油运行业景气延续，干散集运复苏动力不足。2023 年公司营业收入同比减少12.9%，主要系干散及集运业务受全年需求低迷拖累，运价下跌明显，导致营收同比分别下滑39.5%、22.2%。业务结构看，油运/干散/集运/滚装营收占比分别为37%/28%/21%/8%，毛利占比分别为57%/20%/15%/ 8%。Key points of investment:
Incident: China Merchants Shipping released its 2023 annual report. The company achieved operating income of 25.88 billion yuan, a year-on-year decrease of 12.9%; net profit to mother of 4.84 billion yuan, a year-on-year decrease of 4.9%; net profit after deducting non-return to mother of 4.64 billion yuan, a decrease of 3.5% year-on-year. In the fourth quarter of a single quarter, the company achieved operating income of 6.86 billion yuan, an increase of 13.7% and a decrease of 15.6% year on year; net profit to mother of 1.08 billion yuan, up 9.2% from the previous year and a decrease of 11.6% year on year; net profit after deducting non-return to mother was 1.02 billion yuan, an increase of 15.9% month on month and a decrease of 11.9% year on year.
Comment:
The oil transportation industry continues to prosper, and there is insufficient momentum for the recovery of dry and scattered transportation. In 2023, the company's revenue decreased by 12.9% year on year. The main reason was that the distribution and freight forwarding business were dragged down by low demand throughout the year. Freight prices fell significantly, leading to a year-on-year decline of 39.5% and 22.2%, respectively. Looking at the business structure, oil transport/dry scattering/consolidation/roloading accounted for 37%/28%/21%/8% of revenue, respectively, and 57%/20%/15%/8% of gross profit, respectively.
Oil freight rates showed strong performance, and the performance reached a record high. In 2023, the company's tanker fleet achieved net profit of 3.08 billion yuan, an increase of 249.2% over the previous year; of these, net profit of 740 million yuan was achieved in the fourth quarter, an increase of 38.1% over the previous year and a decrease of 19.2% over the previous year. In 2023, due to the impact of China's crude oil inventory replenishment in the first half of the year and additional OPEC+ production cuts in the second half of the year; however, under the tight balance between oil tanker supply and demand, the average daily TCE for VLCC rose 64% year on year, benefiting from the company's tanker fleet's performance reaching a record high. At the same time, the VLCC fleet continued to outperform the market and the fleet structure was superior to the company's European and American peers. The management's operating ability was excellent.
Demand for dry shipping was sluggish, and multiple sentiments at the end of the year drove freight rates to the end of the year. In 2023, the company's dry distribution and shipping fleets contributed to net profit of 90 million yuan and 870 million yuan, respectively, a year-on-year decrease of 58.4% and 58.2%; of these, net profit for the fourth quarter was 330 million yuan and 240 million yuan respectively, up 57.8% and 34.9%, respectively, and increased by 195.9% and 3.2% year-on-year respectively. The company's fragmentation and shipping fleet benefits were affected by the easing of port blockages, high interest rates in Europe and the US, and concerns about real estate-related demand in China. Overall freight rates operated at a low level in 2023, and profits shrunk sharply.
However, in the fourth quarter, under the influence of multiple factors such as the Red Sea crisis, restrictions on movement in Panama, strong agricultural harvests in Brazil, and concentrated early delivery of large quantities, there were short-term mismatches in the dry distribution and shipping markets, which provided strong support for freight rates at the end of the year.
The boom in foreign trade continues, and there are two breakthroughs in the route strategy. In 2023, the company's Ro-Ro fleet achieved net profit of 270 million yuan, +206.1% year-on-year; of these, net profit for the fourth quarter was 49 million yuan, a decrease of 46.2% month-on-month and an increase of 0.2% year-on-year. The flexible advantages of the company's PCTC fleet in both domestic and foreign trade operations are highlighted. In 2023, 5 domestic trade vessels were adjusted to the foreign trade market, multiple new self-operated routes were opened, and a breakthrough from freight forwarding to ship ownership was achieved.
Profit forecast: VLCC rents fluctuate greatly, and are affected by production in major oil producers. In the context of OPEC+ maintaining production cuts to support high oil prices, we adjusted the company's 2024-2026 tanker fleet revenue level to 107.2/118.7/12.81 billion yuan (the previous 24-25 forecast was 120.7/12.54 billion yuan). Affected by weak demand for real estate in China, we also adjusted the company's 2024-2026 dry distribution fleet revenue level to 86.7/87.6/10.07 billion yuan (the previous 24-25 forecast was 109.1/11.02 billion yuan). Based on this, we adjusted the company's 2024-2026 net profit to 67.4/71.1/8.24 billion yuan (the previous 24-25 forecast was 77.4/8.28 billion yuan), which is equivalent to EPS of 0.83/0.87/1.01 yuan. As of April 5, 2024, the company's closing price was 8.22 yuan, corresponding to 24-26 PB 1.6/1.5/1.3 times, respectively. We continue to be optimistic that the company's multiple platforms have both offense and defense, and wait for demand to recover and resonate. Based on its net asset size in 24, we will give it a net market ratio of 1.9 times, corresponding to a target price of 9.69 yuan, to maintain a “buy” rating.
Risk warning
The risk of a geopolitical conflict between major countries, the risk of a rapid easing of the Russian-Ukrainian conflict, the risk of production cuts in major oil producers, the risk of a downturn in the global economy, and the risk of environmental protection policies falling short of expectations.