Incidents:
China Shipping released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 74.8 billion yuan, +25.81% year on year, and realized net profit of 2.96 billion yuan, +1615% year over year; 2024Q1 achieved revenue of 15.3 billion yuan, +68.84% year over year, and net profit to mother of 400 million yuan, +821% year over year.
After deducting non-net profit, the accelerated upward trend in the profitability of shipping companies benefited from the “double increase in volume and price” of ship delivery. The company's 2024Q1 revenue was 15.3 billion yuan, an increase of 69.84% over the previous year. Benefiting from cost improvements and improved quality and efficiency, 2024Q1 achieved net profit of 338 million yuan after deducting non-net profit of 2.2%, and corrected for two consecutive quarters after 2023Q4. Under the major shipbuilding cycle, the combined effects of capacity dividends, price dividends, and cost dividends have shown a trend of releasing the profitability of shipping companies. Currently, the new ship cost index continues to operate at a high level. The cost side shipbuilding board price remains fluctuating at the historical center of more than 4,000 yuan/ton. Under the sharp difference between volume price and cost, we continue to be optimistic about the release of the profitability of shipping companies.
New ship deliveries and orders continue to be booming. The shipbuilding cycle continues to be booming in 2023. The company grasped the development trend of high-end, intelligent, and green shipbuilding, and strengthened batch order acceptance for medium and high-end ship types. A total of 128 civilian ships/9.1861 million DWT/72.888 billion yuan were received throughout the year; 81 civilian ships were completed and delivered throughout the year, with a tonnage of 122.80% of the annual plan, an increase of 7.55% over the previous year.
According to data from the China Shipbuilding Industry Association, in January-February 2024, the country received new ship orders of 15.2 million DWT, +64.4% year on year, and orders of 14.9.19 million dwt for handheld vessels, +31.3% YoY. A total of 8.26 million DWT were completed, or +95.4% YoY. The company has plenty of orders in hand, and the trend of high orders/delivery in the industry is remarkable.
Investment advice:
We expect that in 2024-2026, the company will achieve revenue of 804/854/94.5 billion yuan, an increase of 7.4%/6.3%/10.7% year on year, and net profit to mother of 53.9/89.5/12.02 billion yuan in 2023-2025, respectively, an increase of 82.3%/66.0%/34.4% year on year.
Considering that Chinese ships are leading domestic military and civilian vessels, and that civilian ships account for a high proportion of civilian ships, the company was given a target price of 42.19 yuan for 6 months, corresponding to 35 xPE in 2024, and a “buy-A” rating was given under the current shipbuilding cycle.
Risk warning: Macroeconomic risks fall short of expectations, raw material prices and exchange rates fluctuate, and environmental policies fall short of expectations.