The collection and transportation market is booming in 2021, and the net profit in 2022 is expected to further increase compared with the same period last year. COSCO Shipping Holdings announced his performance in 2021: revenue increased by 94.9% to 333.7 billion yuan, and net profit increased significantly to 89.3 billion yuan (2020: 9.9 billion yuan), which is in line with the performance forecast. In the context of the continuing tension in the global supply chain, container rates have risen sharply, driving strong growth in the company's performance. At the same time, the company issued a profit forecast for the first quarter on March 31, with an estimated net profit of 27.6 billion yuan for 1Q22, an increase of 78.6% over the same period last year. We expect the 2022 co-freight rate to continue to grow compared with the same period last year, and the company's net profit in 2022 is expected to further increase compared with the same period last year. We maintain the 2022max 2023 net profit forecast of 108 billion / 74 billion yuan, and increase the 24-year net profit forecast of 42.3 billion yuan. Based on the valuation of 1.04x/1.76x 2022E PB, the corresponding H shares and A shares are priced at HK $18.1 and HK $25.0 (HK $2022E BVPS 14.2) respectively.
Maintain the "buy" rating on H and A shares.
The epidemic disrupted the global supply chain and freight rates rose sharply.
Since 2020, the epidemic has led to continued tension in the global supply chain, driving up the freight rate of sea containers.
In 2021, the company's average freight rate rose 109% year-on-year to 1796 TEUs, of which the average freight rate for trans-Pacific, Asia-Europe routes rose 87% to 178% year-on-year. In terms of cargo volume, the company's container volume reached 26.9 million TEUs in 2021, an increase of 2.2% over the same period last year. The relatively low growth rate of cargo volume is mainly due to the longer transportation time and the decrease of fleet turnover efficiency in the case of port congestion.
Profits are expected to remain high in 2022
In the post-epidemic era, the stability of the supply chain has become the primary consideration for enterprises. In the current strong market, we expect the company's long-term freight rate to rise further in 2022. In terms of the spot freight market, we expect that the problems of port congestion and supply chain shortage will gradually alleviate in the medium to long term, but the pace of relief will be relatively slow, which will support the spot freight rate. Our 2022 profit forecast is based on the assumption of an average freight rate of $2028 per TEU, an increase of 13% year-on-year.
Cash flow and balance sheet are strong; companies are expected to continue to pay dividends in 2022 to announce a dividend rate of 15.6% for 2021, compared with 7% for H shares and 5% for A dividends. As of the end of December 2021, the company has 97.4 billion yuan in net cash and strong cash flow, and we expect the company to continue paying dividends in 2022. Our H share list price of HK $18.1 is based on 1.04x 2022 forecast PB, the company's three-year historical PB average 1.3x minus 0.5 standard deviation The A-share target price of RMB25.0 is based on 1.76x 2022E PB, the company's three-year historical PB average 2.2x minus 0.5 standard deviation, the valuation is higher than the historical discount considering the high base in 2021, and the profit growth rate of the company slows down in 2022 (the previous target price is HK $22.7m / 26.7e PB, based on 2.7x/2.3x 2022E PB).
Risk tips: 1) freight rates are lower than expected; 2) global economic growth is lower than expected; 3) natural disasters; 4) policy risks.