Key points of investment:
Incident: 1. China Merchants Shipping plans to split its subsidiaries Sinotrans Container Transport Co., Ltd. and Guangzhou China Merchants Ro-Ro Transportation Co., Ltd. to achieve restructuring and listing through restructuring with Antong Holdings Co., Ltd. After the completion of this spin-off, the company's shareholding structure will not change, and Antong Holdings will become the controlling shareholder of Sinotrans Shipping and Guangzhou RoRo.
2. On May 28, 2024, the company and Antong Holdings signed the “Framework Agreement on Issuance of Shares to Purchase Assets”. Antong Holdings plans to acquire certain shares of Sinotrans Shipping and Guangzhou RoRo by issuing RMB common shares and paying cash (if any). The “Framework Agreement on Issuance of Shares to Purchase Assets” is a preliminary intention reached in this transaction and is not legally binding. The specific plan and related terms of this transaction are determined by the parties involved in the transaction separately.
Antong Holding Fleet: As of the end of 2023, the company is currently operating a fleet of 73 containers, with a total capacity of 2,217,800 DWT; it has its own fleet of 48 ships, 1.571,300 DWT. According to Alphaliner statistics, as of December 31, 2023, the company ranked 22nd in comprehensive capacity among global container shipping companies, ranking among the top three domestic container logistics companies. As of May 2024, Alphaliner statistics show that the company currently has a total operating capacity of 83,000 TEU. Furthermore, in May 2024, the company disposed of an old ship of its own (built in 1997), so it now has 47 ships. In 2023, the company's net profit to mother was 568 million yuan, and net profit for the first quarter of 2024 was 51 million yuan.
China's outbound container fleet under China Merchants Shipping: By the end of 2023, the company had 19 container ships and 10 outsourced ships, controlling a total operating capacity of 45,200 TEU. According to Alphaliner data, the company's fleet ranks 33rd in the world in terms of capacity. China Merchants Shipping's container fleet generated net profit of 872 million yuan in 2023 and contributed 104 million yuan in net profit in the first quarter of 2024.
China Merchants Shipping's Ro-Ro fleet: The company operates its own Ro-Ro fleet of 22 ships, totaling 85,400 DWT and 410,000 parking spaces. In addition, the company also has 6 handheld orders (2 with 9300 parking spaces and 4 with 7800 parking spaces), which are expected to be delivered one after another in 2025-2027. China Merchants Shipping's container fleet generated net profit of 267 million yuan in 2023 and contributed 80 million yuan in net profit in the first quarter of 2024.
We believe that the cooperative advantages of automobile transportation and container transportation under Antong Holdings and China Merchants Shipping are expected to be exploited. The consideration of the restructuring is unknown, which will enable Antong Holdings' domestic trade container business to improve:
1. After the transaction is completed, Antong Holdings hopes to become a subsidiary of China Merchants Shipping Holdings, integrating Antong's domestic trade container ship business with the foreign trade container business of Sinotrans and China Merchants RoRo's automobile role-loading business.
2. According to Alphaliner statistics, in May 2024, Antong Holdings had a shipping capacity of 83,000 TEU, ranking 23rd in the world. After merging China Merchants Shipping's shipping capacity of 45,000 TEU, the total capacity will reach 128,000 TEU, and the total capacity may rise to 19th place in the global ranking.
3. Domestic and foreign trade shipping, Sinotrans (Southeast Asia, China, Japan, South Korea foreign trade), and car role-loading under China Merchants Shipping are all liner services. The client has a certain degree of coincidence, and there is potential for synergy between cost-side terminal services and door-to-door land transportation.
4. Empowered by China Merchants Shipping, the competitiveness of Antong Holdings' domestic trade container business is expected to improve with domestic trade collaboration.
5. The restructuring price is unknown. Follow the progress of subsequent transactions.
Maintain profit forecasts and maintain a “buy” rating. Considering the unknown restructuring consideration, the company's net profit forecast for 2024-2026 remains unchanged at 8.5, 10, and 10.2 billion dollars. Maintain a “buy” rating.
Risk warning: The release of new orders exceeded expectations, global macroeconomic downturn, and geographical disturbances.