Main points of investment:
Strategic restructuring to speed up capacity digestion, increased concentration to accelerate head recovery. According to Xiao Yaqing, director of SASAC, the shipbuilding industry will become one of the key areas for SASAC to promote strategic restructuring in 2019. Overcapacity is one of the important reasons for the downturn of the shipbuilding industry. The implementation of strategic restructuring will accelerate the resolution of excess capacity and contribute to the healthy development of the industry. In addition, in the depressed environment, the market concentration has further increased, with the national proportion of new orders received by the top 10 enterprises in 2018 accounting for 76.8%, an increase of 3.4 percentage points over the same period last year. As a leading enterprise in China's shipbuilding industry, under the background of accelerated elimination of backward enterprises and accelerated resolution of production capacity, the operating situation is expected to improve quickly.
The loss is stripped off the account is recovered, and the transfer of assets helps to travel light. Affected by the continued downturn in demand, it is difficult for marine equipment to pay orders, which has become an important source of losses for the company. From January to October 2018, Mountain Building heavy Industry and Qingdao Wushu lost 2.3 and 590 million yuan respectively. Through the sale of shares in Mountain heavy Industry and Qingdao Wushu, on the one hand, the source of losses is reduced, and profitability is improved; on the other hand, the company will recover a total debt of 1.895 billion yuan, reduce the occupation of the company's funds, and further improve the capital situation.
At the critical stage of naval strategic transformation, warships need to provide performance support. China's naval ship construction continues to be booming. In 2018, the number of main ships launched reached 21 and the displacement reached 157000 tons. At present, our navy is still in the early stage of ocean-going development, and large ships still need to be developed vigorously. Under the background of accelerated production of key models such as 055, the prosperity of ship construction is expected to be further improved, which has become an important support for the company's performance growth.
Profit forecast and investment rating: increase the rating. In terms of civil ships, strategic restructuring and increased concentration are expected to accelerate the improvement of the company's business environment, while the divestiture of marine assets will further reduce the company's burden and help to travel light; in the case of military ships, under the background of accelerated construction of key models such as 055, military business is expected to further grow and become an important support for the company's performance growth. It is estimated that the net profit from 2018 to 2020 is 1.149 billion yuan, 1.434 billion yuan and 1.624 billion yuan respectively, the corresponding EPS is 0.05,0.06 yuan and 0.07 yuan respectively, and the pre-stock price PE is 92 times, 74 times and 65 times respectively.
Risk tips: strategic restructuring of the shipbuilding industry is not as expected; military procurement is not as expected; recovery of civil ships is not as expected; systemic risk.