Event: The company released the 2023 Annual Report and the 2024 First Quarter Report.
The inflection point has been shown, and profitability and cash flow have improved markedly
In 2023, the company achieved annual revenue of 74.839 billion yuan, an increase of 25.81% over the previous year. Among them, the shipbuilding and offshore engineering business achieved operating income of 70.420 billion yuan, an increase of 40.87% over the previous year; net profit attributable to mother was 2,957 billion yuan, an increase of 1614.73% over the previous year, mainly due to the income of offshore platform assets related to Waigaoqiao Shipbuilding and Disposal. Looking at a single quarter, the company's 2023Q4 revenue of 25.185 billion yuan hit a new quarterly revenue high; after deducting 137 million yuan, it was corrected for the first time since 2020, and the company's profit inflection point appeared. The net cash flow from the company's operating activities in 2023 was $18.213 billion, compared to -$37 billion for the same period last year. Sufficient cash flow supports the company's continuous market development during the shipping cycle. The company's asset impairment was calculated at 267 million yuan, a year-on-year decrease of 82.23%, which is a significant improvement over the past three years. We believe that the company's loss orders in the early stages have gradually been cleared, and profits from high-value ship deliveries are expected to usher in rapid growth in the future.
2024Q1 achieved revenue of 15.27 billion yuan, a year-on-year increase of 68.84%; net profit after deducting non-attributable net income of 338 million yuan, an increase of 1032% year-on-year, a 12-year high; net sales interest rate of 2.65%, with a significant improvement in profitability. The company's inventory at the end of the period was 36.561 billion yuan, an increase of 270 million yuan over the beginning of the period. Sufficient inventory will strongly support the company to carry out ship repair and other business activities.
The company has sufficient orders in hand, and revenue growth is guaranteed
The company is currently ordering 318 ships (Clarkson caliber) for a total of 11.16 million CGT, scheduled until 2028. Based on 2023 deliveries, the production capacity coverage rate is 3.7 years. Looking at delivery expectations, a total of 3.21 million CGT is expected to be delivered in 2024, up 6.3% from the 2023 delivery volume. The date of receipt of orders for delivered ships was mainly concentrated on 2021-H2-202H1. The average price index for new shipbuilding during this period was 153.66 points, up 18% from the previous period (2020H2-2021H1). Delivery volume and order price both increased, and the company's revenue was guaranteed. In addition to the main shipbuilding industry, the company (23 annual report caliber) ordered 77 ships/1,346 billion yuan for manual repairs, 2,379 million yuan for offshore equipment contracts, and 831 million yuan for application industry contracts, providing support for the release of the company's performance.
Industry sentiment continues to rise, and the profit margin of shipping companies is expected to increase the popularity of the global shipping market in the first quarter. The average value of the Clarkson Shipping Index reached 24,795 US dollars/day, up 0.7% year on year, making it the second-highest in the same period since 2009. At the end of the first quarter, Clarkson's new ship price index closed at 183.2 points, up 1.1% from the beginning of the year, and 50.9% higher than at the beginning of the rise in current ship prices. Based on August 2008 prices, bulk carriers, oil tankers, and container ships are ranked at 70.8%, 84.5%, and 88.8% quantiles respectively, and there is still room for growth. In terms of cost, the average price of 20mm shipbuilding boards in the first quarter was 4,417 yuan/ton, a year-on-year decrease of 5.2%. We believe that factors such as the current geographical conflict, global manufacturing recovery, and OPEC+ production cuts are expected to pulse the upward trend in the shipping market. Shipyard orders and order prices are expected to increase further. At the same time, there is limited room for cost side shipbuilding board prices to rise, and the profit margin of shipbuilding companies is expected to increase.
The leading position is stable, and multiple advantages help profit continue to improve
Scale advantage: The company's total shipbuilding volume ranks first in the country all year round. It is a well-deserved leader in the domestic shipbuilding industry, and its global influence is constantly increasing. According to the ranking of handheld orders at the end of the first quarter, Jiangnan, Waigaoqiao, and Guangzhou Shipbuilding ranked second, fourth, and eighth in the country. Currently, the concentration of the global shipbuilding industry has further increased. By the end of 2023, the number of active shipyards (with at least 1,000 GT or more handheld orders) in the world was only 371, down 64% from 1,041 during the peak period. We believe that the current relationship between supply and demand in shipbuilding is difficult to change. Relying on its leading position in the industry, the company is expected to take big orders and pick good orders, and the share of orders for high value-added ships is expected to continue to increase in the future.
R&D advantages: The company has mastered core technology in terms of high-tech and high-value-added ship models. In 2023, the company completed 1,500 patent applications, including 1306 invention patents; authorized 621 patents, completed 35 scientific and technological achievements assessments, and received 93 scientific and technological progress awards. In particular, the “Aida Mordu” large-scale cruise ship project broke Europe's technological monopoly on basic and detailed cruise ship design. We believe that with the gradual delivery of the company's oversized container ships, large LNG carriers, VLCCs, VLOC and other high-value vessels, the company's technology will become more mature, cost control will be more reasonable, process management will be more effective, and future profitability is expected to improve further.
Group endorsement advantage: The company is a listed flagship company in China Shipbuilding Group's core military and civilian products business. With the support of the Group, it has resources, technology, and management advantages that other companies do not have. With the merger of the two ships and the further resolution of subsequent interindustry competition, the size of the company's assets is expected to expand further, and the asset structure is expected to be further optimized.
Profit forecast: As a leading shipbuilding leader in China, the company is expected to fully benefit from the upward industry cycle and open up space for long-term development. The company's profit elasticity was verified against the backdrop of increasingly intensive delivery of high-priced orders. We forecast the company's revenue for 2024-2026 to be 809.96/901.34/102.85 billion yuan, net profit to mother of 50.43/84.81/10.288 billion yuan, corresponding PE of 33.21/19.74/16.28X, maintaining the “recommended” rating.
Risk warning: macroeconomic fluctuation risk, raw material price fluctuation risk, exchange rate fluctuation risk