(Report Producer: Huatai Securities)
Express: Anti-fragility and Comparative Advantages
1H22 Review: Disturbed by the COVID-19 Epidemic, Comparative Advantages Are Significant
1H22 Express stock prices still show a V-shaped trend, and the differentiation of individual stocks continues unabated. 1) From the beginning of the year to early March, the industry's volume grew rapidly. With the integration of Jitu and Best to release market share, the market competition was relatively mild; except for the shrinkage of the valuation of , SF Express and , Tongda System was relatively resilient; 2) The epidemic broke out in mid-March, and the industry The volume of parcels declined rapidly, and the express delivery sector made up for the decline. SF Express took the lead in rebounding after the annual report was disclosed; 3) Since mid-April, logistics guarantees and smoothness have promoted the recovery of the industry's parcel volume, and the express delivery sector has shown significant excess returns. STO and YTO have successively Breaking through the high point at the beginning of the year, SF Express maintained range fluctuations, while Yunda experienced a significant correction due to the impact of the epidemic. Year to date (as of 6/17), Shenwan Logistics has outperformed the CSI 300 Index by 3.3pct, with YTO leading the gain of 30% and SF Express leading the decline of 24%.
2H22 Outlook: We are optimistic about the mid-term boom, and the investment strategy recommends overweighting. We divide the changes in national express delivery volume since March into five stages: 1) In early March, industry volume continued the strong growth from January to February (1- +20/+18% year-on-year in February/early March); 2) From mid- to late March, the epidemic situation worsened in many places across the country, and the industry volume continued to decline; 3) From late March to mid-April, the industry volume bottomed out ; 4) From mid-April to the end of April: Logistics guarantees and smoothness promote the recovery of the industry's piece volume; 5) Since the end of April (excluding May Day and June 18 disturbances): The industry's piece volume fluctuates within a narrow range. Comparing 2020, the differences between the impacts of the two epidemics are: 1) The outbreak of the 2020 epidemic coincided with the Spring Festival holiday, and it was difficult for couriers to return to work after the holiday; "Transportation" full link. 2) After the epidemic was brought under control in 2020, factors such as the decline of e-commerce catalyzed the prosperity of online consumption, and the volume of express delivery quickly exceeded the normal value before the epidemic; after the epidemic eased this time, the performance of social retail and e-commerce consumption was weak, and the industry volume has not yet It has clearly exceeded the pre-epidemic normal value.
The market consensus is that the express delivery industry has both supply elasticity and demand resilience. Due to the strong availability of production factors such as manpower and transportation capacity, and the fast production process (the whole process takes about 2-3 days), the post-epidemic supply recovery speed of the express delivery industry is faster than that of most industries; express delivery products include clothing, daily necessities, Mainly home appliances, etc., the demand is relatively resilient, and there is a possibility of making up for the suppressed demand after the epidemic (takeaway/fresh food e-commerce is more rigid, but it is difficult to make up for it). Market differences focus on macroeconomics and volume growth forecasts. In the first half of June, the national express collection and delivery volume was basically the same year-on-year, causing some investors to worry about 618 and the industry's growth rate in the second half of the year.
Based on the year-on-year changes in the average price of domestic parcels (delivery in the same city + parcels in different places), we divided the express delivery industry since 2009 into five competition cycles. We believe that the meso-level competition in the express delivery industry is the superposition of capital entry and stock competition, and capital entry often intensifies stock competition. Since 2009, the express delivery industry has experienced four large-scale capital inflows; the first three were mainly financial investors, while this time they are mainly industrial investors. 1) 2011: Yunda introduced , Lenovo and Fosun Investment; 2) 2013: Zhongtong introduced investments such as Sequoia, and SF Express introduced investments such as China Merchants Group; 3) 2016-2017: Tongda Department and SF Express successively carried out backdoor transactions/IPOs Listed; 4) 2020-2021: SF Express expands e-commerce parcels, JD.com expands online express delivery business, and Jitu launches online delivery.
The first two rounds of late-comer financing triggered stock competition, and prices quickly recovered after the initiators reached their predetermined targets. After the entry of the third round of capital, the withdrawal of second-tier express delivery and the transfer of part of first-tier express delivery shares have digested the price war, and the competition cycle has gone up. After the entry of this round of industry capital , existing companies and new entrants have entered the "elimination round", and the price war cycle has lengthened and the intensity has increased. As policy intervention and the decline in secondary market valuations inhibit capital entry and market competition, we believe that this round of price wars has basically ended, and the price decline since 2021/12 has been better than the long-term center.
