In depth research on logistics industry: Depth of bulk supply chain industry: Leading attack under stable and smooth cycle with increasing volume and profit
In depth research on logistics industry: Depth of bulk supply chain industry: Leading attack under stable and smooth cycle with increasing volume and profit
The bulk supply chain model avoids the risk of price fluctuations, and industry profits mainly come from service revenue. Commodities are the foundation of industrial production and daily life, with a wide range of uses and large trading volumes. Their prices are subject to significant fluctuations due to multiple factors.
With the development of the industry, commodity trading has gradually shifted from traditional trade models to supply chain management models, giving rise to bulk supply chain enterprises; The scope of enterprise services covers multiple links such as logistics, financing, and warehousing, helping customers manage risks throughout the entire process from procurement, inventory to sales, transportation, and funding. The source of enterprise profits has gradually shifted from mainly earning the price difference between buying and selling to mainly earning service income from providing bulk commodity circulation services. The overall efficiency of the industry has been improved and risk management capabilities have been strengthened.
The industry concentration continues to increase, and the scale of leading businesses has also increased.
1) Industry concentration: There are numerous categories of bulk supply chain goods, including metal minerals, energy chemicals, agriculture, forestry, animal husbandry, and fishery, with huge demand. Therefore, the domestic supply chain market is also very large in scale, but the industry concentration is low, and there is still a lot of room for top enterprises to increase their market share. Looking back at the concentration of the bulk supply chain market in the past, the market share of bulk supply chain enterprise CR4 has increased from 1.21% in 2016 to 4.18% in 2022, highlighting the head effect and continuously improving market concentration.
2) Leading enterprise operations: China Construction&Development Corporation and Xiamen Xiangyu Bulk Commodity Management have maintained steady growth in their overall cargo volume, while Xiamen Guomao's cargo volume remained stable from 2021 to 2023; The average annual revenue and gross profit growth rate of each company's supply chain business are relatively high. In the first half of 2024, the commodity trading volume of China Construction and Development Corporation, Xiamen Xiangyu, and Xiamen Guomao were 105 million tons, 101 million tons, and 78 million tons, respectively, with a year-on-year increase of+9%/-0.6%/-30.9%. In terms of performance, the supply chain business revenue of leading enterprises has maintained a rapid growth rate of over 20% annually from 2016 to 2023; The average annual growth rate of gross profit is above 9%, and profits have also steadily increased.
Futures hedging ensures stable single ton profits in the bulk supply chain.
1) Fluctuations in commodity prices and hedging effects of futures hedging. The operation of bulk supply chain enterprises is affected by price fluctuations, and their business can use futures hedging tools to hedge the impact of price differences. After supply chain enterprises use methods such as futures hedging, the correlation between profits and commodity price indices weakens, and the degree to which performance is affected by prices decreases.
2) The service chain has been extended, and the profit per unit of cargo volume may have an upward trend in the medium and long term. Leading enterprises such as Jianfa Group, Xiamen Xiangyu, and Xiamen Guomao actively expand their product categories, extend their upstream and downstream supply chains, increase their cargo volume, stabilize customer sources, and ensure business profitability stability. In terms of gross profit per ton, the overall gross profit per ton of bulk commodities in Xiangyu, Xiamen is relatively stable, and the gross profit per ton of metal and mineral commodities can basically be maintained at around 40 yuan/ton. The gross profit per ton of metal and mineral commodities in Xiamen International Trade has steadily increased, reaching 37.4 yuan/ton in 24H1. The gross profit per ton of energy and chemical commodities has remained stable, rising to 48.9 yuan/ton in 24H1, exceeding previous levels.
3) The impact of 2023 has ended, and the structural adjustment of single ton profit may increase. In 2023, the industrial prosperity is relatively low, the demand for bulk commodities in the market is slowing down, prices are significantly decreasing, the business activity of merchants and enterprises is decreasing, and the turnover of commodity goods, monetary funds, etc. is slowing down. On the one hand, bulk supply chain enterprises face increased credit risks and higher risk control requirements. On the other hand, in order to ensure long-term business stability and proactively benefit customers, their accounts receivable and inventory turnover rates have significantly decreased. In addition, some of the risk exposures held by bulk supply chain service providers have also been affected by the decline in commodity prices, resulting in a significant decrease in profits. In the future, we believe that the economic prosperity may be close to the bottom, and there are also many favorable policies to boost industry demand. The commodity market is expected to usher in a cyclical turning point. At the same time, bulk supply chain enterprises actively narrow their risk exposure, adjust the structure of goods, enhance risk control requirements, and strictly control credit risks. Due to the combination of multiple factors, the gross profit per ton of enterprise goods is expected to rebound.
Profit has hit a low valuation, and high dividends are expected to bring higher investment value. The supply chain business revenue of supply chain enterprises in 2023 has decreased significantly year-on-year, and there will still be a year-on-year decline in the first half of 2024; But the year-on-year growth rate of business gross profit has returned to positive, and the performance is expected to hit bottom.
Compared with the previous single ton gross profit situation of supply chain enterprises, the single ton gross profit of Xiamen Xiangyu's main cargo types is stable, and the single ton gross profit of Xiamen Guomao's main cargo types has increased or rebounded significantly. The overall unit profit is relatively stable, and the performance recovery is expected.
From the perspective of valuation and dividends, the current valuation level of bulk supply chain enterprises is not high, and the historical valuation percentiles of PE and PB are both at a low position, with significant room for valuation repair. From the perspective of dividend distribution, assuming that CICC, Xiamen Xiangyu, and Xiamen Guomao can still maintain their previous dividend ratios, their corresponding dividend yields can reach 5.0%, 6.8%, and 6.0%, respectively, which have certain investment value.
