COSCO Marine Holdings released its 2023 annual report, showing the company's strong return to shareholders with high dividends and repurchases.
COSCO Marine Holdings achieved operating income of 175.45 billion yuan in 2023, a year-on-year decrease of 55.1%, and realized net profit to mother of 23.75 billion yuan, a year-on-year decrease of 78.2%. Q4 In a single quarter, the company achieved operating income of 40.89 billion yuan, a year-on-year decrease of 45.1%, and net profit to mother of 1.77 billion yuan, a year-on-year decrease of 85.5%. It is worth noting that in terms of dividends, a cash dividend of about RMB 3,670 billion is expected to be distributed at the end of 2023. In addition to the cash dividend of approximately RMB 8.196 billion already distributed to all shareholders in mid-2023, the company will distribute a total cash dividend of about RMB 11.866 billion in 2023, which is approximately 50% of the net profit attributable to shareholders of listed companies achieved by the company in 2023. In addition, the company has repurchased 215 million shares of common stock through the secondary market, including 60.0 million A shares and 155 million H shares. As of February 23, the cancellation of 155 million shares has been completed.
The company's freight volume was relatively stable in 2023, but single-box revenue declined markedly. In 2023, COSCO Maritime Control achieved a total freight volume of 24.4 million TEU, a year-on-year decrease of 3.5%. Among them, US/Europe/Asia/other routes/domestic trade routes achieved cargo volume of 4.5/4.5/8.2/2.7/4.5 million TEU respectively, a year-on-year decline of 5.5%/4.0%/2.3%/3.1%/3.4%. Judging from freight volume, the company is still increasing its layout in emerging markets to explore market opportunities in third countries. However, the company's route revenue declined markedly in 2023, mainly due to the decline in single-box revenue for international routes. HAIC's 2023 foreign trade route revenue was only 1055.1 US dollars/TEU, down 1581.6 from the 2022 average, or about 60%. Although the decline was significant, it still clearly outperformed the industry. The average SCFI in 2023 was 1005.8, down 70.5% year on year, and CCFI average was 937.3, down 66.4% year on year.
The industry showed significant signs of decline in 2023, but due to the Red Sea incident, 2024 may improve marginally. The global economy was weak in 2023, and container ships began to be delivered in batches. Due to the worsening relationship between supply and demand, the overall freight rate level continued the downward trend since the second half of 2022. However, in mid-November 2023, the situation in the Red Sea continued to be tense, and the tightening supply of capacity in the relevant route markets drove freight rates to rise somewhat at the end of the year. Considering that about 30% of the world's capacity is deployed on European routes, and detouring the Cape of Good Hope from the Suez Canal route will increase the one-way transportation distance by about 30%, which may drive the overall demand of the industry by about 9%, the industry's supply and demand pattern is expected to improve accordingly.
The Federal Reserve is expected to start cutting interest rates in June, which may release consumption vitality, and stocks can be expected to be replenished during the peak season. According to the minutes of the Federal Reserve's interest rate meeting in March, the Federal Reserve may start cutting interest rates in June. At that time, consumption momentum in Europe and the US is expected to be activated. Considering that US durable goods inventories are currently in a low position, the US is expected to enter a phase of passive inventory removal and active inventory replenishment, or lay the foundation for peak season demand.
Risk warning: The global economy declined beyond expectations, security incidents, and dividend payment rates fell short of expectations.
Investment advice:
As a first-tier shipowner, both sides of the revenue and cost showed bargaining power superior to the industry average. Considering the current Red Sea incident driving demand, we raised the company's 2024 performance forecast from 27.65 billion yuan to 29.10 billion yuan, but the rise in 2024 or an overdraft of 2025 demand lowered the 2025 performance forecast from 31.35 billion yuan to 29.58 billion yuan, and introduced a 2026 performance forecast of 30.73 billion yuan. The PE valuation corresponding to the current stock price is 5.7/5.6 billion yuan /5.4X, maintaining a “buy” rating.