Measured by gross profit/net profit per ticket, the prosperity of e-commerce express delivery continued to decline from 2016 to 3Q21: 1) From 2016 to 2018, the entire industry was at a relatively high level of prosperity, with strong profit per ticket except for Best's low-price grabs; 2) 2019/ In 2020/3Q21, the entire industry has successively approached the break-even line of Best, STO, and Yunda/YTO. In 3Q21, the express delivery industry ushered in supply-side reforms when the business cycle was nearing the bottom, and price increases drove the recovery of the economy (the industry business prosperity quantile in 3Q21/4Q21/1Q22 was 0/14/24%). We believe that "ensuring the smooth operation of the network", "not operating below the cost" and "share-guided price self-discipline" correspond to the ultimate goals of regulatory policies, intermediary goals and operational goals, while "not operating below the cost" has a high probability The deduction path is that the headquarters' profits are positive. We further discuss the deduction of prosperity under four regulatory scenarios:
1) No supervision scenario (blue line): Assuming that there is no policy intervention in 2021, the industry prosperity in 2022 is likely to further drop to mid-level. Tong's break-even line, and finally hit the bottom: 1) Zhongtong established its leading position (market share 25% and more than 5% ahead of the second place), 2) the number of first-line express delivery dropped significantly. From 2023 to 2024, we believe that the industry prosperity is likely to recover quickly, which is also the investment window that many investors have previously deduced. 2) Three scenarios of supervision: The industry-wide price war in 3Q21 is close to the break-even line of YTO/Yunda, implying the expectation of bankruptcy of Best and STO, which is obviously beyond the tolerance of regulatory agencies. Based on the consideration of "ensuring the smooth operation of the network", we believe that weak supervision is unlikely to be lower than STO's break-even line (cautious scenario: gray line), and strict supervision is unlikely to exceed BEST's break-even line (optimistic scenario: optimistic scenario: red line), and neutral supervision is somewhere in between (neutral scenario: black line).
In the past year, “peak season price increases”, “boom confirmation” and “comparative advantages” have successively driven excess returns in the express delivery sector. At present, we believe that the market’s understanding of economic recovery has deepened significantly (causing the expected difference in the numerator), but comparative advantages will still drive the marginal allocation of assets (catalyzing the expected difference in the denominator): 1) Supply elasticity and demand resilience have significantly reduced the impact of the epidemic, 2) The process of economic recovery is not over yet. 3) Valuations are still attractive after absorbing the impact of the epidemic and oil prices. 4) Institutions are underweight.
Driven by the triple drive of "regulatory stability" + "leading prices" + "users pay", we are optimistic that the mid-term prosperity of e-commerce express delivery will rise; under strong/medium/weak supervision scenarios, the industry's mid-term prosperity is expected to recover to the average of Best/Both / STO's break-even line, the valuation of leading companies is still attractive after absorbing the impact of the epidemic and oil prices; "post-epidemic repair" + "performance release" + "comparative advantage" are triple catalyses, and the investment strategy recommends overweighting. We make analogies to stocks that may not be accurate: 1) Zhongtong analogy Wuliangye (brand advantage) + Yanghe (channel advantage), 2) Yuantong analogy Fenjiu (management optimization alpha), 3) Yunda is analogous to Luzhou Laojiao (following the leader), 4) STO is analogous to Jiuguijiu (start again).
Airlines: Waiting for the release of price elasticity
1H22 Review: Another heavy blow from the epidemic will delay the recovery of airlines
The severe epidemic situation in the first half of 2022 caused airline operations to plunge into a trough. In the first half of 2022, the local epidemic of COVID-19 spread in many places, and the daily number of confirmed cases once exceeded 3,000. The impact was particularly obvious in first-tier cities with strong demand for civil aviation, resulting in a sharp decline in various airline indicators. Air China (601111 CH), China Eastern Airlines (600115 CH), China Southern Airlines (600029 CH), Spring Airlines (601021 CH), Juneyao Airlines (603885 CH) total supply/demand from January to May respectively year-on-year The decline was 43.7%/50.6%, only 38.9%/29.5% in the same period in 2019. In April, it was 17.4%/12.0% in the same period in 2019, which was the lowest since the outbreak of the epidemic in February 2020. There is a negative correlation between the absolute income of
and and the number of confirmed cases, but the relative income still slightly outperforms. In early March 2022, the number of confirmed cases of the local epidemic surged, which suppressed the operations of airlines and also dragged down the Shenwan Airlines Index. The aviation index fell by 10.6% in March.However, overall in the first half of the year, the COVID-19 epidemic has had varying degrees of impact on all walks of life. If the epidemic improves, the market expects that the aviation industry may have greater recovery flexibility. Against the background of the overall weak market, the aviation sector still slightly outperformed the relative return. As of June 17, 2022, the SW Aviation Index has outperformed the Shanghai and Shenzhen 300 Index by 1.5pct year-to-date.
2H22 Outlook: Gradually emerging from the darkest moment, profit breakthrough will eventually come
Fleet introduction is slowing down, and supply tightening is clear. It is expected that the growth rate of fleet introduction will continue to slow down during the "14th Five-Year Plan". Due to the grounding of the B737MAX and the impact of the epidemic, my country's fleet introduction slowed down from 2019 to 2021. The civil aviation passenger fleet has a net introduction of 378 aircraft. The fleet size will increase by 10.8% at the end of 2021 compared with the end of 2018. The civil aviation passenger fleet from 2011 to 2018 The compound growth rate of introduction is 11.0%, and the three-year growth rate from 2019 to 2021 is only equivalent to one year in the high-speed stage. Looking forward to the "14th Five-Year Plan", the Civil Aviation Administration of China still attaches great importance to civil aviation safety, and airlines have gradually set high-quality development of and as an important goal. We believe that the growth rate of my country's civil aviation fleet will remain low.
