Introduction to this report:

As a leading shipping finance platform, diversified equity investment is expected to drive profit growth. Investors need to be patient and wait for a breakthrough in the company's development path after deducting ROE from existing businesses.

Key points of investment:

1. First coverage, rating “neutral”. Profits from shipping leasing and container manufacturing are expected to stabilize, and profits from equity investment are expected to continue to grow, but returns after deducting non-shareholders are still low. We forecast EPS of $0.17, 0.17, and $0.18 in 2019-21. The comprehensive DCF valuation method and the comparable company average PE method gave 15 times PE, with a target price of 2.57 yuan.

2. Professional in shipping leasing, leading the world in scale. Relying on the Group's deep shipping background, the company engages in various shipping finance businesses such as shipping leasing. Profit margins improved after the optimization and integration of the shipping leasing business. The scale of ship leasing is among the best in the world, and container leasing is second in the world. It is expected that there will be stable returns in the future. However, the company's domestic financing costs are higher than financial leasing institutions controlled by banks, and lower interest spreads limit the improvement in return on net assets.

3. Trusted container manufacturing assets have significantly increased market influence. The company increases the capacity utilization rate of container manufacturing, accelerates research and development of special containers, and enhances competitiveness. After Shengshi Container's container manufacturing assets were acquired by the trustee parent company, its market influence in the container manufacturing field increased significantly. Although container manufacturing is highly concentrated, competition has been fierce over the years. Fortunately, the timing of the acquisition was chosen when the industry was weak.

4. Expand investment in related industries and exert synergies. The company expands businesses such as industrial funds, small loan companies, insurance and factoring to create a one-stop shipping financial service system. Synergies help improve returns and reduce risk. However, due to the short investment period, long-term investment capacity and return on investment still need to be observed.

5. Risk warning. The growth rate of the global economy has declined, new shipbuilding orders have increased dramatically, and the prices of transactional financial assets have fallen.