The transportation industry continues to be booming in the short term, and opportunities for development are still there. Container transportation is an indispensable link in global trade exchanges. Since the second half of 2020, the shipping industry has entered a high boom stage, and freight rates have been rising all the way up. Since the epidemic, supply and demand for container shipping have been mismatched, and freight rates have risen. We believe there is still a continuing trend of high prosperity this year. Although freight prices fell at the beginning of the year, they remained high, and the balance between supply and demand is still at a weak stage. Currently, the retail sales ratio in the US is still at a historically low stage, and retail sales volume is still rising, and with the resumption of work and production after a new round of unblocking in individual regions of the country and the arrival of the peak season for traditional European and American products, the level of port congestion may continue. We think it is more likely that short-term freight rates will continue to fluctuate at a high level. They may be stable at reasonable prices in the medium to long term, but they will still be higher than pre-pandemic levels.
The company is deeply involved in container transportation and logistics services, and has deep operating experience. With container transportation and logistics as its main business, the company has long been committed to becoming the best and most innovative international container transportation and logistics service provider, providing links to world trade. Benefiting from the increase in freight rates and the company's good operation, the company achieved outstanding performance in 21 years. It achieved total annual operating revenue of 16.832 billion US dollars, an increase of 105% over the previous year, and achieved net profit of 7.128 billion US dollars, an increase of 689% over the previous year. Although the cost of a single box increased year-on-year, the company's ability to control costs is still excellent.
Many advantages are outstanding, and the company's future growth is worth looking forward to. Although the industry has entered a mature stage and the overall degree of homogenization is high, in comparison, we believe that the company still has many highlights to find, which continues to provide room for growth for medium- to long-term development. 1) It has complementary advantages with COSCO SHIPPING Group, and has strong synergies under dual brand operation; 2) Being in the Ocean Alliance is conducive to improving business competitiveness; 3) The company's profitability is strong, and its high payout rate is more attractive.
Key Profit Forecasts and Assumptions: Considering the volatility of future performance, we expect the company's net profit for 2022-2024 to be US$105.70/83.93/7.565 billion US dollars, and EPS of US$16.01/12.71/11.46, respectively. Based on the USD/HKD exchange rate of 7.85, we will give 3 times PE in 2022, corresponding to the target price of HK$377.04, covering the “superior to market” rating for the first time.
Risk warning: trade demand falls short of expectations, freight rates fall short of expectations, fuel costs continue to rise