Regarding supervision, the Civil Aviation Administration of China has reduced the number of aircraft takeoffs and landings to ensure the target growth rate. Under the theme of high-quality development, my country's civil aviation goal is to ensure 17 million aircraft takeoffs and landings in 2025. According to this goal, the compound growth rate of aircraft movements during the "14th Five-Year Plan" will drop to 6.5% from 2021 to 2025, while the compound growth rates from the "11th Five-Year Plan" to the "13th Five-Year Plan" will be 12.6%, 9.1%, and 8.0 respectively. %. (The "Thirteenth Five-Year Plan" estimates exclude the growth rate of -22.4% in 2020 due to the impact of the epidemic; if the B737MAX grounding in 2019 is taken into account, the year-on-year growth rate of aircraft takeoffs and landings dropped to 5.2%, and further excluding the compound growth rate from 2016 to 2018 rate reaches 9.0%). The "Plan" lowers the number of aircraft takeoffs and landings to ensure the target growth rate, and gives a signal to the industry to tighten supply from the policy level. We expect that this will restrain the growth rate of airline fleet introduction during the "14th Five-Year Plan". (Report source: Future Think Tank)
For airlines, due to the impact of the epidemic, funds are tight, losses are serious, and the willingness to introduce airline fleets is reduced. Since 2020, the COVID-19 epidemic has eroded airline profits, and airlines' cash flow has also significantly deteriorated. They have to use external financing to reduce daily operating risks, which reduces the importance of fleet expansion strategies. In terms of profitability, after at least two years of losses, we expect that after the epidemic subsides, the airlines’ primary demand will turn to repairing their income statements and balance sheets. The net losses attributable to the parent company of the three major airlines in 2020/2021/1Q22 were 37.1 billion/41 billion/ 21.2 billion. In 2022, the local epidemic is still under control, and we expect airlines to still record significant losses. In terms of cash flow, the net operating cash inflow of the three major airlines in 2020 was only 11.7 billion, and it rebounded to 32 billion in 2021, but it was significantly lower than 105.4 billion in 2019. In addition, the epidemic hit again in 1Q22, and the operating cash flow of the three major airlines was outflow. 11.7 billion. The net investment cash outflows from 2019 to 2021 continued to narrow, reaching 31.5 billion/29.9 billion/17.4 billion respectively. The three major airlines have no choice but to support daily operations and capital expenditures through financing.
Based on analysis from the Civil Aviation Administration and airlines, we believe that the introduction of fleets in the industry will slow down. Taking the three major airlines as an example, according to the fleet introduction plan reported in 2021, the compound growth rate from 2019 to 2023 is expected to drop to 3.2% (the compound growth rate from 2015 to 2018 is 7.5%), which will promote the tightening of the growth rate of my country's civil aviation supply.
Endogenous demand is not afraid of the disruption of the epidemic
Although the first half of 2022 will hit the bottom again, the growth of my country's civil aviation demand is resilient. Taking the SARS epidemic as a reference, due to the rapid control of SARS, the epidemic mainly suppressed the demand for civil aviation from April to July 2003, and the monthly civil aviation passenger turnover fell by 16%/77%/50%/0.2 respectively year-on-year. %, and the civil aviation passenger turnover in 2003 fell by 0.4% year-on-year. However, the pent-up demand rebounded with a vengeance after the epidemic, and the endogenous demand for civil aviation brought by economic growth drove the rapid recovery of civil aviation passenger turnover after the epidemic subsided.
In 2003, the growth rate of GDP still reached 10.0%, an increase of 0.9pct compared with 2002. In terms of civil aviation demand, the year-on-year growth rate rebounded to 41.1% in 2004. The compound growth rate of civil aviation passenger turnover reached 18.5% in 2003-2004, while in 2001- The compound growth rate in 2005 was only 16.1%, which shows that aviation demand was only temporarily suppressed by travel restrictions and has not disappeared.From a quantitative analysis, we have observed my country’s annual civil aviation RPK growth rate and GDP growth rate since 1991. After excluding the special values affected by the SARS epidemic in 2003-2004, it was found that there was a significant correlation between the two sets of data. There are fluctuations in the absolute value of the multiplier. During the economic downturn, the absolute value of the multiplier is lower. In 1996-1999 and 2008, the RPK growth rate/GDP growth rate was lower than 1. After excluding 1996-1999, 2003-2004, and 2008 After three periods of abnormal values in 2018, during the period of steady economic growth in China, the average RPK growth rate/GDP growth rate reached 1.7 times.
my country's GDP growth rate in 2020 and 2021 is 2.2% and 8.1% respectively, and on March 5, 2022, the State Council Government Work Report proposed that the main expected development goals in 2022 are: GDP growth of about 5.5% . Driven by the steady growth of my country's national economy, the demand for civil aviation passenger transport will continue to increase steadily. Calculated based on the RPK growth rate/GDP growth multiplier of 1.7, the demand for civil aviation passenger transport in 2022 is expected to increase by 28.1% compared to 2019. If the impact of the epidemic weakens, my country's civil aviation industry is expected to form a large supply and demand gap.
Profit potential needs to be tapped, and price elasticity needs to be released.
The supply and demand structure has improved, and airlines' income levels are expected to return to their previous highs, promoting airlines' profits to increase. During the "12th Five-Year Plan" and the "13th Five-Year Plan", Chinese airlines introduced fleets at a high speed, the prosperity of the civil aviation industry deteriorated, and the revenue level continued to decline. However, with the tightening of fleet introduction, we believe that the revenue level of Chinese airlines will hit the It has rebounded at the bottom and is expected to gradually return to the previous high. In addition, airline revenue levels are fully elastic to profits, and an increase in revenue levels will drive airline companies to achieve breakthroughs in profits. We estimate that for every 1% change in revenue per passenger kilometer of Air China, China Eastern Airlines, China Southern Airlines, Spring Airlines, and Juneyao Airlines, total profits will increase by 1.25 billion, 1.10 billion, 1.39 billion, 140 million, and 160 million respectively. Compared with normal times without the epidemic, During the period, total profits in 2019 increased by 13.7%, 25.7%, 34.0%, 6.0%, and 11.7%.
