CIMC Group: Global container leader, diversified development company in the logistics and energy sector, is the world's leading supplier of equipment and solutions for the logistics and energy industry. The industrial layout mainly revolves around the logistics and energy sector. The logistics sector business includes container manufacturing, road transport vehicles, airport and fire rescue equipment, logistics services, etc., and the energy sector includes energy/chemical/liquid food equipment, marine engineering, etc. Looking at the business structure, containers are the company's core manufacturing business, and the share of revenue and gross profit has changed with the industry cycle. In the 22-year container downturn, containers accounted for 31% and 45% of the company's revenue and gross profit, respectively; in '22, logistics, road transport vehicles, energy and chemical equipment, airport equipment, and marine engineering accounted for 21%, 16%, 15%, 5%, and 4% of main revenue, respectively. As a leader in the global logistics and energy equipment industry, the company has the highest container share in the world. The subsidiary CIMC Vehicle is the world's number one semi-trailer manufacturer, and CIMC Tianda is one of the main suppliers of boarding bridges in the world. At the same time, the company is also one of China's high-end marine engineering equipment companies.
The diversified development of the company's business sector, taking into account the cyclical position and operating conditions of each business, and looking ahead to 24 years, we believe that the marginal changes in the container and offshore sectors are more significant, which is clearly driving the incremental contribution to performance. At the same time, the energy, chemical, road vehicle and logistics business in the non-box sector is expected to develop steadily.
Container sector: The recovery in foreign trade combined with the renewal and release of old containers is expected to bottom out and rebound in 2024. Containerized goods are mainly consumer products. Retail in Europe and the US is an important terminal demand market for exports. The decline in global trade continued to drag down demand for consolidated transportation in '23. UNCTAD estimates that in 23Q2-Q3, consumers' tendency to consume services increased, while the growth rate of commodity trade was under pressure. Container manufacturing experienced a supercycle in '21 due to the pandemic, and a downward cycle began in '22. 23H1 global container production is about 853,000 TEU. The estimated annual output is less than 1/3 of '21, which is the lowest level in nearly 10 years. We believe that containers are expected to bottom out and rebound in 2024. The main factors are: 1) the current low position of US inventories creates demand space, and the recovery in global commodity trade is expected to drive a recovery in demand; 2) the release of huge demand for used container replacement. The service life of containers is 13-15 years. The last round of used containers during the peak period of 2008-2011, and the demand for replacement of used containers delayed due to unbalanced container supply and demand during the pandemic is expected to be released. The 23Q3 company's standard dry box picked up further month-on-month. The cumulative sales volume of 23Q3 was about 213,000 TEU, up 159% and 18% respectively compared to Q1 and Q2, and is expected to pick up further in the future as the container industry bottoms out and rebounds.
Non-box sector: The boom in the offshore industry cycle is rising, offshore orders are full, drilling platform rates and utilization rates are rising, oil prices are relatively high, oil prices are relatively high, and offshore oil and gas capital expenses are recovering. Combined with the recovery in offshore oil and gas capital expenditure, the recovery in offshore oil and gas capital expenditure, combined with a sharp exit on the supply side after the last round of downturn in the offshore industry cycle, it is expected that the upward trend in the offshore industry cycle will continue. The company's offshore engineering-related business mainly involves two major aspects of offshore engineering and drilling platform leasing on the manufacturing side. Among them, offshore engineering is mainly operated through centralized Raffles, mainly FPSO, wind power installation vessels, and roro ship manufacturing. In the offshore industry business of 23Q1-3, oil and gas and non-oil and gas businesses account for about 4:6. The company's FPSO business has shown impressive performance along with the recovery of the industry. It is expected that the capacity utilization rate of offshore manufacturers will increase markedly in 3-5 years; Offshore wind power installations and ship operation and maintenance demand relays, and the continuous growth of global new energy vehicles combined with environmental factors Demand for new construction is expected to continue to be strong; as of the end of 23Q3, the company had offshore orders of 5.2 billion US dollars, an increase of 38% over the previous year. Drilling platforms have become a scarce link in the industrial chain, and the company's offshore asset management business has improved markedly. As of the end of 23Q3, a total of 10 platforms have received leases. Next year, high-value semi-submersible platform leases are expected to gradually be implemented along with the boom in the industry.
We expect the company's net profit from 2023-25 to be 6.86, 30.79, and 4,564 billion yuan respectively, corresponding to PE of 55, 12, and 8 times, respectively, covering the first time, and giving it a “buy” rating.
Risk warning
1. Risk of increased market competition; 2. Risk of price fluctuations of major raw materials; 3. Risk of profit prediction assumptions not being established or falling short of expectations.