The largest third-party ship management service provider in China. We are committed to providing customers with comprehensive one-stop shipping solutions in the value chain of the shipping industry. Intercontinental Shipping Group Holdings Co., Ltd. is headquartered in Qingdao, China, and has a broad operating map. It has shipping operation centers in Singapore, Hong Kong, and Japan, and ship management centers in Qingdao, Shanghai, Ningbo, Zhoushan, Fuzhou, Hong Kong, Singapore and Greece. According to the Frost & Sullivan report, in terms of the number of ships owned by third parties under management in 2021, the company ranked first among China-based ship management service providers.

Dry bulk demand: Domestic trade dry bulk transportation demand is closely related to the state of downstream industries, and coastal domestic trade cargo throughput is increasing year by year.

Among the major bulk commodities in foreign trade, seaborne iron ore trade is expected to remain stable in 2023; coal trade is expected to grow 2% against the backdrop of rising European demand; grain trade is expected to increase by 5% after Ukraine's grain exports were severely interrupted in 2022. Looking at the medium term, as China recovers after the epidemic, imports and exports will gradually return to pre-epidemic levels in 2023-24.

Forward supply: Shipyard production capacity is tight, shipyards are being taken over by high value-added orders for containers and LNG, bulk carrier shipyards are less attractive, and forward supply is at a low level. Recently, new shipbuilding prices have continued to rise, demand for containers and LNG carriers has increased, orders have taken up the ship platform, and dry bulk carriers are competing with high-value-added ships. Production capacity was fully cleared during the last round of shipbuilding, and the number of active shipyards continued to decline. Leading shipyards are already scheduled to 2025, and production capacity is tight.

The company's main business is divided into three areas: the shipping business of controlling ships, the shipping business of leased ships, and the business of ship management. The revenue from the shipping business that controls ships is related to the number of ships controlled and market freight costs. The cost is mainly related to the price of purchasing a ship and the number of ships, and the cost per ship is relatively fixed. Revenue from the shipping business of leased ships is related to the number of leased ships and market freight costs. Costs are related to the number of ships and the sentiment of the shipping market. Ship management business refers to the daily management of ships, technical management, crew management, repair and maintenance services, and third party free ship certification and system document management under maritime regulations and conventions. We believe that the information management business will grow steadily as the company expands.

Financial situation: Revenue from the three major business segments of ship leasing, ship control, and ship management continues to grow, and gross margins are impressive. In 2019-2022, ship leased revenue was 6445, 9535, 25719, and 19812 million US dollars, respectively, accounting for 48%, 53%, 69% and 55% of main business revenue; ship control revenue was 4440, 4703, 6656, and 107.73 million US dollars, respectively, accounting for 33%, 26%, 18%, 30% of main business revenue; ship management service revenue was 2675, 3655, 4900, 53.26 million US dollars, accounting for 20%, 20%, 13% and 15% of main business revenue.

First coverage, giving a “buy” rating. It is estimated that the company's net profit to the parent in 2023-2025 will be 54.90 million, 6161, and 65.35 million US dollars, respectively. Among them, control ships contributed $1535, 3665, and 30.38 million dollars; leased ships contributed US$1,499, 984, and 15.98 million dollars; and ship management services contributed US$1188, 1137, and 15.24 million dollars. Referring to the average PE of shipping companies, the leased shipping business was given 9 times PE, the ship management business was 9 times PE, and the profit of 26.79 million US dollars in 2023 corresponds to a valuation of 240 million US dollars. Considering the sharp appreciation of ship assets since 2021, the net asset value of the restructured ship was 290 million US dollars. Under the segmented valuation method, considering the liquidity issues of Hong Kong stocks, the net asset value of the restructured ship was discounted 0.7 times. Intercontinental Shipping's reasonable valuation was 4.4 billion US dollars, giving a “buy” rating.

Risk warning: the boom in the dry bulk shipping cycle falls short of expectations, demand for refined oil products imported from Europe and the US falls short of expectations, and the price of ship assets falls short of expectations