The increase in full economy class fares will become a new driver of airline profits. In 2018, the Civil Aviation Administration and the National Development and Reform Commission promoted domestic air passenger transport price reforms and expanded the scope of adjustable full-fare routes to basically include first- and second-tier mutual routes with strong demand. After four years of multiple rounds of increases, we believe it will provide impetus for airlines to further improve their earnings levels. We have selected mutual flight routes between five cities in Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu. Assuming that the average ticket price is 80% of the full ticket price and the endogenous growth rate of passenger volume is 5%, the increase in the full ticket price will contribute 27.2 billion net profits to the industry. Increment.
investment analysis
recommends actively deploying the aviation sector where industry prosperity continues to rise. Although the short-term local epidemic is still the main factor inhibiting my country's civil aviation industry, the epidemic only temporarily suppresses travel and has not hindered the growth of aviation demand. There is no need to worry about the recovery of demand. After my country's epidemic situation stabilizes and prevention and control policies are relaxed, my country's civil aviation industry will enter the recovery channel, and the slowdown in supply growth will become the main driver of the industry's boom, providing impetus for airlines' revenue levels and profits to rise. Moreover, the recent bottoming out of international routes may further tighten the supply of domestic routes.
In addition, with the deregulation of full fares, the elasticity of airline income levels will be further released, and airlines are expected to enter a profit cycle. In terms of targets, the three major airlines that have been more seriously affected by the new crown epidemic will gain higher flexibility in the recovery, and the improvement in supply, demand and income levels will be more obvious for the improvement of the profits of the three major airlines. China Southern Airlines is the first choice, as it has the scale and resources for domestic routes. Advantage. In terms of small and medium-sized airlines, they are still in their own expansion stage and have shown more stable profits under the impact of the epidemic. We believe that they will continue to grow steadily as the impact of the epidemic gradually weakens. We recommend Juneyao Airlines. The recovery of the epidemic in Shanghai will have an impact on its operations. A significant boost.
Shipping: Container/dry bulk shipping will usher in the peak season, and the Russia-Ukraine conflict increases the volatility of the crude oil market
1H22 Review: Excess returns are significant, and sub-sectors continue to differentiate
From January 1 to June 17, 2022, Shipping (Shenwan) The index fell by 3.5%, outperforming the CSI 300 Index by 9.3 percentage points, but the performance of various shipping sub-sectors was divergent.In terms of individual stocks, the share price of COSCO Shipping Holdings fell by 19.8%, mainly due to the impact of the epidemic during the Spring Festival off-season, and spot container freight rates continued to decline from January to May; the share prices of COSCO Shipping Energy/ China Merchants Shipping rose by 66.4%/36.8% respectively, mainly due to The Russia-Ukraine conflict caused significant fluctuations in freight rates, creating trading opportunities in the sector. Overall, in the first half of 2022, the container shipping and dry bulk markets were relatively flat, but the average freight rate maintained a year-on-year growth; the crude oil market was incidentally driven by the Russia-Ukraine conflict, and freight rates jumped sharply from February to April; in April Since the second half of the year, with the stalemate between Russia and Ukraine, freight rates have shown a downward trend from high levels.
2H22 Outlook: Container shipping boom is high, dry bulk oil shipping trend is on the rise
Oil shipping: High oil prices suppress short-term demand, mid- and long-term prosperity is improving. From February to April, driven by the incident of the Russia-Ukraine conflict, Suezmax, the mainstream ship type in the Black Sea region and Aframax shipping prices have jumped sharply; since late April, freight rates have shown a downward trend from high levels. VLCC ship types are mainly used in the Middle East and are less affected by the Russia-Ukraine conflict, so freight rates remain low.
Europe’s embargo on Russian oil exports has increased short-term market uncertainty and volatility. According to IEA data, Russian crude oil production in 2021 was 10.8 million barrels per day, accounting for 11% of global crude oil production. Among them, Russia’s crude oil exports to Europe by sea were 2.35 million barrels per day, accounting for 6.3% of the global seaborne crude oil transportation volume. The European export embargo on Russia will have an impact on both the supply and demand sides of the oil shipping market, thus increasing the uncertainty and volatility of freight rates. 1) UK: Gradually reduce Russian oil imports to 0 by the end of 2022, and actively seek other purchasing countries, such as the Middle East, the United States, etc.; 3) EU : Starting from May 31, start Russian oil imports for 6 months Import exemption period. Imports of Russian oil will be banned from December 1, 2022.
For the oil transportation market, transportation demand is highly correlated with global oil exports, so we pay more attention to the boosting effect of changes in global oil exports on oil transportation demand. The Middle East/Africa/Russia/Latin America are the world's major oil exporters, accounting for 41%/14%/13%/10% of global seaborne oil exports (2021). We believe that under the current background of high crude oil prices, energy shortages, pessimistic global economic expectations, and geopolitical conflicts, it is difficult for other oil-producing countries to be willing to significantly increase production in the short term to make up for the 2.35 million barrels/day gap that Russia is embargoed by the EU. .
