On November 14, 2022 (Monday), 15:00-16:30 PM, Shanghai ZhonggrainFlow Co., Ltd. held a presentation on the third quarter of 2022 results through the Shanghai Roadshow Center. Mr. Li Yonghua, Director/General Manager of the Company, Mr. He Jiale, independent director, Mr. Dai Xin, Secretary of the Board of Directors, and Ms. Zeng Zhiying, head of Finance, attended the presentation of the third quarter of 2022 results to interact and communicate with investors, and answered questions of common concern to investors.
Question 1: What new changes will the General manager bring to the company's operation? What is your freight rate in the third quarter? What about freight rates in the fourth quarter? What is the price of a single box of domestic and foreign trade in the third quarter? Is the foreign trade business affected by the downward movement? In the third quarter, the freight rate of the Thailand-Vietnam route even appeared zero negative freight rate, but your company's own ships still continued to put capacity in the region. How do you achieve profitability in the region? It is reported that your company's 18 new ships are being delivered one after another, is the supply in the current market facing overdemand? How do you view the market opportunities and challenges in Asia?
Reply: Foreign trade container Freight rates can refer to China Containerized Freight Index (CCFI), The freight rate of Domestic trade can refer to the Panasia Domestic Container Indicator (PDCI). In the past, the average annual freight rate of domestic trade is relatively stable. Generally speaking, the fourth quarter is the annual peak freight rate. The trend of freight rates in the third quarter and the fourth quarter of this year also converged with the historical trend, after the third quarter off-season fell, and gradually picked up with the arrival of the fourth quarter peak season.
The signing of RCEP has laid the foundation for the development of regional economic integration in East Asia, bringing a large number of opportunities for trade and transportation needs. Opening up domestic and foreign trade and building a double cycle will give container logistics new opportunities for development. Therefore, based on its own domestic trade network advantages, the company opens up some overseas businesses to provide customers with one-stop "door to door" container logistics services combining domestic and foreign trade. To meet the needs of customers. The profitability of the whole logistics service also depends on the efficiency of the whole logistics and the layout of the logistics network. Therefore, although the price of foreign trade routes fell in the third quarter, the company still continued to put capacity in the region.
The company's new ships will be delivered one after another, and the target source of new ships is the incremental source of scattered and modified goods, and generally speaking, the fourth quarter is the peak season, and the transportation demand is relatively strong. The company will use the newly built 18 4600TEU vessels to promote the process of "bulk transformation" in the industry, expand the source of container cargo, and lay a good foundation for the company's long-term revenue increase, while the company will continue to improve operating efficiency and continue to create value for the majority of shareholders.
Question 2: Since the company's listing, the dividend payout ratio is relatively high, and the current asset-liability ratio is basically reasonable. In the future, will the company tend to maintain the current dividend payout ratio level or reduce the asset-liability ratio level?
Reply: The company has been committed to creating value for the majority of shareholders for a long time, the board of directors will comprehensively consider the characteristics of the industry, development stage, its own business model, profitability level and whether there are major capital expenditure arrangements and other factors, and in accordance with the procedures stipulated in the articles of association of the company, put forward a specific cash dividend policy every year.
Question 3: The current domestic freight forwarding price is higher than the 2020 level. Does the company think that the 2020 freight rate is relatively balanced and reasonable in the long run? What do you think about long-cycle rates?
Reply: Historically, the average annual freight rate of domestic trade containers is relatively stable, with obvious seasonal performance, generally speaking, the fourth quarter is the peak season of the year, and the industry freight level also has seasonal fluctuations, and the fourth quarter is the peak freight rate of the year. The company's newly built 18 4600TEU ships will be delivered one after another, and the company will use these ships to promote the process of "bulk transformation" in the industry, and the target source of goods is the incremental source of bulk transformation, so it will not have a significant impact on the original freight rate system.
Q4: What is the reason for the sequential decline in revenue in the third quarter? What is your judgment on the current situation of the foreign trade market in the fourth quarter and 2023? How is the foreign trade expansion in Southeast Asia? How many owned and chartered vessels are there? What is the company's plan for the foreign trade market capacity?
Reply: The company leased some container ships to foreign trade liner companies, and part of the company's overseas business was affected by the decline in foreign trade freight rates. In the third quarter, the foreign trade market freight rates declined, and the company's revenue in this part of the business declined. Generally speaking, the fourth quarter is the peak season for the domestic trade container transportation industry, and the market transportation demand is relatively strong. At present, the company has invested 4 self-owned vessels to open Southeast Asia routes to Thailand and Vietnam. In the future, the company will improve the offshore operation network and explore new business growth points according to the specific situation of the market and the company.
Question 5: In terms of profit, what are the major cost increases facing the domestic trade market? How to improve the gross profit margin decline in the third quarter? The next stage, the capital operation plan of the company? Where will you invest your disposable profits?
Reply: In the first three quarters of 2022, the company's fuel price has increased due to the fluctuations of international oil prices, and the cost of ship leasing has also increased to a certain extent. The Company will make use of the good cooperative relationship established with suppliers in the industry for a long time, and actively communicate and negotiate to promote the reduction of the company's cost. The container ships invested and built by the company and the supporting containers still need corresponding capital investment, which will be the main investment area of the company's disposable profits in the next three years. Meanwhile, the company is also vigorously developing the logistics park and storage business, and will build logistics parks in Tianjin, Qinzhou, Rizhao, Xiamen and Shanghai.
Question 6: With regard to production capacity, the launch of new ship capacity has become a major focus of attention. How much will the company's market share in the industry increase after the completion of production capacity? What are the main difficulties in the current stage of loose modification? Where is the company's medium - and long-term investment value mainly reflected? In the face of the consensus that the freight boom will return to the normal level after the third quarter, how will the company adjust the business strategy to improve the market performance?
Reply: The company has signed 18 orders for large domestic trade container ships with domestic shipyards, and plans to launch one ship every month starting from October 2022. After the completion of all launches, the company's own capacity will increase by about 113% and the total capacity will increase by about 60% on the basis of the current capacity.
The main difficulty of the company is to break the original logistics habits of customers and provide competitive solutions.
The medium and long-term investment value of the company is reflected in: First, the company will invest 18 container ships successively to release capacity reserves for the needs of the industry, which will promote the reduction of the cost of a single container and create value for the majority of shareholders. Secondly, the container itself has the characteristics of environmental protection, compared with developed countries, the containerization rate of China's port is still at a relatively low level, and promoting the industry to reorganize helps reduce the environmental pollution of bulk commodity transportation. Thirdly, the use of containers with water transportation as the core for intensive transportation has low carbon emissions per unit, which helps to reduce carbon emissions of the transportation industry. Finally, standardized container handling and transportation are more convenient, which is conducive to reducing the comprehensive logistics cost of the whole society.
From the historical data, the freight rate of Domestic trade Container industry is relatively stable. Generally speaking, the fourth quarter is the peak of the annual freight rate. The freight rate of domestic trade container can refer to the Panasia Domestic Container Indicator (PDCI). The company will take "quality, service and efficiency" as the guiding ideology, continue to reduce costs and increase efficiency, pay close attention to the macro environment, firmly grasp the development opportunities of the industry, timely adjust the company's business plan, actively explore new markets, continue to promote the strategy of "dispersive transformation", expand the domestic trade container logistics transportation industry space, and strive to create value for the majority of shareholders.