China Ship Leasing is the world's leading ship leasing company: China Ship Leasing is the only red-chip listed company under the China Shipbuilding Group. It is the first shipyard leasing company in Greater China. It is one of the world's leading ship leasing companies, providing customized and flexible ship leasing solutions to ship operators and traders around the world.
Ship leasing is a high-end racetrack with barriers in terms of capital, management, channels, etc.: the way shipowners obtain transportation capacity usually includes various methods such as bank loans, bond financing, equity financing, and leasing. Among various methods, leasing companies use leasing methods to deliver customized ship leases to shipping companies for use and collect rent, which can solve the problem of financing shipbuilding without increasing the debt ratio of shipping companies. Due to the cyclical, professional, and capital-intensive characteristics of the shipping and shipping industries, ship leasing has also formed high entry barriers in terms of capital, management, channels, etc.
After more than ten years of growth, the domestic ship leasing industry has ushered in new development opportunities: China's ship leasing business was dominated by domestic business in the early stages of development, adding only 1,3-billion US dollars of fleet assets each year. After about 10 years of development, the average annual addition of fleet assets reached US$16.5 billion in 2017-2019. In recent years, the increase in environmental protection requirements has shortened the ship renewal cycle; the shipping industry is speeding up fuel substitution, and energy upgrades are also being carried out in various fields on land; since the second half of 2020, the shipping market, especially the container ship and bulk carrier transportation market, has improved markedly. When these factors are combined, downstream demand for energy-saving and environmentally friendly new ship products continues to rise, and ship prices and freight rates have soared, benefiting the ship leasing industry. We anticipate that China's ship leasing companies will grow further from the investment level of $15 billion a year in the future.
Countercyclical strategy+manufacturer background, optimal management is moving forward steadily: the company adopted a countercyclical strategy, obtained high-quality assets at lower prices during the downturn in the shipping market, and accumulated high-quality customers. However, the manufacturer background belonging to China Shipbuilding Group gives the company a great advantage in terms of shipbuilding expertise, skills and related resources, can seize business opportunities in a timely manner, and has the possibility of collaborating with other enterprises in the group to provide customers with one-stop services.
Through improved management, the company's performance has grown rapidly, and it is willing to maintain a stable high dividend policy.
Profit forecasts, valuations and ratings: With the recent improvement in the shipping market, shipowners' demand for increased capacity has increased dramatically; environmental requirements such as “carbon peaking, carbon neutrality”, desulfurization, and denitrification demand for alternative clean energy, as well as environmental requirements for ships themselves, are expected to continue to increase the company's profit level. We forecast that the company's 2021-2023 EPS will be HK$0.23, 0.27, and HK$0.32 respectively. The current stock price corresponding to PB is 0.95X, 0.87X, and 0.78X, respectively. Through relative valuations, the company's 2021 PB was below the average of comparable companies. The first coverage gave the company a “buy” rating.
Risk warning: risk of reduced quality of loans receivable; risk of interest rate fluctuations; risk of customer payment default; risk of foreign exchange rate fluctuation; risk of high cyclicality in the maritime industry; risk of competition in the global leasing industry.