According to OPEC+ data, global oil production in 1Q22 was 98.83 million barrels/day, lower than the level in 2019 (100 million barrels/day); according to the OPEC+ June meeting, OPEC+ only increased production by 648,000 barrels/day in July. Therefore, we believe that the Russian export embargo and the decline in global oil transportation will put pressure on transportation demand. We recommend paying close attention to the progress of the subsequent Russia-Ukraine conflict and the impact of oil production changes in OPEC+, Iran, Venezuela, and other countries on boosting transportation volume. In the medium to long term, Europe will gradually reduce its dependence on Russian energy and turn to North America or the Middle East for procurement with longer transportation distances, which will benefit the growth in demand for ton kilometers .
Supply is tightening and the proportion of new shipbuilding orders is at a low level, which will drive the industry's mid- to long-term prosperity. As of May 31, global crude oil tanker newbuilding orders accounted for 5.8% of existing shipping capacity, a historical low since 1998; of which VLCC orders on hand accounted for 5.8% of existing shipping capacity. According to the ship delivery plan, we expect the nominal shipping capacity of crude oil tankers to increase by 4.7%/2.4% year-on-year in 2022/2023 (the number of ship scrappings so far is 2.88 million deadweight tons, and the number of ship scrappings in 2023 is assumed to be 0); among which, the nominal shipping capacity of VLCC will increase year-on-year 5.2%/2.6% (the number of ships scrapped year-to-date is 1, assuming that the number of ships scrapped in 2023 is 0). Considering that the ship energy efficiency index (EEXI) and carbon intensity index (CII) environmental treaties will come into effect in 2023 and old ships will be phased out, we predict that the actual effective transport capacity of the industry in 2022-2023 will be lower than the above nominal transport capacity. According to Clarksons forecast, global crude oil transportation demand will increase by 6.0%/4.2% year-on-year in 2022/2023. Affected by the conflict between Russia and Ukraine in the short term, demand will fluctuate greatly; however, in the medium and long term, as global oil demand rebounds and supply tightens, the oil shipping sector will usher in a mid- to long-term boom.
Container shipping: The peak season in the third quarter is expected to drive up freight rates, and freight rates will be under pressure in 2023
1-May, due to the Spring Festival off-season and the impact of epidemic prevention and control, container freight rates continued to decline week-on-week; since June, with the resumption of production and work Advances were made, and goods accumulated in the early stage were exported one after another, and freight rates stopped falling and rebounded. Although market demand is weak, the overall freight rate level is still higher than the same period last year. From January 1 to June 17, the average value of China Export Container Freight Index (CCFI)/Shanghai Export Container Freight Index (SCFI) increased by 53%/63% year-on-year. Looking forward to the second half of the year, we expect that global supply chain disruptions will continue. Combined with the traditional peak season in the third quarter, spot market freight rates are expected to increase month-on-month. On the other hand, in the post-epidemic era, supply chain stability has become the primary consideration for enterprises. Cargo owners are increasingly willing to sign long-term transportation contracts with container liner companies, and contract freight rates and cargo volumes will increase year-on-year in 2022.
20-21 The U.S. fiscal stimulus led to a high demand base, and demand growth slowed down from 2022 onwards. According to CTS data, from January to April, global container shipping volume was 56.21 million TEUs, a year-on-year decrease of 3.8%, mainly due to the high base in the same period last year and the impact of the epidemic; compared with the same period in 2019, it increased by 3.5%. Among them, cargo volume from Asia to North America/Asia to Europe/Asia fell 3.7%/0.3%/1.6% year-on-year. Compared with the same period in 2019, the performance was +28.1%/-4.4%/+5.5%. According to Alphaliner's latest forecast, global container cargo volume is expected to grow by 4.9%/4.5% year-on-year in 2022/2023 (6.7% in 2021), but it is necessary to pay close attention to the negative impact of the United States and Europe entering an interest rate hike cycle on the global economy and container cargo volume.
The supply of container ships is expected to increase by 4.3%/8.3% year-on-year in 2022/2023. As of May 31, global orders for container ships accounted for 26.2% of existing shipping capacity, a significant increase from 10.7% in January 2020. The main reason for the substantial increase in new shipbuilding orders is the high prosperity of the container shipping market in 2020-2021, the improvement of the industry's balance sheet and new environmental protection regulations, and old ships will face the risk of being phased out. We believe that this round of new capacity in the industry is mainly due to the tightening of regulations on environmental protection and carbon reduction. Container shipping companies have the main purpose of optimizing their own fleet structure rather than blindly expanding production capacity. According to Alphaliner's forecast, the industry's net ship supply growth rate in 2022/2023 will be 4.3%/8.3% (assuming the scrapping volume of old ships is 0.1%/0.2%), and the industry will face greater pressure on new supply in 2023. (Report source: Future Think Tank)
Dry bulk: Freight rates are expected to rise month-on-month during the peak season in the second half of the year; the supply and demand structure is improving, and the boom will continue in 2023
Since the beginning of this year, affected by the epidemic, China’s imported iron ore/coal demand has been weak, dragging down Dry bulk freight rates. From January 1 to June 10, the average value of the Baltic Dry Bulk Index (BDI) increased by 5% year-on-year; on the other hand, the small bulk market (grain, timber, steel, non-ferrous metals, etc.) performed well Eyes, the average value of the Baltic Handysize Shipping Index (BHSI) increased by 38% year-on-year. We expect that in the second half of the year, BDI and BHSI freight rates are expected to increase month-on-month, benefiting from seasonal peak season demand and China's infrastructure stimulus.
