Main points of investment
The epidemic has led to a global shortage of containers, and container procurement and leasing prices have risen because of the second rise of the epidemic in the world, resulting in a slowdown in the efficiency of the global logistics chain. The industry predicts that the shortage of export boxes may last until the second quarter of next year. According to industry information, the latest order price for 20-foot dry cargo containers has reached $2500, an increase of about 40 per cent year-on-year. The price of container leasing is in direct proportion to the price of new boxes, and it will rise accordingly.
The company is the second largest container leasing company in the world, with a comparable valuation of HK $6 billion. Florence International, a subsidiary of the company, owns about 365 million TEU of containers, making it the second largest container leasing company in the world. The third largest container rental company in the world is Textainer, which has 3.5 million TEU containers, is listed in the United States and currently has a market capitalization of US $810 million, or about HK $6.3 billion.
It is expected that the company's container occupancy rate and rent are expected to continue to rise in the coming quarters.
The company has great flexibility in short-term profit and steady growth in the medium and long term.
At present, there are about 50 million TEU containers in circulation around the world. Every 1% decline in container transport efficiency creates an additional 500000 TEU of new container demand. In recent years, the global annual dry cargo container production volume of about 3.8 million TEU. Global demand for new cases is expected to remain high in the short term.
The company currently has an annual capacity of 550000 TEU containers. The parent company acquired the container-making assets of 0716.HK for 3.8 billion yuan in 2019, and is expected to inject this capacity into the company in the future, thus doubling the company's production capacity to 1 million TEU / year and ranking second in the world in market share.
The company's long-term equity investment generates a stable income of about 2 billion yuan per year. As of June 30, 2020, the book value of equity in listed companies and financial enterprises has reached 29.279 billion yuan. In the future, the company's long-term equity holdings are mainly banks, insurance and funds, and it is expected that it can steadily obtain an investment income of about 2 billion yuan a year.
The "buy" rating is given to the company for the first time, with a target price of HK $1.36, the company's container-making business is in an upward period of prosperity, short-term profits are flexible, production capacity is expected to be injected in the medium and long term, and profitability is guaranteed; container leasing business benefits from higher rents and higher rental rates; ship leasing business and investment income are expected to provide stable cash flow in the future; other industrial leasing businesses expand new growth space. The company's net profit for 2020-2022 is expected to be 2.67 billion yuan, an increase of 44.60% 8.58% 1.61% over the same period last year. At 5.5 times PE in 2020, the reasonable valuation is HK $15.8 billion, corresponding to a share price of HK $1.36 per share, with 43 per cent room for growth and a "buy" rating.