An overview of the incident. The company issued an announcement that it plans to use its own capital of 35 million yuan (inclusive) to 70 million yuan (inclusive) to repurchase shares at a repurchase price of no more than 50.00 yuan/share (inclusive). The price is not higher than 150% of the average trading price of the company's stock in the 30 trading days before the board of directors passed the repurchase resolution. The repurchased shares will be used to implement future equity incentive plans or employee stock ownership plans.
The reversal trend in the shipping boom continued, and volume and price simultaneously began an upward trend. Mass production of containers exceeded 6.7 million TEU in 2021, then fell 70% in 2022 and 2023, and production in 2023 was only 2.3 million TEU. As the Red Sea incident continued to lengthen, the overall industrial chain boom reached an inflection point in September of last year. After entering 2024, combined with European and American inflation and export volume sentiment increased year-on-year. Currently, the tension in all parts of the industrial chain continues to increase. According to Drewry (Drewry) estimates, container manufacturing is expected to increase rapidly in 2024, and manufacturing volume is expected to reach about 3.5 million TEU, an increase of 50% year on year. According to Wind, the shipping index (European line) EC2406 price went from 748 points at the end of September last year to 4,409 points on June 14, and the industry is resilient enough. Container holdings increased 1% to 5140 TEU in 2023, and global container holdings are expected to increase by a further 2.3% in 2024.
? The boom starts from downstream to upstream, and the paint process will not be missed. Looking at the industrial chain, downstream terminals are reflected in freight rates, midstream are container manufacturers, and upstream suppliers are reflected in industrial coatings. According to Agile data, the price increase in the Chinese container market in May exceeded market expectations. The average price of a 40-foot high container in major ports in China rose 45% from US$2,240 in April to US$3,250, up 45% month-on-month, while the market price in November last year was only 1,698 US dollars (2021 was an industry high, with a price of 7178 US dollars). At present, the industrial chain is full of orders, and the sharp rise in freight prices has been transmitted to midstream container manufacturers and container prices, while upstream paint prices are expected to follow the price increase; in terms of competitiveness, the company's container paint market share is rapidly rising. According to investor research records, by 2023, the company's container paint market share was close to 600,000 TEU, with a market share of about 26% (only 13.6% in 2020); the main fundamental factor in the company's stock price correction was that gross margin fell short of expectations in the first quarter, with 20.37% year-on-year decline. Arrived With the digestion of low price orders, the company's gross margin is expected to pick up 24Q2 against the backdrop of a reversal in supply and demand and the beginning of a wave of sentiment.
? The competitive pattern for wind power blade coatings is relatively good, and the gross margin is relatively stable. The company's market share of wind power coatings has exceeded 30% in 2021. The sales volume of wind power paint in 2023 was 12,400 tons, +53.91% year over year, with a rapid sales volume; 2024Q1 wind power paint sales volume was 2169 tons, with an apparent sales unit price of 35,800 yuan/ton, +3.96% month-on-month and -24.19%; we believe 2024Q1 is a low annual demand point and a high base for the same period in '23. It is expected to continue to grow this year as installed capacity rises throughout the year. According to the China Telecommunication Union forecast, the installed capacity of wind power is expected to reach 89GW in 2024, +26% over the same period; we believe that the company, as the core domestic wind power coating company, will significantly benefit from the release of new installed capacity demand throughout the year. In addition, we judge that the company is expected to strengthen product category expansion. Against the backdrop of high barriers to core technology, the profit space for wind power coatings is considerable in the future.
The steady and orderly development of marine coatings+photovoltaic coatings will provide broad space for future growth. According to the company's announcement, the China Classification Society (CCS), the Norwegian Bureau of Shipping (DNV), and the American Bureau of Shipping (ABS) all sent inspectors to complete on-site sampling and sealing of products such as anti-fouling paint at the company's bottom; marking that the company's marine paint certification has officially entered the testing process; the company aims to achieve business breakthroughs in the marine paint repair market and fully deploy the new ship paint business in 2025. We believe that if the final certification is completed, the company will be expected to break into the marine paint supplier system and achieve long-term growth by leaps and bounds in the next 5-10 years. Furthermore, the company announced a strategic cooperation with Covestro to enter photovoltaic coatings. It is expected that the future demand potential for single PV frame coatings will reach tens of thousands of tons, and the blue ocean of photovoltaic coatings is also worth looking forward to in the future.
Investment advice
We maintain the company's 2024-26 revenue forecast of 15.43/18.64 billion yuan, net profit forecast of 213/2.92/355 million yuan, corresponding to EPS forecast 2.0/2.7/3.3 yuan; corresponding to the closing price of 37.55 yuan on June 14, 19.02/13.87/11.41x PE. In view of the future horizontal growth of marine coatings, photovoltaic coatings, etc., the current valuation is cost-effective and maintains a “buy” rating.
Risk warning
Production capacity release falls short of expectations, new product development progress falls short of expectations; downstream demand falls short of expectations; costs are higher than expected; systemic risks.