China Shipbuilding Defense: Huangpu Wenchong Holdings. Huangpu Wenchong, a subsidiary of China Shipbuilding Defense Holdings, a key domestic military and civilian ship assembly company, was founded in 1851. It is the main construction base for domestic military ships, special engineering vessels, and marine engineering. It is the largest and strongest production base for dredging engineering ships and regional container ships in China. The company lays out four major fields: marine defense equipment, marine transportation equipment, marine development equipment, and marine science and technology application equipment. By the end of 2023, the total price of the company's handheld order contract was about 55.76 billion yuan, of which the handheld shipbuilding order contract was 53.73 billion yuan, including 110 ship products and 2 offshore equipment, totaling 3.4987 million dwt. Ample on-hand orders provided an important guarantee for the company's subsequent performance growth.
Volume and price have risen sharply in the shipbuilding cycle, and shipping companies have enjoyed the triple dividend of “capacity, price, and cost” on the supply side. The shipbuilding industry has gone through many years of supply side clearance after the 2008 financial crisis, and global shipyards have been reduced by more than half since the 2009 peak; on the demand side, ships newly built since the 2000s will accelerate into an aging phase starting in the 2020s, compounded by green drivers, and the civil shipbuilding cycle will begin.
Shipyard supply is tight and shipbuilding demand is strong. Under the seller's market, orders for new ships are concentrated, and shipping companies enjoy “capacity dividends”; on the price side, the global new shipbuilding price index continues to be high, and shipbuilders have high bargaining power and enjoy the price dividend of “delta supply Investment advice: We expect the company to achieve revenue of 17.8/20.5/24.4 billion yuan in 2024-2026, up 10.5%/14.9%/19.3% year on year; net profit to mother 0.5/1.09/1.82 billion yuan in 2024-2026, up 948%/116%/67.4% year on year, corresponding to PE41.49/19.20/11.47 for H shares. Under the current civil shipbuilding cycle, we selected domestic and overseas listed shipping companies China Shipbuilding, China Heavy Industries, Yangzijiang, Hyundai Heavy Industries, and Samsung Heavy Industries as comparable companies. As of 2024/6/28, the PB (LYR) of the company China Ship/China Heavy Industries/Yangzijiang/Hyundai Heavy Industries/Samsung Heavy Industries was 3.8/1.4/2.5/2.7/2.4 respectively, the PB of China Shipbuilding Defense A/H shares was 2.4/1.4, respectively, and China Shipbuilding Defense H shares had a valuation advantage. We gave CSIC H shares 1.5 times PB and selected the 2024/6/28 HKD/RMB exchange rate of 0.93, corresponding to the target price of HK$19.92. For the first time coverage, we gave it a “buy-A” rating. Risk warning: macroeconomic risks falling short of expectations, fluctuations in raw material prices and exchange rates, falling short of expectations in environmental policies, falling short of expectations, profit forecasts falling short of expected risks.