Company announcement 2023 performance forecast: 1) Net profit to mother: Net profit to mother is expected to achieve net profit of 23.86 billion yuan in 2023, -78.3% year over year; according to estimates, Q4 is expected to achieve net profit of 1.80 billion yuan, -85.5% year-on-year and -67.3% month-on-month.
2) Net profit deducted from mother: Net profit of 23.75 billion yuan without return to mother is expected to be achieved in 2023, -78.2% year over year; Q4 is expected to achieve net profit of 1.77 billion yuan, -85.6% YoY and -67.5% month-on-month. 3) Profit before interest and tax EBIT:
EBIT is expected to be 36.64 billion in 2023, -78.5% YoY; Q4 is expected to reach 3.44 billion, -87.3% YoY and -59.5% YoY. 4) Operating data: CCFI averaged 937 points in 2023, -66.4%; of these, CCFI averaged 854 points in the fourth quarter, -47.1% YoY, -2.8% month-on-month; the 2023 SCFI average was 1006 points, -70.5% YoY; of these, SCFI averaged 1089 points in the fourth quarter, -20.8% YoY and +10.4% month-on-month.
The shipping market faced many challenges in '23, and the company's fourth quarter results were under pressure. In 2023, container freight rates fell sharply from the high point during the epidemic. The average value of SCFI in 23Q4 was 1,089 points, down nearly 78% year-on-year from the average value of 4851 points in 22Q1. At the same time, the growth rate of capacity supply in the shipping industry increased, and transportation demand was relatively weak. According to Clarksons data, as of January '24, on-hand orders for container ships accounted for 24.7% of total capacity. The supply-side growth rate in 2023 was 8.0%, and the demand-side growth rate was only 1.4%. This is also one of the factors that led to a significant drop in market freight rates compared to last year.
It is recommended to continue to monitor the impact of the Red Sea incident. We have previously published three follow-up reports analyzing the potential impact of the Red Sea incident. 1) We recommend focusing on the consumption of effective capacity and the strong learning effect of detours on the market. According to Clarksons estimates, ships avoiding the Suez Canal and detouring the Cape of Good Hope will significantly increase the cost and sailing time of container ships, increasing the flight range by about 29% (Far East-Europe route), increasing the sailing time from 28 days to 36 days, and increasing fuel costs by about $650,000. 2) We understand that mainstream shippers and shipping companies should be risk-averse. Once there is a major loss in maritime transportation, it is difficult to make up for it. The attack on a ship caused by the Red Sea conflict is a highly uncertain event, and it is difficult for both cargo owners and shipping companies to predict in advance, so detours (partial detours) are the most likely option for a period of time. 3) Short-term freight rates have jumped. As of January 7, SCFI closed at 1,897 points, +7.8% from week to week, and SCFI's European route closed at $2,871 per TEU. Before the pandemic, the average value of SCFI's European route from 2017 to 2019 was only $820 per TEU. Currently, it has risen 250.1% year on year from this average level. If the Red Sea incident continues to be affected, the company's 24-year performance is expected to benefit.
Investment advice: 1) Profit forecast: According to the performance forecast, net profit of 23.86 billion yuan is expected to be achieved in 2023. Based on Clarksons statistics on the delivery situation of container ships in 24-25 years, the average CCFI freight rate is 23 years or further declining. We will adjust the net profit to the mother from 2024 to 2025 to achieve 140.1 billion and 15.06 billion yuan respectively (20 billion and 21 billion before adjustment). The corresponding EPS is 1.48/0.87/0.94 yuan, corresponding PE is 7 /11/10 times 2) Target price: We believe that as the world's leading central enterprise logistics leader, the company's steady ability to withstand pressure continues to increase, and we are optimistic about the company's profit center verification and the sharp rise in the cyclical value of central enterprises after “ship-to-chain” end-to-end transformation. At the same time, the company promotes share repurchases, effectively boosting investor confidence. Using the cyclical growth stock pricing method, we gave the expected profit of 2024 15 times PE, corresponding to a target market value of 210.2 billion yuan, corresponding to a stock price of 13.1 yuan, with an expected margin of 35% compared to the current price, and gave it a “recommended” rating.
Risk warning: European and American import demand has declined sharply, spot freight rates are lower than long-term agreement prices, large-scale expansion of capacity, etc.