The North-South ship restructuring plan was introduced, high-quality assets were integrated and upgraded, and high-quality assets were integrated and upgraded. On September 18, 2024, the North-South Ship restructuring plan was introduced. It will deeply integrate the superior scientific research and production resources and supply chain resources of Chinese ships and China Heavy Industries, and promote the deep integration and upgrading of advanced shipbuilding technology. We expect the company's net profit to be 5.36/9.04/11.75 billion in 2024-2026, corresponding PE 29/17/13 times. Comparable companies agree that the average PE value for 2024 Wind is 25 times higher. Considering that the company is a global leader in shipbuilding and has plenty of orders in hand, it enjoys a certain valuation premium. The company was given 41 times PE in 24 years, with a target price of 49.11 yuan (previous value: 49.11) yuan, maintaining a “buy” rating.

The average stock trading price was determined for the previous 120 trading days, and the exchange price was fair. On the evening of September 18, 2024, China Shipbuilding and China Heavy Industries announced plans for share exchange, absorption, merger and related transactions. In this stock exchange, absorption and merger, China Shipping's share exchange price was determined to be 37.84 yuan/share according to the average stock transaction price for 120 trading days before the pricing benchmark date. The stock exchange price of China Heavy Industries was determined to be 5.05 yuan/share according to the average stock trading price for the 120 trading days before the pricing benchmark date, and it was determined that the share exchange ratio between China Heavy Industries and China Shipping was 1:0.133.5. This transaction constitutes a major asset restructuring and related transaction. After completion, China Heavy Industries will terminate its listing and cancel its legal personality. China Shipbuilding will become the surviving company, the actual controller will not change, and stock trading will resume on September 19.

Standardize competition in the industry and build a world-class shipbuilding enterprise

In order to protect the interests of shareholders dissenting from the two parties to the merger, the transaction granted the opposing shareholders of China Shipping the right to request a takeover, and the opposing shareholders of China Heavy Industries to choose cash. The price of China Shipping's objecting shareholders' takeover rights is 80% of the average trading price of China Shipping's stock in the 120 trading days before the pricing basis for share exchange, absorption and merger, or 30.27 yuan/share. The cash option price for China Heavy Industries dissenting shareholders is 80% of the average trading price of China Heavy Industries shares in the 120 trading days before the pricing basis for stock exchange, absorption and merger, or 4.04 yuan/share. After the transaction is completed, it will regulate competition in the ship assembly business and promote the preservation and appreciation of state-owned assets. China Shipbuilding will continue to focus on building a strong army, seizing opportunities for transformation and upgrading of the shipbuilding industry and boosting prosperity, and build a world-class shipbuilding enterprise with international competitiveness.

The global shipbuilding market is progressing steadily, and new shipbuilding prices continue to rise

In the first half of 2024, demand in the shipbuilding market continued to be strong, driven by cyclical changes in capacity and continued green changes in the industry. According to Clarkson data, in the first half of 2024, the world sold a total of 77.248 million dwt of new ships, up 24.4% year on year; completed shipbuilding volume of 47.515 million dwt, up 1.8% year on year; by the end of June 2024, global orders for handheld ships were 313.596 million dwt, an increase of 18.5% year on year. By the end of June '24, the Clarkson New Ship Price Index was 187.23 points, up 55% from 121 points in early 2020. Under the booming trend of the shipbuilding industry, after asset restructuring, the company is expected to continue to lead the development of the global shipbuilding industry with strong scientific research and innovation capabilities, advanced management level, exquisite manufacturing technology, rich product structure and production line.

Risk warning: raw material price fluctuation risk; exchange rate fluctuation risk.