The supply and demand are basically good, and we are optimistic about the market outlook in 2023. Based on the improvement of the supply and demand structure, we believe that the dry bulk transportation market is still in the upward stage of the cycle in 2022-2023. As of May 31, the industry-wide new shipbuilding order backlog was 6.6%, and tight supply will support cyclical recovery. According to Clarksons forecast, supply growth in 2022/2023 is 2.2%/0.5% year-on-year (assuming a ship scrapping rate of 1%/1%) vs. demand growth of 1.4%/1.9%. In 2023, industry supply will further tighten, and market sentiment is expected to maintain a positive trend.
Highway: Post-epidemic economic reconstruction, resumption of work promotes travel heating
1H22 Review: The epidemic has dragged down passenger vehicle traffic, but has had little impact on truck traffic. Since the beginning of the year, the expressway sector has outperformed the Shanghai and Shenzhen 300 Index. From January 1 to June 17, 2022, the A-share SW Expressway Index fell 1.0%, outperforming the CSI 300 Index by 11.8pct and outperforming the SW Shipping Index by 3.6pct. Among them, the optimal time for the sector to obtain relative returns is from January to early April. At that time, the economic downturn, the decline of track stocks, and the Russia-Ukraine conflict made risk appetite favorable to high-dividend assets.From mid-April to mid-May, the epidemic had a greater drag on industry profits. The first quarter report performed poorly, and highways underperformed the broader market. From late May to the present, Shanghai’s epidemic relief and logistics guarantees have been promoted, and highways across the country have Online vehicle traffic continues to rebound, driving the recovery of highway stock prices.
The performance of individual stocks is divided. The market prefers companies whose profits are less affected by the epidemic and have high dividend rates. Among the stocks we covered, Guangdong Expressway A/ Shandong Expressway / Anhui Expressway /China Merchants Expressway rose 11.9/10.3/5.1/3.5%, Shenzhen Expressway A shares fell 6.7%; Shenzhen Expressway H shares/ Yuexiu Transportation Infrastructure rose 4.8/4.4%, while Zhejiang, Shanghai, Hangzhou and Ningbo fell by 2.4%. Among them, the first-quarter net profit attributable to parent companies of Shandong Expressway/Wantong Expressway increased by 19.7/15.3% year-on-year, benefiting from the increase in profits from the acquisition of assets from ; while China Merchants Expressway/Shenzhen Expressway/Zhejiang Shanghai-Hangzhou-Ningbo decreased by 11.7/23.7/11.8% year-on-year. %, traffic flow has been greatly affected by the epidemic. Companies with high dividend yields are favored by the market. The 2021 dividend rate of Shandong Expressway/Wantong Expressway/ Guangdong Expressway A reached 7.5/7.4/6.9% (closing day 2022/6/17), which is at a high level in the A-share expressway sector; Yuexiu Transportation Infrastructure/ The 2021 dividend rate of Shenzhen Expressway H shares reached 13.8/9.6% (closing day 2022/6/17), which is at a relatively high level among the sectors.
2H22 Outlook: The epidemic subsides and passenger flow is expected to rebound
At present, truck traffic has basically recovered, and passenger car traffic is expected to rebound quickly. Jiangsu Province is the region most affected by the current epidemic in Shanghai. In April, the traffic volume of Jiangsu Province's highway network dropped by 53% year-on-year. As of late May, the flow of export trucks on Jiangsu Province's highways had returned to the level before this round of epidemic. Nationally, compared with April 18, the national highway truck traffic volume increased by approximately 11.2% on June 1, and railway freight volume increased by 5.6%, both of which returned to around 90% of normal levels. Shanghai has fully resumed work and production since June 1, and the number of new daily COVID-19 infections in Beijing has dropped significantly. It means that the epidemic has crossed the "deep water zone". In June, passenger vehicle traffic on the national road network is expected to rebound rapidly.
We believe that: 1) the market's expectations for traffic volume have passed the most pessimistic stage; 2) the epidemic has subsided and the actual travel recovery stage is the buying point for absolute returns in the highway sector. The epidemic is an important variable affecting highway traffic flow. If the epidemic is cleared this summer, the highway traffic volume from July to August is expected to achieve year-on-year growth and exceed the same period in 2019 due to the superposition of business travel and tourism peak seasons. In August last year, a cluster of epidemics broke out in Nanjing and other places, which had a greater impact on travel, resulting in a low traffic base.
Railway: The bottom of high-speed trains is up, and coal freight is overweight
1H22 Review: Performance is under pressure due to the epidemic, but the market has expectations. Year to date, the railway sector has outperformed the Shanghai and Shenzhen 300 Index. From January 1 to June 17, 2022, the SW A-share Railway Index rose 0.9%, outperforming the CSI 300 Index by 13.6pct, and outperforming the SW Shipping Index by 5.5pct. Among them, the optimal time for the sector to obtain relative returns is from January to mid-April. The logic is similar to that of the highway. The economic downturn, the decline of track stocks, and the Russia-Ukraine conflict have made risk preferences favorable to high-dividend assets.From late April to mid-May, the railway industry's first quarter report performed poorly, with railways underperforming the market. From late May to now, as the epidemic in Shanghai has eased and logistics have been smooth, the stock price of the railway sector has recovered, with small-capitalization stocks significantly outperforming large-capitalization stocks.
