Investment logic
The global leader in logistics and energy equipment, has improved its business performance significantly. The company is a global leader in logistics and energy equipment. Benefiting from the recovery of the container and offshore industry boom, the company's 1Q24 revenue was +21.7%, net profit after deduction was +656.2% year-on-year, and business performance improved markedly.
The container industry is booming, and the company's performance as a global leader is expected to recover. As China and the US gradually entered the inventory replenishment cycle and global commodity trade picked up in '24, the WTO expects the growth rate of global merchandise trade volume to be 2.6%/3.3% in 24/25, gradually recovering from -1.2% in '23. Container demand is directly correlated with global commodity trade volume, and the recovery in commodity trade is expected to drive up container demand. At the same time, after the Red Sea route was diverted, some containers were unable to return in time due to lengthening routes and increased flight times, and onshore ports may face container shortage problems. In order to ensure transportation efficiency, if shipowners increase capacity investment or reduce port connections, it will cause congestion in some ports, further reduce container turnover efficiency, and stimulate short-term demand growth. 1-4M24 China's cumulative container production has been +164% year-on-year, showing a significant recovery trend. The company is a leader in the global container industry. The announcement shows that the production of standard dry containers, refrigerated boxes, and special containers has remained number one in the world for 23 years. Production and sales of 1Q24's container manufacturing business rebounded markedly year-on-year, with dry container sales of 490,000 TEU, +499% year-on-year. In the future, as global commodity trade recovers and short-term geopolitics catalyzes, the company's container sales are expected to continue to pick up, and container performance is expected to continue to recover.
The offshore boom cycle is improving, and the company's marine performance can be expected to recover. Global demand for crude oil has recovered since '21, and offshore exploration capital expenditure has continued to grow, driving up demand for offshore oil and gas equipment. According to Clarkson, global drilling platform utilization was 88% at the end of 23 and is expected to increase to 91%/93% in 24/25. At the same time, along with the 10-year downturn in the industry, supply-side production capacity was drastically cleared. Under the mismatch between supply and demand, drilling platform costs and rents continued to rise.
The company is leading in offshore equipment technology. As of 4M21, the global share of deep-water semi-submersible platforms built and delivered by 4M21 is 25%, ranking first in the world. Furthermore, the global ocean climate has improved in recent years, and Wind Europe expects European Seabreeze to add 5.0/6.7GW of installed capacity in 24/25, +32%/+33% over the same period last year. China's Sea Wind added 6.8 GW of installed capacity in '23. We expect to add 10/15 GW of installed capacity in 24/25, maintaining a high growth rate. The boom in sea breeze construction is expected to drive the release of demand for wind power installation vessels. The company can design and build equipment such as offshore wind power installation vessels and modular booster stations in batches. The technology is leading, and the revenue from the ocean wind business is expected to grow in the long term. In '23, the company's offshore business revenue was 10.5 billion yuan, +81% year-on-year; net loss was 31 million yuan, a year-on-year decrease of 303 million yuan. In the future, along with the upward trend in the industry cycle, equipment costs and rents will continue to rise. We are optimistic that the profitability of the company's offshore business will increase.
Profit forecasts, valuations, and ratings
We estimate that the company's revenue for 24-26 will be 1496/1676/181.9 billion yuan, net profit to mother will be 2,40/34.2/4.47 billion yuan, and the corresponding PE will be 22X/16X/12X. Considering the rising boom in the container and offshore industry and the company's leading position in the domestic market, we gave the company 28 times PE in 24 years, corresponding to a target price of 12.46 yuan/share, and gave it a “buy” rating for the first time.
Risk warning
The recovery in global commodity trade falls short of expectations, the risk of fluctuations in raw material prices, the risk of increased industry competition, and the risk of exchange rate fluctuations.