China Shipbuilding Leasing is a leading enterprise in the shipyard leasing industry
China Shipbuilding Leasing is the only leasing company under the China Shipbuilding Group. Its main business is to provide various ship leasing solutions. Based on revenue scale, the company currently has a market share of 3.9% in the global ship leasing industry, ranking fourth, and ranking first in the global non-bank ship leasing industry.
The scale of the business continues to grow rapidly
Since 2016, CSIC Leasing's revenue and net profit levels have maintained a relatively rapid growth trend: total revenue in 2018 was $2.105 billion, with a two-year compound growth rate of 42.88%; net profit was HK$707 million, with a two-year compound growth rate of 27.86%; the ROE level remained above 10%. Considering that the company currently has plenty of orders on hand, the company will continue to expand at a rate of around 20% over the next 3 years.
A recovery in the shipping industry will increase the return on assets of the company's fleet
China Shipbuilding Leasing's current fleet and on-hand orders cover various ship types such as LNG/LPG, dry bulk cargo, and containers. The ratio is relatively even, with a total value of 5.793 billion US dollars. In 19-21, the recovery of the shipping industry will prompt a considerable increase in asset prices for these types of ships. We expect the company's return on interest-bearing assets to around 10% as a result.
Multi-channel financing and loose monetary policies reduce corporate debt costs, financing costs and bank expenses are the company's biggest costs, accounting for 71.54% of its total costs in 2018; bank loans are the company's largest debt item, accounting for 95.85% of the company's total debt in 2018. After the company went public, financing methods became more diverse. With the large maturity of the company's short-term debt in 2018 and the decline in interest rates, the pressure on the company's debt costs will decrease. It is expected that the cost of the company's interest-bearing debt will drop to around 3.5% in the next three years.
Profit forecasting and valuation
The company's net profit levels in 2019-21 are estimated to be $1,066 million, $1,566 million, and HK$2.157 billion respectively. Referring to the average price-earnings ratio levels of the four H-share listed leasing companies, the average profit for 19-20 is 7.76X PE. The corresponding target market capitalization is HK$10.086 billion, and the stock price is HK$1.64.
Risk warning
Interest rates, exchange rate risks, and the escalation of the Sino-US trade war have caused the global economy to slow beyond expectations