According to the Smart Finance app, Guolian Securities has released a research report pointing out that since 2024, the magnitude of the increase in ocean freight rates has been relatively high. As a result, the market is more concerned about the short-term profit performance of exporting companies. Guolian Securities estimated the ratio of sea freight to value for home appliances category in 2023, and compared the actual cost changes of 8 sample exporting companies under the background of the significant increase in sea freight rates in 2021. It was found that although the cost of enterprises was under pressure due to the increase in freight rates, the actual sea freight was significantly lower than the change in SCFI index due to factors such as long-term contract prices for shipping and business structure. Guolian Securities believes that companies with higher FOB ratio, higher proportion of production capacity migration overseas, and higher unit volume value will be less affected by the increase in shipping costs.

Guolian Securities' main points are as follows:

The ocean freight rate has risen sharply since the beginning of 2024.

Recently, top shipping companies such as Maersk and Mediterranean announced that they will raise export prices from major ports in Asia starting from July 1st. The highest FAK rate for Asia-Europe has reached $9800/FEU. This shipping surge is similar to the situation in early 2024 and 2021, but the reasons for this increase are slightly different: 1) the impact of the Red Sea incident at the end of 2023 continues, and the shipping companies are forced to bypass the Cape of Good Hope, resulting in a chain reaction of freight rates; 2) Tariff expectations in the United States, European Union and other places have forced merchants to compete for containers in advance to ship goods, leading to increased demand and tight capacity, resulting in high ocean freight rates; under this background, the market is more concerned about the sustainability of exports and the short-term profit impact on relevant enterprises.

What is the impact of this round of sea freight on export categories?

Based on the SCFI index, we calculated the rise in freight rates on the European and American routes and compared the ratio of sea freight to value for home appliances products in 2023. Assuming half of the goods sign a long-term contract price, the sea freight to value levels for functional sofas, smart beds, office chairs, height-adjustable desks, refrigerators, washing machines, and air conditioners are approximately 9.29%/11.59%/10.07%/9.87%/6.42%/5.33%/3.50%. In addition, we calculated the impact of the degree of sea freight increase on the freight-to-value ratio of each product category in 2023 through sensitivity analysis, and found that home furnishings were relatively more affected by the increase in shipping costs due to the lower unit volume value of their products.

Actual changes in corporate sea freight rates in 2021

Due to the existence of factors such as quotation models and long-term contract prices, there may be considerable deviation between the sea freight borne by enterprises and the degree of index increase. We selected 8 companies, including Zhiou Technology, SeewayTimes, Loctek Ergonomic Technology Corp., Taotao Car Industry, Man Wah Holdings, Craftsmanship Home, UE Furniture, and Co-creation Grass to estimate their predicted changes in sea freight rate in 2021, compared with the actual disclosed values in financial reports. It was found that the unit container freight rate increase of Taotao Car Industry in 2021 was only about 1/3 of the index increase, and companies with higher FOB ratio, higher proportion of production capacity migration overseas, and higher unit volume value had a smaller actual change value compared to the change in the shipping rate index.

Investment suggestion: focus on relevant enterprises with high FOB ratio, high value, and production migration

Since 2024, the magnitude of the increase in ocean freight rates has been relatively high. As a result, the market is more concerned about the short-term profit performance of exporting companies. Guolian Securities estimated the ratio of sea freight to value for home appliances category in 2023, and compared the actual cost changes of 8 sample exporting companies under the background of the significant increase in sea freight rates in 2021. It was found that although the cost of enterprises was under pressure due to the increase in freight rates, the actual sea freight was significantly lower than the change in SCFI index due to factors such as long-term contract prices for shipping and business structure. We believe that companies with higher FOB ratio, higher proportion of production capacity migration overseas, and higher unit volume value will be less affected by the increase in shipping costs.

Risk warning:

1) Risk of consumer willingness not reaching expectations; 2) Risk of overseas operating environment and policy; 3) Risk of RMB exchange rate fluctuation; 4) Risk of measurement deviation.