China Merchants Steam Shipping (601872) All businesses go hand in hand, and oil transportation contains greater flexibility-clevelanddrifters.com

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China Merchants Steam Shipping (601872) All businesses go hand in hand, and oil transportation contains greater flexibility

time：2023-03-24 02:01:33 source：clevelanddrifters.com author：Market analysis

China Merchants Steam Shipping (601872) All businesses go hand in hand, and oil transportation contains greater flexibility

In the first half of the year, China Merchants Steamship achieved a net profit of 2.889 billion yuan attributable to shareholders of listed companies, a year-on-year increase of 105.99%. Deducted non-net profit of 2.705 billion yuan, a year-on-year increase of 200.51%. All businesses have achieved growth. During the reporting period, the bulk carrier fleet achieved operating income of 6.059 billion yuan, a year-on-year increase of 18.12%; the oil tanker fleet achieved operating income of 2.444 billion yuan, a year-on-year increase of 25.76%; the container fleet achieved operating income of 3.445 billion yuan , a year-on-year increase of 49.85%; the Ro-Ro fleet achieved operating income of 807 million yuan, a year-on-year increase of 24.22%. The oil tanker fleet operates well and outperforms the industry average. The global VLCC market in the first half of 2022 was sluggish. The VLCC-TCE disclosed by the Baltic Exchange in the first and second quarters was -177,000 and -21,700 US dollars per day, respectively, but China Merchants Shipping only lost 29 million yuan. This is due to the timely installation of the desulfurization tower and the adjustment of the ship structure in advance. During the reporting period, the company received 1 VLCC and completed the disposal of 2 aging VLCCs. Among the 50 VLCCs owned by the company, 30 were energy-saving ships, accounting for 60%. In addition, 7 of the energy-saving ships have been installed with desulfurization towers, and 6 ships are expected to be installed within this year. The overall young fleet structure with desulfurization tower installed helps the company to gain a greater advantage on the cost side under the market background of the continuous widening of the high- and low-sulfur oil price difference. (1) Bulk cargo: In the first and second quarters of 2022, BDI maintained high volatility and recorded 2,041.08 and 2,529.67 respectively. Although the industry boom was worse than last year, the company's bulk cargo fleet performance remained stable, contributing a net profit of 1.473 billion yuan in the first half of the year. Thanks to the company's continuous dynamic adjustment of the rolling lock ratio and rhythm based on market conditions. Considering the company's flexible adjustment and rolling price-locking business strategy, the large fluctuation of BDI in the second half of the year may have limited impact on the company's bulk carrier fleet performance. (2) Consolidation: As of June 2022, the company has 27 container ships in operation, with a total capacity of 40,494TEU. Alphaliner statistics show that it ranks 31st in the world. The company's container shipping fleet mainly focuses on the Asian regional routes. There are two characteristics of this market: the container shipping companies are not affected by the trade flow of the main line during the non-economic cycle, and the loading rate of the round-trip routes is very high, which is compared through the asset turnover rate. Good ROE level; during the economic cycle, the company also enjoys the excess returns brought by the rise in freight rates in the global container shipping market. Although the container shipping market will face downward pressure and the volatility of freight rates will intensify, the company's container shipping performance is still expected to be better than the industry average. (3) Ro-Ro: The company currently has 2000-5000 car-class car-ro-ro ships and other large-scale car-ro-ro ships that can be used for coastal/ocean oceans, with a total capacity of 22. At present, the company has a solid position in the domestic trade market, and has foreign trade qualifications, experience and capabilities. Although profits declined year-on-year in the first half of the year due to rising oil prices and crew costs, China's auto exports have grown rapidly with broad prospects, and the international ro-ro market is in short supply. In the future, ro-ro car ships are expected to become a new growth point for the company. The recovery of the oil transportation market is just around the corner, and the company's VLCC fleet will fully benefit from the performance flexibility brought about by the recovery of oil transportation. The oil transportation industry will face the problem of insufficient effective supply in the next 2-3 years: a. The aging of ships is serious, and the number of ships to be scrapped is gradually increasing; b. The IMO environmental protection policy has become stricter, and the fleet supply has lost elasticity; c. There is no room for new orders. Demand side: The long-term logic of route reconstruction and future database replenishment logic are being gradually verified. China Merchants Shipping is a global leader in integrated shipping. All businesses go hand in hand, and oil transportation has great performance flexibility. We estimate that China Merchants Shipping’s operating income from 2022 to 2024 will be 29.5 billion, 30.8 billion and 31.7 billion yuan, respectively. 7.4 and 8.3 billion yuan, corresponding to PE of 10.17, 8.64 and 7.69 respectively. Maintain "overweight" rating.

(Responsible editor：Aerospace stock)

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