| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 32.49 | -49 |
| Intrinsic value (DCF) | 258.24 | 308 |
| Graham-Dodd Method | 26.76 | -58 |
| Graham Formula | 107.84 | 70 |
Milkyway Chemical Supply Chain Service Co., Ltd. (603713.SS) is a leading specialized logistics provider headquartered in Shanghai, China, with a distinguished history dating back to 1997. Operating within the Industrials sector's Integrated Freight & Logistics industry, the company has carved a critical niche by offering comprehensive, end-to-end supply chain solutions exclusively for the chemical sector. Its service portfolio is extensive, covering everything from international freight forwarding (import/export booking, multimodal transport) and specialized transportation via its fleet of tank containers and self-built tank yards to value-added services like tank cleaning, repair, and technical support. A key differentiator is its expertise in handling hazardous and sensitive materials, serving high-stakes industries such as oil and gas, petrochemicals, and renewable energy. This specialization positions Milkyway as an essential partner for chemical producers and consumers, ensuring the safe, efficient, and compliant movement of goods within China and across global markets. The company's asset-heavy model, including owned tank containers and yard networks, provides a significant barrier to entry and underpins its reputation for reliability in a complex and highly regulated field.
Milkyway Chemical presents a compelling case as a specialized player in a critical logistics niche, boasting a profitable track record with FY2024 net income of CNY 565 million on revenue of CNY 12.1 billion. The company's focus on the chemical industry, an essential and growing global sector, provides a defensive quality and insulates it from some broader economic cyclicality. However, investors must weigh this against significant financial considerations. The company carries a substantial debt load of CNY 5.03 billion against cash of CNY 1.37 billion, indicating a leveraged balance sheet. This is further evidenced by high capital expenditures (CNY -647 million), which, while necessary for maintaining its specialized asset base, pressure operating cash flow (CNY 482 million). The moderate beta of 0.72 suggests lower volatility than the broader market, which may appeal to risk-averse investors. The dividend yield, based on a CNY 0.71 per share payout, adds an income component. The primary investment thesis hinges on the company's ability to manage its debt while continuing to capitalize on its specialized market position.
Milkyway Chemical's competitive advantage is fundamentally rooted in its deep specialization within the chemical logistics value chain, creating a defensible moat against generalist logistics providers. Unlike broad-based freight companies, Milkyway's entire operational framework—from its specialized tank container fleet and self-built tank yards to its technical services like cleaning and repair—is tailored for the unique demands of chemical transport. This asset-intensive model requires significant capital investment and operational expertise, presenting a high barrier to entry. Its positioning as a one-stop-shop for chemical supply chain needs, including complex regulatory compliance (filing, inspection) and hazardous material handling, fosters strong client stickiness. Competitors would struggle to replicate this integrated service model without similar dedicated assets and industry-specific knowledge. However, this specialization also defines its competitive landscape, pitting it directly against other global and regional chemical logistics specialists. Its primary competitive positioning is as a dominant regional player in China, leveraging its local network and understanding of domestic regulations. A key challenge is scaling this model globally against larger, well-capitalized international peers who possess wider geographic networks. Milkyway's strategy appears to be strengthening its domestic fortress while selectively expanding its international multimodal transport capabilities, using its Chinese base as a springboard for global trade flows linked to the world's largest chemical market.