2Q25 results beat our expectations

Xiamen Xiangyu announced its 1H25 results: Revenue rose 25.6% YoY to Rmb203.95bn, and attributable net profit rose 32.48% YoY to Rmb1.03bn. In 2Q25, revenue rose 8% YoY to Rmb106.81bn, and attributable net profit rose 40.8% YoY to Rmb0.52bn, beating our expectation due to sharper- than-expected decline in financial expenses.

Trends to watch

Agricultural products and oil products performed strongly in 1H25; logistics business contributed incremental revenue.

1) Commodity operation: In 1H25, operating volume increased 19.02% YoY, with hedging and spot trading gross profit dropping 3.66% YoY to Rmb2.92bn. By category, agricultural products & oil supply chain performed strongly. In 1H25, hedging and spot trading gross profit for agricultural products increased 255.01% YoY to Rmb536mn. Net profit of its agricultural products business increased to Rmb0.13bn in 1H25 (vs. a loss of Rmb99.03mn in 1H24). Hedging and spot trading gross profit for its energy & chemical products rose 51.54% YoY to Rmb458mn in 1H25, mainly driven by the growth in its international oil product busiuness.

2) Commodity logistics: In 1H25, revenue rose 17.39% YoY to Rmb4.996bn and gross profit grew 20.51% YoY to Rmb427mn, mainly driven by external client base expansion and development of international logistics business.

3) Manufacturing: In 1H25, revenue fell 6.71% YoY to Rmb5.28bn, and gross profit dropped 19.09% YoY to Rmb581mn. The revenue decline was mainly due to lower overall completed volume (vs. 1H24) caused by the transfer of some orders to the new shipyard in Qidong. The firm’s booked gross margin was impacted by fluctuations in the renminbi-to-US dollar exchange rate. However, the actual gross margin after hedging improved YoY.

Net margin rose in 1H25 thanks to effective financial expense control. In 1H25, the firm completed a private placement and raised Rmb3.22bn to increase its capital. In addition, it received first installment of the debt transfer payment from the controlling shareholder Delong, notably replenishing working capital. The firm’s financing scale dropped. In 1H25, its financial expenses fell 41.8% YoY to Rmb0.6bn. This, coupled　with the central bank's interest rate cut, reduced financing costs, and notably boosted the firm's profit. Its net margin rose 0.1ppt YoY to 0.5% in 1H25, implying improved profitability.

From a long-term perspective, as a market leader, the firm is poised to grow stronger as it transforms into a service provider, integrates its supply chain, and expands globally. The firm is undergoing three critical shifts alongside other companies in the industry. 1) Transition into service provider: Growth in the firm’s roster of manufacturing clients is enhancing stability in demand. 2) End-to-end supply chain integration: Improved control of the value chain both upstream and downstream boosts profitability and resilience amidst cyclical fluctuations. 3) Global expansion with manufacturing partners: The firm’s overseas revenue CAGR of 39% (2019-2024) demonstrates rapid growth in its overseas business and significant growth potential. As the industry leader in China's Rmb50trn bulk commodity supply chain market (CR5 is as low as 5.3%), the firm's advantages in scale, turnover, and risk management support stronger profitability (high GM and ROE in 2024). We expect the firm to continue to gain market share going forward.

Financials and valuation

We maintain our 2025 and 2026 earnings forecasts. The stock is trading at 11.0x 2025e and 9.0x 2026e P/E. We maintain an OUTPERFORM rating and TP of Rmb8.58, implying 13.0x 2025e and 10.7x 2026e P/B, offering 18.2% upside.

Risks

Volatile commodity prices; disappointing growth of manufacturing sector; impairment of accounts receivable and inventory.