A-share freight rail has performed better than passenger rail. Among the stocks we covered, Tielong Logistics/Daqin Railway rose/Guangshen Railway rose 5.4/3.9/0.9%, Beijing-Shanghai High-speed Railway fell 2.9%; Guangshen Railway H shares rose 6.0%. The epidemic has a greater impact on passenger traffic, but has a relatively small impact on freight traffic. The stock price trend basically reflects changes in profits. In the first quarter, Tielong Logistics' net profit attributable to its parent increased by 6.3% year-on-year, Daqin Railway/Beijing-Shanghai High-speed Railway's net profit attributable to its parent decreased by 18.1/31.6% year-on-year, and Guangshen Railway's net loss attributable to its parent expanded year-on-year.
1-May, the epidemic had a greater impact on railway passenger transport and less impact on freight transport. According to the National Railway Administration, the national railway passenger volume increased by 23% year-on-year from January to February and dropped by 36% compared with the same period in 2019. There is still a large gap between the scale of travel and that before the epidemic. Railway passenger volume in March/April decreased by 58.4/79.8% year-on-year, mainly affected by epidemic-related travel restrictions. In May, considering the large impact of the epidemic in Shanghai and Beijing, railway passenger traffic is expected to remain at the bottom. According to the National Railway Administration, the national railway freight volume from January to April increased by 4.0% year-on-year. According to China Railway Group, the national railway freight volume in May increased by 6.6% year-on-year, of which the thermal coal volume increased by 7% year-on-year. From January to May, the Daqin Line completed cargo transportation volume of 171.32 million tons, a year-on-year decrease of 2.33%. (Report source: Future Think Tank)
2H22 Outlook: Travel can be expected to resume, and the guaranteed supply of coal will benefit freight
High-speed rail passenger flow is expected to rebound quickly. Shanghai has been promoting the full resumption of work and production since June, and the number of new confirmed cases in Beijing has dropped significantly, which means that the epidemic has crossed the "deep water zone". Passenger traffic on the Yangtze River Delta and Beijing-Tianjin-Hebei high-speed rail is expected to recover quickly in June. To what extent high-speed rail passenger flow can rebound, we can refer to May 2021, the year when passenger traffic has recovered to the highest extent since the epidemic. In that month, the national railway passenger volume was 96% of the same period in 2019. Most domestic cities achieved "zero" of new confirmed cases, and the popularization of vaccinations also boosted travel confidence. If the epidemic in cities along the Beijing-Shanghai line is "cleared" in 3Q22, the passenger flow of high-speed rail is expected to rebound to or even exceed the level of the same period in 2019, which is expected to drive the stock price of high-speed rail to rebound.
Increased coal production and guaranteed supply will benefit freight transportation. At a full-scale video and telephone conference on May 30, China Railway Group raised its railway freight volume target for 2022 to about 3.9 billion tons, a year-on-year increase of about 5.0% (the previous target was 3.8 billion tons, a year-on-year increase of 2.1%). In the context of ensuring coal supply, the National Standing Committee on April 20 proposed a target of adding 300 million tons of new coal production capacity this year, which may increase railway transportation demand from 2-4Q. The China Railway Group pointed out that it will make good use of major freight channels and busy trunk lines such as Daqin, Tangbao, Wari, and Haoji to enhance the transportation capacity of electricity and coal to provide sufficient transportation capacity support for various regions to "face the peak summer". But at the valuation level, risk aversion may affect the allocation demand for high-dividend freight railroads.
Airport: Recovery depends on traffic, and disruption depends on business
1H22 Review: The attributes of public utility infrastructure are highlighted, and the relative benefits are obvious.
1H22 The local epidemic in my country has had an impact on aviation demand, and airport traffic has fallen sharply. However, my country's listed airports are mostly gateway hubs with developed hinterland economies and strong endogenous demand for aviation. They also have regional monopoly and public utility attributes. Before the epidemic, profit growth was stable and fluctuating. smaller. Although the epidemic situation in first-tier cities has been severe since March, and the share price of the airport sector has fallen with the market, overall, under the background of a weak market and the expectation that the epidemic will eventually subside, the share price of the airport sector has performed relatively steadily, with obvious relative returns. As of June 17, 2022, the CITIC Airport Index has outperformed the CSI 300 Index by 12.8pct year-to-date.
2H22 Outlook: Traffic will eventually pick up
Observation Since the outbreak of the epidemic in 2020, in 3Q20-4Q20 and after the Spring Festival in 2021, the domestic passenger throughput of Shanghai Airport, Baiyun Airport and Shenzhen Airport has exceeded the level of the same period in 2019. In addition, many overseas countries have gradually relaxed their COVID-19 prevention and control policies, promoting the gradual recovery of civil aviation.The U.S. Centers for Disease Control and Prevention (CDC) announced the lifting of domestic travel restrictions for fully vaccinated people as early as April 2021, and announced on June 10, 2022 that international passengers will no longer need to travel before boarding a flight to the United States. A negative COVID-19 test certificate is required. In the EU, the European Commission announced on May 17, 2022 that flights from all EU member states cannot force passengers to present nucleic acid test reports, vaccine certificates and entry health registrations before boarding.
