Core views:
The container industry cycles about four to five years, and is currently at the beginning of a new boom cycle.
The upward and downward cycle of containers is about 2-3 years. After experiencing the bottom of the downward cycle in 2023, containers have gradually entered the upward cycle in 2024. Combined with factors such as the Red Sea incident, demand in the container industry has risen, and freight rates and average container prices have risen simultaneously. The container industry cycle reflects two historical rules: 1. The driving force of each cycle is different, and what is different from the past is that the current cycle is driven upward by triple dynamics; 2. The total volume center of containers is essentially upward in fluctuation. The underlying logic is determined by the continuous growth of the fleet capacity and the global population.
New demand+renewal demand+turnover demand all drive the upward cycle. We have broken down the three major requirements in detail. 1. New demand: Active inventory replenishment in Europe and the US has generated demand momentum in this round. Currently, US retailers have entered the inventory replenishment cycle, and long-term holdings have maintained growth under population and trade expansion. 2. Renewal demand: Container holdings continue to grow. At the same time, enterprises will increase the renewal rate during the boom cycle, and dual superposition will drive the renewal demand to continue to rise. 3. Turnover demand: Longer transportation distances reduce effective supply, and the situation in the Red Sea has clearly catalyzed in the short term.
The container competition pattern is steadily concentrated, and supply-side optimization drives the rise in container prices. According to Drewry, in 2022, the world's top four container manufacturers had a market share of about 85%. The competitive pattern remained stable for a long time, and the production of old production capacity accelerated the optimization of the pattern. Under tight supply and demand, box prices ushered in the opposite rise in steel prices, and the profit center expanded. As the number one leader in the world, the company is expected to be the first to benefit in this recovery cycle. Production and sales of 2024Q1 dry boxes have increased dramatically, and the incremental momentum of performance is remarkable.
Profit forecasting and investment advice. The main container business boom reversed upward and the bottom of offshore engineering. We expect the company's net profit to reach 27.8/38.6/4.87 billion yuan in 24-26, and net assets per share to reach 9.7/10.3/11.1 yuan. The company was given a PB valuation of 1.3x in 2024, corresponding to 12.58 yuan/share; considering the AH share premium factor, corresponding to HK$8.81 per share, they all maintained a “buy” rating.
Risk warning. Macroeconomic and geopolitical risk, oil price fluctuation risk, steel price fluctuation risk.