Results Review

2025 results largely in line with our expectations

Milkyway Chemical Supply Chain Service announced its 2025 results: Revenue rose 10.0% YoY to Rmb13.34bn and net profit attributable to shareholders grew 10.9% YoY to Rmb627mn, implying an EPS of Rmb3.96. In 4Q25, revenue rose 3.9% YoY to Rmb2.67bn and attributable net profit grew 35.8% YoY to Rmb102mn. The firm’s results were largely in line with our and market expectations.

Trends to watch

Logistics service segment (freight forwarding, warehousing, and transportation): Stable business scale and improving profitability. In 2025, revenue from the logistics segment rose 5.0% YoY to Rmb7.26bn, gross profit grew 9.5% YoY to Rmb1.05bn, and gross margin rose 0.6ppt YoY to 14.5%. In terms of the integrated warehousing and distribution business, the mismatch between depreciation provisions for new warehouses starting operation in 2H25 and business rampup temporarily weighed on earnings of the warehousing business. We expect the business to recover in 2026 as the bidding business grows.

In addition, the firm is expanding into booming emerging businesses such as wind power transportation. We expect earnings of the logistics segment to grow steadily along with business delivery.

Distribution business: Rapid growth in scale thanks to market expansion and platform strategies. In 2025, the distribution segment generated revenue of Rmb6.05bn (+16.7% YoY) and gross profit of Rmb465mn (+15.7% YoY). Chemical prices increased marginally in 1Q26, which we expect will drive further growth in the firm’s distribution business.

The firm has shifted its strategic focus to three key areas to drive rapid growth. 1) In terms of contract logistics, the firm expects to penetrate the alternative energy sector. 2) As for the distribution business, the firm expects to enhance its competitiveness in freight deconsolidation and mixing, and expand its presence in Southeast Asia. 3) The firm plans to accelerate its expansion in Southeast Asia and East Asia for the international logistics services business. Meanwhile, the firm is enhancing its logistics capabilities and human resources training with AI-powered tools to improve organizational efficiency. We expect these efforts to drive earnings growth.

Financials and valuation

As the Middle East’s geopolitical situation may pose uncertainties to chemical logistics demand, we slightly lower our 2026 and 2027 attributable net profit forecasts 3.4% and 2.6% to Rmb711mn and Rmb810mn based on prudent expectations. The stock is trading at 13.3x 2026e and 11.7x 2027e PE. We maintain an OUTPERFORM rating. As we are upbeat on the firm’s medium- and long-term growth momentum, we keep our TP unchanged at Rmb79.14, implying 17.6x 2026e and 15.4x 2027e P/E, offering 32.4% upside.

Risks

Further decline in transportation and warehousing prices; goodwill impairment risk.