Central shipping enterprises, increasing their overall strength

COSCO Haifa is a company specializing in shipping logistics production and finance services belonging to the central enterprise COSCO SHIPPING Group. It focuses on ship leasing, container leasing, and container manufacturing. Since the asset restructuring in 2016, the business structure has been continuously optimized, and operating income, net profit, shareholders' equity, and profitability have all shown an upward trend. The 2021-2022 performance fluctuated greatly, mainly due to fluctuations in container manufacturing volume, prices, etc.

The box-making business is expected to rise in volume and price

The box-making business is expected to return to average value and grow further as the economy recovers. Although China's container production reached a record high in 2021, the 2019-2023 average increased compared to the 2014-2018 average, which is more in line with demand; by the third quarter of 2023, inventory was being steadily digested, container demand was entering a recovery path, and China's container production and export prices began to rise. The 2024 China-US inventory cycle is expected to enter an upward period, which will drive up container production and prices. COSCO Haifa's packaging business is expected to recover, and revenue and profit are expected to enter an upward period.

Stable profitability of leasing and investment

The profit of the leasing business and investment business is relatively stable, with the center being around 1 billion yuan. Shipping leasing includes ship leasing, container leasing, etc., and both revenue and gross profit are relatively stable. Ship leasing is mainly a long-term charter contract with a fixed rent, and revenue is relatively stable; revenue from container leasing, management and sales is relatively stable, and fluctuations mainly come from used box sales. The investment business mainly invests in Bohai Bank, Everbright Bank, and Haifa Baocheng Leasing, and the return on investment is relatively stable.

Profit forecasts and target prices

Profits are expected to increase significantly in 2024-2025. As the economy recovers, container production, sales and prices are expected to rise, driving profit growth in the packaging business. Profit from ship leasing, container leasing, and investment businesses is relatively stable. We forecast EPS for 2023-2025 to be 0.16, 0.27, and 0.37 yuan/share, with growth rates of -44%, 68%, and 38%. The comprehensive AE valuation method and comparable company Wind unanimously anticipated PE in 2023. Taking the average of the two valuation results, COSCO Haifa's target price was 3.4 yuan, covering it for the first time, and giving it a “buy” rating.

Risk warning: macroeconomic risks, another decline in international trade, a sharp rise in the price of raw materials such as steel, a sharp rise in container rental prices, a sharp decline in investment bank profits, a sharp decline in credit risk, and a rise in domestic and foreign interest rates. The calculation results are subjective