Key points of investment
Core logic: the leading shipbuilding company, benefiting from the upward trend in the industry. The company's profit continues to improve. The company is a leading global shipbuilding company, with a global market share of about 11% (in terms of completed DWT). It is also the core listed military and civilian ship company with the largest production capacity, the most complete industrial chain, and the strongest technical strength under the China Shipbuilding Group; core driver:
1. The industry is booming, and leading companies are taking the lead in receiving high-quality orders. 2. Supply is tight, shipping prices are rising to improve profits; 3. They are optimistic about the long-term revaluation of military central enterprises. Asset integration and state-owned enterprise reform are worth looking forward to.
Performance driven: new orders and shipping prices have increased, and high-quality orders continue to focus on leading companies as the core driver: (1) upward cyclical boom, rising demand for multi-ship orders, and improvement in shipyard profitability; 1) Demand: Volume -- China's 2023 completion/new/handheld orders increased 12%/56%/32% year over year, respectively, 59%/71%/60% during the peak period, respectively. There is plenty of room for growth in many indicators; 2) Demand: Price -- Clarkson's new ship cost index closed at 182 points as of March 2024, up 10% year on year At the beginning of 2021, the cumulative increase was 43%, at the 95% level of the historical peak. Tight shipping positions and general inflationary pressure, including labor costs, prompted ship prices to continue to reach new highs; 3) downstream capacity - tanker capacity is still scarce until 2025, and there is more room to place orders; 4) Supply: Shipyard traffic is almost saturated, but the number and delivery volume of active shipyards have declined significantly, and tight supply and demand may drive ship prices to continue to rise; trend judgment: tight supply and demand are driving ship prices to continue to rise; trend judgment: due to shrinking supply and difficulties in expanding production, tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue to rise; trend judgment: tight supply and demand drive ship prices to continue A record high, the cycle is expected to fluctuate upward in the long term, and the boom is high Continued, leading companies are highly flexible in their performance.
(2) The company is expected to prioritize the development of the industry: 1) New ship orders are developing in the direction of large-scale, high-end, and dual-fuel; the company has strong technical strength to build large ships and is highly competitive in future high-quality and high-price orders; 2) Industry concentration continues to increase, and the number of shipbuilding completed and new orders received by the company's subsidiaries is at the top of the industry, and the “Matthew effect” is obvious.
Jiangnan Shipyard: Mainly engaged in large-scale military ships, oversized container ships, liquefied gas carriers, special ships, etc., as of 2023H1, its total assets/net assets were 762/18.9 billion yuan, respectively. Operating revenue and net profit increased 76% and 225%, respectively, accounting for 41% and 40% of the company's total volume; by the end of 2023, in-hand orders (DWT) accounted for 32% of the company's total share, making it one of the oldest shipyards with the strongest military and civilian ship technology.
Waigaoqiao Shipyard: Mainly engaged in large-scale luxury cruise ships, oversized container ships, VLCCs, oversized liquefied gas carriers (VLGC), LNG carriers and special ships. As of 2023H1, its total assets/net assets were 355/49 billion yuan respectively. Operating revenue and net profit increased 56% and 722% year-on-year respectively, accounting for 28% and 45% of the company's total volume; by the end of 2023, in-hand orders (DWT) accounted for 30% of the company's total, and is one of the most technologically advanced civilian shipyards in China.
The “14th Five-Year Plan” naval construction progressed steadily, and the company's military and civilian ship business grew steadily at the same time. The company's subsidiaries Jiangnan Shipbuilding and Guangzhou Shipbuilding International are important production bases for warships and military auxiliary ships within the group, and it is expected that they will continue to benefit from naval modernization in the long term.
Profit forecasts and investment suggestions:
The company's net profit for 2023-2025 is expected to be 29.4/54.1/8.71 billion, an increase of 1611%/84%/61% year-on-year, and PE is 57/31/19 times, maintaining a “buy” rating.
Risk warning: There are risks such as shipbuilding demand falling short of expectations and fluctuations in raw material prices.