Incident: The company announced its 2023 results, achieving full year operating income of HK$3,226 million, up 13.03% year on year; net profit to mother of HK$1,902 million, up 12.86% year on year. The board of directors recommended a final dividend of HK$0.09 per share (subject to approval by the shareholders' meeting), along with an interim dividend of HK$0.03 per share for the year 23, and HK$0.12 per share for the full year, with a dividend distribution rate of 38.7%.

Short-term and immediate operating vessels made a profit of HK$512 million. Refined tankers and VLGC performed well: in '23, the company's 14 refined tankers (8 50,000-ton and 6 75,000-ton) made a total revenue of HK$344 million, up 10.2% year on year. The four very large liquefied petroleum gas carriers (VLGC) performed well, achieving an investment income of HK$88 million belonging to the company, an increase of 143.2% over the previous year. Eight bulk carriers achieved a profit of HK$80 million. The 26 short-term and instantly-operated vessels generated a total profit of approximately HK$512 million for the Group.

The existing fleet is becoming more valuable and younger: as of December 31, 2023, the company had a total fleet of 151 ships, of which 128 ships were leased and operated, and 23 were under construction. Although the fleet size decreased by 7 ships year on year, operating assets reached HK$39.96 billion, up HK$3.43 billion year over year, or 9.4%. The average age of operating vessels is about 3.65 years. According to the contract amount, marine clean energy equipment, container ships, liquid cargo ships, bulk carriers and special vessels account for about 40%, 15%, 15%, and 14% of the Group's operating fleet, respectively. After actively and passively adjusting the size of the ship fleet, the stock fleet tends to be more valuable and younger.

Strengthen capital cost control and maintain a good asset structure and credit status: From March 2022 to July 2023, the Federal Reserve raised interest rates by a cumulative margin of 525 basis points. The company controls the average cost of interest-bearing debt at 3.7% per year through cross-currency financing, controlling the size of interest-bearing debt, and improving capital utilization efficiency. At the same time, we continue to maintain excellent international credit ratings of Fitch A and S&P A. Panda bonds of 2.2 billion yuan were issued in China, and an additional project loan of about 2.57 billion yuan was added. The average financing interest rate for the additional RMB debt was 3.15% per year, which is significantly lower than the financing cost of the US dollar of more than 6% per year, greatly reducing financial expenses.

Profit forecast, valuation and rating: The company's net profit to mother for 2023 is in line with our forecast of HK$1.90 billion.

Taking into account possible fluctuations in freight rates and adjustments in its own fleet, the company's 2024-2025 net profit forecast was lowered to HK$21.00/2.310 billion, and net profit to mother was forecast to be HK$2,541 billion in 2026. EPS for 2024-2026 was HK$0.34/0.38/0.41, respectively. The PB corresponding to the current stock price was 0.56/0.50/0.44X, respectively. Through a reasonable grasp of the downstream shipping market and the rational allocation of ship assets and leasing contracts, the company's performance is expected to maintain good growth, and the company's valuation is currently still at a low level, maintaining the company's “buy” rating.

Risk warning: risk of reduced quality of loans receivable; risk of interest rate fluctuations; risk of customer payment default; risk of foreign exchange rate fluctuations; risk of high cyclicality in the maritime industry; competition risk in the global leasing industry.