Description of the event
The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 74.839 billion yuan, an increase of 25.81% year on year; net profit to mother of 2,957 billion yuan, up 1614.73% year on year; net profit after deducting non-return to mother - 291 million yuan. 23Q4 achieved revenue of 25.185 billion yuan, up 20.30% year on year; net profit to mother of 396 million yuan, up 130.64% year on year; net profit after deducting non-return to mother was 137 million yuan, up 105.25% year on year. 24Q1 achieved revenue of 15.270 billion yuan, up 68.84% year on year; net profit to mother was 401 million yuan, up 821.12% year on year; net profit after deducting non-return to mother was 338 million yuan, up 1031.98% year on year.
Incident comments
Improving the operation of shipbuilding and marine engineering businesses. In 2023, the company's shipbuilding and offshore engineering business revenue was 70.420 billion yuan, up 40.87% year on year; gross profit margin was 10.13%, up 3.90 pct year on year. Among them, the subsidiary Waigaoqiao Shipbuilding recovered the final payment of the contract for 4 offshore platforms and confirmed revenue of 5.927 billion yuan, confirming gross profit of 2,659 billion yuan; after deducting the impact of the 4 offshore platform factors, the ship repair and offshore engineering business revenue was 64.493 billion yuan, an increase of 29.01% year on year; gross profit margin was 6.94%, an increase of 0.71 pct year on year.
New orders and deliveries have continued to increase. In 2023, the company took advantage of its dominant position in the industry to strengthen batch order acceptance for middle and high-end ships. It received a total of 128 civil ship orders per 9.1861 million DWT/72,888 billion yuan (according to the exchange rate at the end of 2023), the ship repair business undertook 299 ships/2,058 billion yuan throughout the year, and the application industry undertook contracts worth 2,429 billion yuan throughout the year. By the end of 2023, the company had ordered 261 ships/19.437,800 DWT/153.499 billion yuan; 77 ship-repair orders: 1,346 billion yuan; offshore equipment contract orders amounted to 2,379 million yuan; and application industry contract orders amounted to 831 million yuan. On the delivery side, the company completed the delivery of 81 civilian ships/7,534,900 dwt throughout the year, with a tonnage of 122.80% of the annual plan, an increase of 7.55%; the company repaired 275 ships/1,976 billion yuan; delivered industrial equipment with an output value of 2,368 billion yuan; and the marine engineering business delivered a 340,000-ton FPSO and 65,000-ton semi-submersible vessel.
By the end of 24Q1, the company's inventory reached 36.561 billion yuan, up 0.7% from the end of 23Q4; contract liabilities reached 67.196 billion yuan, up 7.4% from the end of 23Q4, reflecting that the company's on-hand orders and new orders remained high.
The shipbuilding sector has been booming over a long period of time, gradually leading to the release of profits. The shipbuilding industry is still in the structural recovery stage, with container ships and LNG carriers recovering first. Currently, oil tankers have gradually released orders. Demand for subsequent bulk carriers is also expected to be released, and ship prices are expected to continue to rise due to supply bottlenecks. At the same time, China's shipbuilding industry has maintained a good development momentum, achieved overall growth in the three major shipbuilding indicators, maintained global leadership in international market share, and the transformation and upgrading results were obvious. Currently, the shipyard has sufficient orders in hand, production schedules are full, and subsequent orders will continue to be delivered. Furthermore, in the context of transformation and upgrading, the ship order structure continues to improve. As orders for high-priced and high-quality new ships enter a centralized delivery period, combined with lower raw material prices and improved profits, shipbuilding companies' profits are expected to continue to rise. As a global shipbuilding leader, the company is expected to fully benefit from the development of the industry and achieve greater performance flexibility with its own barriers in scale and technology.
Maintain a “buy” rating. We expect that in 2024-2025, the company will achieve net profit of 5.62 billion yuan and 9.11 billion yuan respectively, corresponding to PE of 29 times and 18 times, respectively, and maintain a “buy” rating.
Risk warning
1. Price flexibility for new orders falls short of expectations;
2. Commodity price reductions fall short of expectations.