Event: Hainan Airlines Technology announced the 2022 annual report and the first quarter of 2023 report. In 2022, the company's shipping business achieved revenue of 150 million yuan, an increase of 0.2% over the previous year, and total revenue of 150 million yuan. Of these, the first quarter to the fourth quarter achieved revenue of 3440.8, 2750.2, 34045, and 509.76 million yuan respectively. Due to rising global oil prices, the fuel costs corresponding to the company's shipping business increased. The company's transportation business cost was 150 million yuan for the year, achieving a gross profit of -4,076 million yuan. The company achieved gross profit of -3.779 million yuan as a whole. On a quarterly basis, the gross profit for the first to fourth quarters was 657.3, 297.5, -552.8, and -7.799 million yuan respectively. The size of 2023Q1's fleet expanded, and revenue increased 39.6% month-on-month to 71.174 million yuan, achieving gross profit of 158.37 million yuan.
With the divestment of Ingram Micro International's assets, the company's cash flow situation is better. In 2021, the company sold Ingram Micro's assets and a large amount of cash flowed back. Through timely repayment of bank loans, the company's interest expenses dropped sharply. At the same time, the asset structure returned to a healthy level. As of the end of 2022, the balance ratio was 33.1%, down 5.4 pp from the previous year, down 61.4 pp from 2020; it held 6.33 billion yuan of monetary capital. The company's financial expense ratio dropped sharply. Under the combined influence, the company achieved net profit of 190 million yuan to the mother in 2022, and net profit of Fumo reached 19818 million yuan in 23Q1.
The growth rate of dry bulk freight capacity has slowed, laying the foundation for the start of a strong cycle. According to the company's annual report data, as of December 2022, there were 1,3113 dry bulk carriers worldwide, with a total carrying capacity of 970 million DWT. The capacity increased 2.9% year-on-year, and the growth rate was lower than the average of the past 3 years (3.7%). Currently, shipbuilding orders are mainly for container ships and LNG ships. At the same time, higher shipbuilding costs, uncertainty in fuel technology, and macroeconomic downturn risks make shipowners less willing to build ships. Furthermore, due to the expiration of the exemption period for the entry into force of the International Ballast Water Convention, a large number of ships around 10 years old will need to dock, which will further weaken the carrying capacity supply of dry bulk carriers.
The size of the company's fleet continues to expand, and dry bulk transportation contributes to the company's profits. In April 2021, the company purchased two 170,000-ton dry bulk carriers “Harvest Ship” and “Joy Ship” in the form of cash and re-established the shipping business department. In the second half of 2022, when the BDI index entered the phased bottom region, the company took the opportunity to purchase 7 dry bulk carriers. Currently, the company's fleet includes six Daling portable dry bulk carriers, two Cape of Good Hope dry bulk carriers, and one Panamanian dry bulk carrier. Diversified ship types will help the company to better carry out cargo collection business.
Profit forecasts and investment suggestions: Considering the transformation of the company's main business, we selected China Merchants Shipping, Pacific Shipping, COSCO Haite, and HNA Technology to compare. Comparable to the company's 23-year average PB was 1.2 times.
First coverage, giving a “hold” rating.
Risk warning: risk of macroeconomic fluctuations, risk of fuel price fluctuations, risk of freight price increases falling short of expectations, etc.