincial chemical cargo ships grew 8.5% YoY to 1.40mn tonnes deadweight （DWT）。 Shipping rate steadily rallied amid tight supply, with average freight rate for a 5,000t vessel on the Jiangyin-Quanzhou line rising 8.8% YoY in 2022.
　　In March 2023, Rongsheng Petrochemical inked a strategic cooperation deal with Saudi Aramco to supply 1.1mnt of chemicals per year to the latter and its associates. We think large refineries going global and increased chemical exports would create ample growth potential for domestic shipping firms.
　　Financials and valuation
　　We leave our 2022 and 2023 earnings forecasts unchanged, and introduce 2024 forecast of Rmb434mn. The stock is now trading at 22.4x 2023E and 16.7x 2024E P/E. We maintain OUTPERFORM and TP of Rmb40.62, implying 25.2x 2023E and 18.7x 2024E P/E, offering 12.4% upside.
　　Risks
　　Global economic growth slows down significantly; domestic demand recovery disappoints; safety accidents.
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   【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。