Home to the world’s 2nd largest economy in terms of GDP, China naturally also holds several records. These include, but are not limited to, top exporter and top receiver of overseas foreign direct investment.
For China to keep its position as the world’s number one exporter, there must be an equally advanced logistics infrastructure to match its immense production capacities. Many foreign logistics companies have this insight, which has led to multi-billion dollar investments into the logistics capabilities of China.
The international firms which are vying for a piece of the Chinese logistics pie include many of the world’s leading brand names – FedEx, UPS, DHL, and Schneider Logistics.
This has consequentially led to the development of the world’s biggest logistics industry. China is leading the continuous growth of this industry which boasts tremendous growth of over 20% in just a period of 4 years – a compounded annual growth rate of 6.69%. Chinese logistics took the biggest share of the global logistics market at 18.6% or $1.6 trillion, with the US coming in second.
The Chinese logistics market is the largest such market in the world not only because of the sheer size of China, but also because the infrastructure put in place for supporting logistics companies. China provides a mix of top quality transportation infrastructure along with competitive pricing.
However, the growth is not only fueled by international companies coming into China. Local businesses are also formidable contenders in this market. Leading the local logistics companies is none other than Sinotrans Limited (HKG:0598).
A Local Play on the World’s Top Logistics Market
A local logistics service provider, Sinotrans engages in many logistics services including freight forwarding, shipping, storage and terminal services, and marine transportation. In a market where most Chinese companies are only operating in the mid-to-lower-end market, Sinotrans stands out by offering high standard services to match those of its international competitors.
In fact, according to Armstrong & Associates, a leading supply chain market research and consulting firm, the company is the only one in China which ranks among the top 20 third party logistics providers in the world. This puts it on par with firms from more developed regions such as Europe and North America. Sinotrans ranked 9th in the world out of the 49 which were analyzed.
Boasting continuous growing financial performance as well as returns, Sinotrans is doing well despite the global economic downturn – especially in an industry that is notorious for low margins. However, Sinotrans’ margins are going nowhere but up. The estimated net profit margin of 4.75% for the latest year is an upgrade from the previous margin of 3.14%.The same is true for its returns with its ROE and ROE. predicted to achieve 12.20% and 6.29% respectively which is an improvement of about 30% from last year.
Selling at just 3.08 HKD, which is less than half of what it used to be, with a P/E ratio of 8.51, and a dividend yield of 3.85, Sinotrans is an investment not to be missed.