The demand is weak and the ship supply is increased, the 3Q dry bulk freight rate is low, and the 4Q month-on-month ratio is expected to improve slightly.
Pacific Shipping released 3Q23 operation data: the average daily freight rate of the company's handy ships / super-handy ships fell 56.8% and 16.1% respectively compared with the same period last year, mainly due to the downward global economic growth rate, high overseas interest rates suppressing demand, new ship delivery and port congestion relief, and the global dry bulk freight market is under pressure. Looking forward to 4Q23, benefiting from the seasonal peak season of the shipping market, dry bulk freight rates are expected to stop falling and pick up, month-on-month improvement. Considering the low freight rate of 3Q23 and the uncertainty of global dry and bulk market demand in the past 24 years, we downgrade the 2023 PB net profit forecast of 8.7% to 150 million / 260 million, maintaining the 25-year net profit forecast of US $350 million; based on 1.0x 2023E PB (the company's historical three-year PB average minus 0.25 standard deviation, the valuation discount is mainly due to the decline in corporate earnings compared with the same period last year. 23e BPS US $0.36), cut the target price by 3% to HK $2.80 to maintain "buy".
China's post-epidemic recovery has led to the demand for bulk shipping, but the global demand for small bulk transport is relatively flat.
According to Oceanbolt data, 9M23 global shipping volume of iron ore / coal / grain / small bulk cargo is + 3.0% and 3.0% respectively compared with the same period last year.
4Q23 freight rates are expected to improve slightly, and the 1Q24 Spring Festival off-season market may be relatively flat.
According to the company's announcement, as of October 10, the average daily freight rate of the company's locked-in 4Q23 convenience ship / super-convenience ship was $11250 and $13,240 per day, respectively, up 10.3% and 14.7% from the previous month, with a lock-up ratio of 70% and 86% respectively. Benefiting from the marginal improvement in import demand for bulk cargo driven by the seasonal peak season, we expect the company's 4Q profit to pick up from 3Q. Looking ahead to 1Q24, as of October 10, the company's average daily freight rates for locked convenience ships and super convenience ships are US $9470 and US $13,290, respectively, with a locking ratio of 29% to 33%. Considering the impact of the Spring Festival off-season in the first quarter, we expect the overall freight rate of 1Q24 to decline slightly compared with 4Q23 or 4Q23.
There is still great uncertainty in the dry bulk market demand in the past 24 years, and the dismantling of old ships is expected to support the freight rate level.
According to Clarksons forecasts, the global supply of bulk carriers (bulk plus small carriers) will grow by 2.9 per cent in 2024 compared with the same period last year. Vs demand will grow by 3.7 per cent and 1.6 per cent. Among them, the global supply of small bulk carriers increased by 3.0% over the same period last year, and the demand for vs increased by 2.4% and 2.5%. Since 2023, Xiaozong bulk cargo has been dragged down by weak demand in Europe and the United States, and the performance of the freight rate is weaker than that of bulk freight, which is a drag on the company's performance. Looking forward to 2024, global economic uncertainty may be a drag on scattered market demand, but low market prosperity and environmental restrictions are expected to accelerate the dismantling of old ships, shrink market supply and support the level of industry freight rates.
Risk hints: freight rates are lower than expected, supply is higher than expected, economic growth is lower than expected, and natural disasters