Event: The company released its 2024 quarterly report. According to the company's announcement, 2024Q1 achieved operating income of 23.74 billion yuan, a year-on-year decrease of 23.4%, achieving net profit attributable to mother of 270 million yuan (YOY +5.1%) and net profit of non-return to mother of 230 million yuan (YOY +4.9%). 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.
Profits in the marine sector were gradually released, and 24-25 performance growth increased definitively. According to Clarkson, Sumeda's New Ocean shipyard completed the delivery of 7 ships in Q1 2024, with a delivery volume of 119 million CGT, +6.8% over the same period last year. Among them, there are 6 bulk carriers and 1 container ship. The timeframe for signing Q1 2024 delivery orders is June 2021 to June 2022.
According to Clarkson, it is expected that 1 container ship and 3 bulk carriers will be delivered in 2024Q2, totaling 68,000 CGT. The order period is September 2021 to June 2022. Total delivery volume is estimated at 375,200 CGT in 2024, -0.3% YoY. 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 bulk carrier orders and is more sensitive to steel prices. Referring to Clarkson data, as of April 2024, compared to the beginning of 2022, the new shipbuilding price index on the revenue side rose by 19.5% (dollar caliber, not adding exchange rate factors), while the price of steel, which accounts for 20% to 40% on the cost side, fell by 23.1%.
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 orders increased from 225,000 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, profit forecasts were maintained, and the “buy” rating was maintained. The company's net profit for 2024E-2026E is estimated to be 11.1 billion yuan, 12.4 billion yuan, and 1.38 billion yuan, respectively, corresponding to PE 10, 9, and 8 times. Performance continues to grow under heavy pressure. Performance verifies the long-term logic. Higher shipbuilding boom will confirm revenue in 24-25, and high-priced orders 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