Core views

Since 2024, new ship prices have continued to rise. Although in terms of DWT, global new shipbuilding orders declined year-on-year in the first half of the year, in terms of value, global new shipbuilding orders increased 15.51% year-on-year in the first half of the year. At the same time, China continued to lead the share of orders received, accounting for 62.7% of orders received in January-June. The new orders received in 2024 are mainly oil tankers and LNG vessels, reflecting changes in the structure of environmental demand for ships. As a leading shipbuilding company in China, the company will continue to benefit from civil ship renewal requirements and environmental protection requirements. As the price of delivered ships continues to rise, the cost of steel prices falls compared to 2021, and the profit of the company's main shipbuilding business can be expected to improve.

occurrences

According to Clarkson statistics, from January to June 2024, new ship transactions increased cumulatively year-on-year in monetary terms. According to Clarkson statistics, in January-June, the world sold a total of 54.4 million DWT orders, a year-on-year decrease of 11.83%. The order amount was 76.9 billion US dollars, an increase of 15.51% over the previous year. China continues to lead the share of orders received, accounting for 62.7% of orders received in January-June.

Brief review

Since 2024, new ship prices have continued to rise. Although in terms of DWT, global new shipbuilding orders declined year-on-year in the first half of the year, in terms of value, global new shipbuilding orders increased 15.51% year-on-year in the first half of the year. At the same time, China continued to lead the share of orders received, accounting for 62.7% of orders received in January-June.

New orders received in 2024 are mainly oil tankers and LNG ships. LNG carriers have seen a large increase since 2022, reflecting changes in the structure of environmental demand demand for ships. As the global emphasis on environmental protection increases, it is expected that subsequent environmental demand will still drive demand for new ships. As a leading shipbuilding company in China, the company will continue to benefit from civil ship renewal requirements and environmental protection requirements. As the price of delivered ships continues to rise, the cost of steel prices falls compared to 2021, and the profit of the company's main shipbuilding business can be expected to improve.

The company's net profit attributable to the parent company in 2024-2026 is estimated to be 46.76, 73.04 billion yuan, and 9.480 billion yuan, respectively, with year-on-year increases of 58.12%, 56.21%, and 29.79%, respectively. The corresponding EPS for 24 to 26 was 1.05, 1.63, and 2.12 yuan, respectively, corresponding to the current stock price PE of 38.68 times, 24.76 times, and 19.08 times, respectively, maintaining a “buy” rating.

Risk analysis

(1) Downstream shipping market adjustment risk: The downstream shipping industry of the shipbuilding industry to which the company belongs is closely related to macroeconomics and geopolitics, and downstream shipping prices fluctuate drastically. If shipping prices are adjusted significantly, it will affect the release of shipbuilding orders.

(2) Risk of rising comprehensive costs for shipping companies: With the sharp increase in orders for new ships, demand for ship support has increased markedly, while it is difficult for shipping companies to increase production capacity rapidly in a short period of time, and extended procurement cycles are common. The gap between raw material procurement and budget is large, and labor costs have risen, leading to a continuous increase in labor costs.

(3) Risk of large exchange rate fluctuations: The company's export vessels are denominated in US dollars. If the exchange rate of the US dollar to RMB fluctuates greatly, it will affect the company's performance.

(4) Interest rate fluctuation risk: Interest income from the company's financial expenses is high. If interest rates fluctuate, it will affect the company's profit.