2023 results are in line with market expectations
The company announced its 2023 results: revenue of 175.448 billion yuan, net profit of 23.86 billion yuan, corresponding to profit of 1.50 yuan per share after dilution, -78.2%; corresponding to 4Q23, achieved revenue of 40.891 billion yuan, -45.1% YoY, -4.3% month-on-month, net profit of 1,789 billion yuan, -85.5% YoY, and -67.5% month-on-month. The company's performance is in line with previous forecasts and is in line with market expectations.
4Q23 traffic volume increased slightly from month to month, and freight rates continued to decline. 4Q23 achieved an overall freight volume of 6.06 million TEU, +0.6% month-on-month, +3.8% year-on-year; 4Q23's single-box revenue continued to decline, with 4Q23 single-box revenue continuing to decline, with dollar caliber -49.3% year-on-month and -5.4% month-on-month. Among them, the company's single box revenue for the Asia and Europe routes decreased 11.0% month-on-month compared to 3Q23, and 4.6% month-on-month.
Development trends
Freight rates have risen since the beginning of the year, supporting the company's profit throughout the year. The company has abundant cash flow and demonstrated investment value. Affected by the Red Sea detour, freight rates have risen since the beginning of next year due to the consumption of some effective capacity, and the company's immediate profit can be guaranteed. Furthermore, it is beneficial for the January Changxie Tariff to sign the price, which can provide some support for the annual results. By the end of 2023, the company had cash on book of 182.304 billion yuan. In 2023, the company's annual dividend was 11.866 billion yuan, and the dividend rate remained at about 50%.
The Red Sea detour consumes part of the effective capacity, but supply and demand are still under pressure throughout the year. According to our previous estimates, if the Red Sea incident continues throughout the year, it is expected to consume about 6% of container shipping capacity. According to Alphaliner data, capacity may increase by 9.7% in 2024. According to Clarksons data, container transportation demand may increase by 3.9% in 2024. Even considering that the Red Sea incident continues throughout the year, there is still some pressure on supply and demand throughout the year. We recommend paying attention to changes in the Red Sea detour situation.
Profit forecasting and valuation
We kept our profit forecast basically unchanged. For the first time, we introduced a profit of 13.237 billion yuan in 2025. The current A share price corresponds to 11.1 times the 2024 price-earnings ratio and 12.5 times the 2025 price-earnings ratio, and the H share price corresponds to 7.9 times the 2024 price-earnings ratio and 8.4 times the 2025 price-earnings ratio. Maintain the outperforming industry rating and target price of HK$11.8 per share for A shares and HK$10.0 for H shares. A shares correspond to 12.7 times the 2024 price-earnings ratio and 14.2 times the 2025 price-earnings ratio. Compared with the current stock price, H shares correspond to 9.6 times the 2024 price-earnings ratio and 10.7 times the 2025 price-earnings ratio, with 21.5% upside compared to the current stock price.
risks
Global economic growth is declining, and geopolitics are changing.