Milkyway (603713) Report Interpretation

Overview

This conference takeaway covers Milkyway’s core chemical logistics and distribution operations alongside its new-energy and semiconductor businesses. Goldman Sachs argues that the core is recovering modestly, while the newer verticals—particularly semiconductor full-chain logistics—offer medium-term growth and margin upside.

Core views

Management described a mild recovery in China’s chemical industry rather than a full-fledged rebound. Chemical producers have generally operated at high utilization, with fewer planned maintenance outages during the usual maintenance season; together with geopolitical disruptions, this has supported a moderate recovery in chemical prices. For Milkyway, higher chemical costs and wider spreads have supported its MCD business. The company has also secured price increases on certain logistics customers and routes, although broad-based increases remain difficult; management noted that any additional price increases would flow directly to profit. Looking ahead, it expects traditional chemical-logistics freight volumes in 3Q to retain the strong momentum seen in 2Q, with potential quarter-on-quarter improvement from a better product mix. New energy performed well in 1H26 and management sees substantial growth potential, supported by relationships with leading clean-energy customers. However, it is expanding customer coverage selectively because receivable cycles are around five months, creating a need to manage associated risk. Semiconductor logistics is the report’s principal medium-term growth opportunity. Milkyway now serves more than 150 semiconductor customers, including leading domestic fabs and memory companies. Having historically focused on hazardous-chemical warehousing and transportation, it began expanding into full-chain services in May-June. The vertical generated around Rmb500mn of revenue last year, below 5% of total revenue, and represented around 6% of revenue in 1H26. Management expects only a limited contribution in 3Q, a more visible contribution in 4Q, and greater earnings elasticity into 2027, contingent on customers’ capacity ramps and fab-construction progress. The attraction of the semiconductor expansion is also its margin profile. Management expects semiconductor logistics to contribute Rmb30-40mn of gross profit in 2026E, equivalent to Rmb300-400mn of incremental revenue. Gross margin for semiconductor full-chain logistics can reach 18-19%, around 6-7 percentage points above Milkyway’s 11-12% company average. Goldman Sachs frames Milkyway as China’s leading specialist in third-party chemical logistics and distribution. Its shift into distribution has doubled its addressable market and created an integrated offering that lets chemical producers outsource two specialized, non-core functions to one provider. The report notes that third-party penetration in developed markets is more than twice China’s level, implying room for further outsourcing penetration. Goldman Sachs believes the market does not fully price in the company’s competitive moat, citing chemical know-how and supplier relationships, integrated specialization, China’s largest strategic warehousing assets, management incentives and execution, technology-enabled operations, and an established M&A record. It therefore remains Buy rated. For valuation, Goldman Sachs derives its Rmb80.7 12-month target price from a 10.0x 2028E EV/EBITDA multiple, discounted back to mid-2027E using a 9.8% WACC. The 10.0x exit multiple references the average 10-year mid-cycle EV/EBITDA of key global peers. The reported price was Rmb61.92 as of the 1 September 2026 close, implying 30.3% upside.

Analysis framework

The report combines management commentary from the Asia Leaders Conference with operating indicators for chemical logistics, customer and service-scope developments in new verticals, and margin comparisons. It then links the business outlook to an EV/EBITDA-based target-price framework discounted using WACC.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  EV/EBITDA exit-multiple valuation

  Goldman Sachs applies a 10.0x 2028E EV/EBITDA multiple, based on key global peers’ average 10-year mid-cycle multiple, then discounts the result back to mid-2027E to derive the target price.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Chemical-industry conditions flowing through to logistics and distribution

  The report links producer utilization, maintenance outages, chemical prices, input costs and spreads to Milkyway’s MCD and logistics performance.

• Competition & strategyEconomic Moat and Competitive Advantage

  Integrated chemical logistics and distribution competitive moat

  The report assesses Milkyway’s industry expertise, supplier relationships, warehousing assets, integrated service model, technology, execution and M&A history as sources of competitive advantage.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Milkyway (603713.SH)

  Primary covered company; expected to benefit from recovering chemical logistics, selective new-energy growth and higher-margin semiconductor full-chain services.

  Strengths

  Integrated chemical logistics and distribution model, industry expertise and supplier relationships, strategic warehousing, technology-enabled operations, management execution and M&A record.

  Weaknesses

  Broad-based logistics price increases remain difficult, and the traditional business is only in a mild recovery phase.

  Comparison

  Third-party outsourcing penetration in developed markets is more than twice that in China; semiconductor full-chain logistics margin of 18-19% is above the company average of 11-12%.

  Risks

  Chemical demand weakness, slower outsourcing or distribution development, input-cost-related ASP pressure, hazardous-chemical incidents, and value-diluting M&A.

Key data

• 12-month target priceRmb80.70Based on a 10.0x 2028E EV/EBITDA multiple discounted at a 9.8% WACC.
• Share priceRmb61.92Price as of 1 September 2026 close.
• Implied upside30.3%Reported upside to the Rmb80.70 target price.
• Semiconductor customersMore than 150Includes leading domestic fabs and memory players.
• Semiconductor revenueAround Rmb500mn last yearBelow 5% of total revenue; the business accounted for around 6% of revenue in 1H26.
• 2026E semiconductor gross profitRmb30-40mnManagement expectation, corresponding to Rmb300-400mn of incremental revenue.
• Semiconductor full-chain gross margin18-19%Around 6-7 percentage points above the company average of 11-12%.
• New-energy receivable cycleAround five monthsA reason management remains selective in customer expansion.

Impact & implications

Goldman Sachs sees a combination of modest core recovery and expansion into new verticals as supporting Milkyway’s growth outlook. Semiconductor full-chain services are expected to be the most important medium-term contributor because of their customer expansion, broader scope and above-average gross margins, although their earnings contribution depends on customer capacity ramps and fab construction.

Risks

• Slower-than-expected chemical-industry sales in China.
• A reversal or slowdown in chemical producers’ outsourcing trend in China.
• Falling logistics-cost inputs that pressure ASP in global freight forwarding.
• Accidents related to Milkyway’s handling of hazardous chemicals.
• Slower-than-expected development of the chemical distribution business.
• Value-diluting M&A.

What to watch

• Whether 3Q chemical-logistics volumes sustain the strong momentum seen in 2Q and whether mix improves sequentially.
• The pace and breadth of logistics price increases and their direct profit contribution.
• New-energy growth alongside receivables management, given roughly five-month collection cycles.
• Semiconductor customer capacity ramps, fab-construction progress, and the timing of a more visible contribution in 4Q.
• Execution of semiconductor full-chain services and realization of the expected 18-19% gross margin.