Company trends

The current situation of the company

We update the company's recent development and reiterate our "outperform industry" rating.

Comment

The potential key beneficiaries of the strategic restructuring of northern and southern shipping. On July 1, the company announced that China Shipbuilding heavy Industry Group and China Shipping Group are planning a strategic restructuring, the relevant plan has not yet been determined, and the plan needs to be approved by the relevant competent authorities. In the hot spot quick review report on July 2, we pointed out that in the medium and long term, the reorganization of North-South ships will help to reduce homogenization competition, further eliminate production capacity, increase industrial concentration, enhance international competitiveness, and improve the operational efficiency of China's shipbuilding enterprises. speed up the high-quality development of China's shipbuilding industry; in the short term, the focus lies in the integration expectations brought about by potential inter-industry competition among listed companies owned by North-South Shipbuilding. Both China heavy Industry and China Shipbuilding are engaged in civil and military ship building and repair; we believe that, no matter how integrated, there is more room for benefit than low-valuation companies. At present, the share price of China heavy Industry corresponds to 1.6 x 2019 Pmax B, which has a potential key benefit.

The share buyback program highlights the company's confidence in its future development. In June, the company disclosed its stock repurchase plan, which intends to repurchase 4600 million yuan within six months, with a repurchase price of no more than 7.82 yuan per share. The repurchased shares will be cancelled to reduce the company's registered capital. On July 24th, the company bought back shares for the first time by way of centralized bidding transaction, the repurchase price was 5.82yuan / share ~ 5.88yuan / share, at a cost of 30.31 million yuan. In fact, since August 8, 2018, the company's controlling shareholder, China Shipbuilding heavy Industry Group, has continuously implemented three rounds of shareholding increase plans; shareholding increases and buybacks have been launched one after another, which we believe reflects the insider's recognition of the value of listed companies.

Valuation proposal

Keep the earnings forecast unchanged, and the company's current share price corresponds to 1.6x/1.5x 2019 Placer B.

The company's potential focus benefits from the strategic restructuring of north-south ships, raising the target price by 5% to 7.10 yuan, corresponding to the 20-year Pamp B of 1.9x/1.9x 2019, with a potential increase of 21%, reiterating that "outperform the industry".

Risk.

The uncertainty of the strategic reorganization plan of northern and southern ships.