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Jiayou International Logistics' share price fell 20.2% YTD as of July 18, which we attribute to market concerns that the company's Mongolian coal supply chain business may miss expectations due to weak coking coal demand. According to data from steelhome.cn, average coking coal prices at major ports in China declined about 24.5% from the beginning of the year to July 18.

However, we believe the current share price already reflects pessimistic expectations for the Mongolian coal supply chain business. Coking coal prices have recently rebounded - data from sxcoal.com shows that prices of Ganqimaodu No.5 Mongolian raw coal rose about 14.3% from June 17 to July 18, and that the price spread between Ganqimaodu No.5 prices and the company’s long-term contract prices widened in 3Q25. We suggest watching for a potential rebound in the company’s share price, driven by improvements in its Mongolian coal supply chain business.

Comments

Mongolian coal supply chain business improved marginally in 3Q25; spread between long-term contract costs and end-market prices widened. The firm’s long-term contract prices for Mongolian coal were revised down in 3Q25 in response to falling coal prices in 2Q25.

On the downstream side, supply and demand conditions improved due to production cuts and the suspension of operations at some domestic coal mines, as well as the temporary shutdown during the Naadam festival in Mongolia. Prices of Ganqimaodu No.5 Mongolian raw coal rebounded by 14.3%, rising from Rmb700/t on June 17 to Rmb800/t on July 18, widening the price spread with the firm’s long-term contract prices in 3Q25. Based on current prices, we estimate that the gross profit per tonne of the firm’s Mongolian coal supply chain business is likely to rise back above Rmb100.

We are upbeat on the firm’s logistics and African land port businesses. On June 23, the firm announced the completion of a 17.26km road between Zambia’s Sakania Port and Ndola. In addition, construction is underway on both the Sakania Port itself and the Sakania-Mufulira road. We believe the firm’s land port network in Africa is taking shape, along with the expansion of the BHL fleet. Overall, we remain optimistic about the growth prospects of the firm’s logistics business in Africa.

The firm's dividend yield is attractive. Its dividend payout ratio increased from 33.5% in 2023 to 53.5% in 2024, and its current trailing twelve-month (TTM) dividend yield stands at 4.6%. The firm generated over Rmb400mn in free cash flow during 2023-2024 and still had Rmb1.02bn in net cash on hand as of end-1Q25. We believe the firm may maintain a dividend payout ratio above 50% this year and continue paying interim dividends in mid-2025.

Financials and valuation

We largely maintain our 2025 and 2026 earnings forecasts, with attributable net profit forecasts at Rmb1.35bn and Rmb1.67bn, implying growth of 5.8% and 23.9%. The stock is trading at 10.9x 2025e and 8.8x 2026e P/E. We maintain our OUTPERFORM rating and our ex-rights target price of Rmb12.8/sh (following the completion of a 0.4-for-1 share conversion on June 13), implying 13.0x 2025e P/E, and offering 19.3% upside.

Risks

Operations of African ports disappoint; sharp fluctuations in Mongolian coal prices.