Key points of investment:
Event: The company released its 2023 annual report. According to the company's announcement, in 2023, the company achieved operating income of 122.98 billion yuan, a year-on-year decrease of 12.9%, achieving net profit of 1.03 billion yuan (YOY +12.8%) and net profit of non-return to mother of 832 million yuan (YOY +9.1%). Among them, 2023Q4's revenue was 26.92 billion yuan, up 2.82% year on year, net profit to mother was 140 million yuan, up 6.7% year on year, and net profit after deducting non-return to mother was 130 million yuan, up 57.9% year on year. Net profit to mother was basically in line with our previous forecast of 1.03 billion yuan, and the performance was in line with expectations.
The performance was in line with expectations, the bulk drag was limited, and the stability of the performance was verified. Referring to the company's 2023 annual report, the total profit related to the company's manufacturing industry accounts for 63%, and the total profit related to the supply chain accounts for 37%. Revenue declined due to falling bulk prices in the supply chain sector. Profits maintained positive growth. The steady performance of the manufacturing sector in the industrial chain was verified, and the value of the industrial chain sector was further highlighted.
Revenue cost confirmation is lagging behind, profits in the marine sector have yet to be released, and 24-25 performance growth is increasing with certainty. According to the company's announcement, Xindayang Shipyard completed the delivery of 19 ships in 2023, with revenue of 4.443 billion yuan and a growth rate of 21.74%. According to Clarkson, its New Ocean Shipyard signed a new order of 541,700 CGT, +54.83% year-on-year, and delivered 376,500 CGT throughout the year, or +29.95% year-on-year. Delivery volume is estimated at 404,300 CGT in 2024, +7.3% year over year. The 2024 delivery order signing timeframe is June 2021 to November 2022. Low-cost orders signed before 2021 have been delivered, and high-priced orders have entered a continuous delivery period. The company accounts for a high proportion of orders for bulk carriers and is more sensitive to steel prices. Referring to Clarkson data, compared to the beginning of 2022, as of March 2024, the new shipbuilding price index on the revenue side rose by 19% (dollar caliber, not adding exchange rate factors), and the price of steel, which accounts for 20% to 40% on the cost side, fell 23%.
Shipbuilding sector: A strong player in the segment, the importance of the shipbuilding sector is underestimated. (1) Starting in April 2021, we put forward the view that the shipbuilder cycle will enter the improvement cycle. At the same time, we point out that 2024 is not a high point in the cycle, but the starting point for the release of the 2021-2038 results of the major shipbuilding cycle. (2) Sumeda's New Ocean Shipyard has the largest market share in the global market share of Daling portable bulk carriers, and Crown series bulk carriers have their own brand patents in design. (3) As of March 2024, the company's handheld order amount increased from 214,000 CGT in 2018 to 1.028 million CGT. Orders contributed to profit after price increases starting in '24. Conservative estimates are expected to contribute more than 200 million additional net profit to mother.
The performance was in line with expectations. Considering that low-price orders are still being digested, it will still take time for high-price orders to be delivered, but new shipbuilding prices continue to rise, ship prices continue to exceed expectations, and the upward trend in the shipbuilding business is clear. The “Buy” rating was maintained, the 24-25 profit forecast was lowered, and the 2026 forecast was added. The company's net profit for 2024-2026 is estimated to be 11.1 billion yuan, 1.24 billion yuan, and 1.38 billion yuan, respectively (the original 24-25 forecast was 1.37/1.52 billion yuan), and the corresponding PE is 10, 9, and 8 times. Performance continues to grow under heavy pressure. The annual performance report verifies the long-term logic. Higher shipbuilding boom will confirm revenue in 24-25, increasing the certainty of performance growth, and reaffirming the “buy” rating.
Risk warning: China's imports and exports are weak, the development of its own brands falls short of expectations, the civilian shipping business has fallen short of expectations, raw materials such as steel prices have risen sharply, and the RMB has appreciated sharply