2021 performance beat expectations: Haifeng International's net profit in 2021 was US$1,163 million, +231% year on year, higher than Yingxi's estimate of US$1.15 billion, exceeding market expectations by 1%; revenue of US$2.01 billion, +79% year on year, beating market expectations by 7%. Fuel costs +61% year on year, gross profit margin 43.8%, +17.4 pcts year on year. Earnings per share are $0.433, and the proposed final dividend of each share is $0.179. The annual dividend ratio is as high as 95%.
The container business performed well: container business revenue in 2021 was US$3.75 billion, +79% year on year, including cargo volume +20% year on year and single container freight rate (excluding warehouse exchange revenue) +52% year on year. 4Q21 revenue +83% year on year; cargo volume +17.8% year on year, +18.1% month on month; average price per box is 959.7 US dollars/TEU, +58.9% year on year, +22.8% month on month. At the end of the period, the container fleet was 96 ships (68 owned, 28 leased), +6.7% year on year, capacity +10.4% year on year, and the estimated actual load rate increased by 7 pcts.
Freight rates are expected to increase further throughout the year: the IMF expects global GDP to be +4.4% yoy in 2022, and Alphaliner expects the container fleet capacity to be +4.2% yoy in 2022 (2021: +4.4%), which is slightly lower than the growth rate of demand. We believe that demand growth will remain steady in 2022 (based on the influence of Russia and Ukraine in the short term and the Fed's moderate interest rate hike), while supply may fall short of expectations due to the Russian-Ukrainian situation and high oil prices. Delivery of new ships is expected to focus on 2023-2024, but the dismantling of old ships, which have been delayed by high freight rates over the past two years, and the imminent implementation of the CII rating by IMO is expected to accelerate the scrapping of old ships, especially when freight rates weaken, which will help balance supply and demand and support freight rates in the long term. We expect that freight rates on Southeast Asia routes will still increase by about 30% year over year in 2022.
Owned ships have increased to improve the cost structure of vessels, and cargo volume is expected to grow steadily over the long term: the company has 36 new ship orders, and 22, 12 and 2 will be delivered respectively from 2022 to 2024. The proportion of owned ships is expected to increase from 71% in 2021 to over 85% in 2024. The company said that if chartered boat rents are high this year, they will replace them with their own ships to improve the cost structure (TCE equivalent to the average daily cost of owning a ship is about 10,000 US dollars versus 30,000 US dollars of leased ships, the cost of the ship is expected to decrease year-on-year). Combined with the grid-like distribution of goods and the high actual load rate brought about by high customer acceptance, the volume is expected to grow steadily over the long term.
Investment advice: We believe the company's current valuation is very reasonable even if it is based on a conservative DDM model and calculation of the risk of potential freight rate falls in 2024. We continue to be optimistic that Haifeng International will seize development opportunities in Asia and grow steadily over the long term. It is recommended to buy it.