According to data from the International Air Transport Association, civil aviation has recovered significantly in many regions around the world. As of April 2022, domestic route demand in the United States has recovered to 95% of the same period in 2019; European civil aviation demand has recovered to 80% of the same period in 2019. It can be seen that the demand for civil aviation at home and abroad still exists. Recently, my country's international routes have also resumed or increased operations, which may be a positive signal for the comprehensive recovery of airport traffic. We believe that after the epidemic eases or epidemic prevention policies are relaxed, the traffic of listed airports will quickly pick up.
needs to continue to demonstrate its non-aviation business monetization capabilities in the medium to long term. As the scale of airport traffic continues to increase, non-aeronautical businesses such as airport retail and advertising have become the key to achieving breakthroughs in airport profitability. After the outbreak of the epidemic, the duty-free business, which has the most obvious contribution to the non-aeronautical business of the hub airport, has been diverted through direct mail and outlying island duty-free channels. Whether it can return to the pre-epidemic period still needs to be observed. The proportion of commercial leasing revenue at Shanghai Airport has increased from 2019 to 2019. The proportion of concession retail revenue at Capital Airport has dropped from 33.2% in 2019 to 1.6% in 2021. However, the airport is exploring business growth such as taxed retail and may continue to demonstrate its non-aeronautical monetization capabilities.
The current valuation of the airport sector is reasonable, waiting for the stabilization of the epidemic and the recovery of international routes to be catalyzed, but the profit elasticity is weaker than that of aviation. For the airport sector, epidemic prevention and control and the liberalization of international flight policies are important catalysts, driving the recovery of airport profits. However, the aviation business cannot enjoy the profit flexibility brought by price increases, and is subject to the reduction of the voice of the duty-free business. Compared with before the epidemic, The improvement of public utility properties may lower the valuation level. However, in the long term, we still believe that the advantages of first-tier airport gateways are still obvious, my country's civil aviation demand continues to be strong, and the trend of traffic converging towards hubs remains unchanged.
Ports: Throughput in the second half of the year improved month-on-month, but year-on-year growth slowed down
1H22 Review: Weak market excess returns were significant
Since the beginning of this year, due to poor performance of the overall stock market, ports belong to the infrastructure defense sector, outperforming the Shanghai and Shenzhen 300. 2022 From January 1 to June 17, 2019, the Port (Shenwan) Index rose by 3.0%, outperforming the CSI 300 Index by 15.7 percentage points. Among them, the share price of SIPG (600018 CH) rose 8.2%.
2H22 Outlook: The impact of the epidemic is gradually recovering, but the growth rate of throughput is expected to slow down in 2022
In the first four months, affected by the epidemic, port throughput performed poorly; since May, cargo volume has gradually recovered. According to data from the Ministry of Transport, the cumulative cargo/foreign trade cargo/container throughput of national ports from January to May showed a year-on-year performance of -0.5%/-3.7%/+2.3%. The poor performance of throughput was mainly due to the high base in the same period last year and the impact of the epidemic. Since May, with the resumption of production and work, port throughput has gradually recovered. According to data from the China Ports and Ports Association, in early June (June 1-June 10), the container throughput of the eight major coastal hub ports increased by 2.7% year-on-year. Among them, the volume of foreign trade containers maintained a strong rebound, with a year-on-year growth of 7.7%; Domestic trade Container throughput fell 11.6% year-on-year. Port throughput is highly correlated with economic activity, and throughput growth will slow down in 2022. According to the IMF's latest forecast, global GDP growth is expected to decline from 6.1% in 2021 to 3.6% in 2022 and 2023. Among them, China’s GDP is expected to grow by 4.4%/5.1% in 2022/2023 (8.1% in 2021). The global and Chinese economic growth will slow down in 2022, which may restrain port throughput. We expect national port throughput to grow year-on-year or in the low single digits in 2022.
Urban passenger transport: affected by “working from home” and “flow restriction” measures
Under the epidemic, “working from home” and “flow restriction” measures in public places have dragged down urban passenger traffic.According to the Ministry of Transport, from January to April, bus/subway/taxi passenger volume in central cities dropped by 20.1/17.0/22.4% year-on-year, and online ride-hailing orders dropped by 19.2% year-on-year. Especially in April, clusters of epidemics broke out in many places across the country and "working from home" was advocated, as well as the limited opening of public places such as culture and entertainment, resulting in bus/subway/taxi/online ride-hailing passenger volume falling by 38.7/40.9/40.5 /37.4%. Looking forward to the second half of the year, the degree of recovery of urban passenger traffic is related to the epidemic. After the epidemic subsides, to what extent urban passenger traffic can rebound, we can refer to May 2021, which has seen the best travel recovery in the past two and a half years. In that month, the passenger volume of subways in central cities increased by 7% compared with the same period in 2019, and the passenger volume of buses and taxis recovered to 70% and 75% of the same period in 2019. The volume of online ride-hailing orders may be consistent with the changing trend of taxi passenger volume. (Report source: Future Think Tank)
Just-in-time logistics: The expansion of non-meal scenes has seized users’ minds
Urban epidemic prevention and control measures have different impacts on just-in-time logistics. In the first half of the year, clusters of epidemics broke out in many places across the country. Taking Shanghai/Jilin as an example, under the background of strict lockdown measures, restaurant closures may affect the demand for takeout delivery, and the supply of riders is also limited due to epidemic prevention measures in the place of residence. Taking Beijing as an example again, when the epidemic was at its worst, bus stops were canceled or suspended, and subway stations were closed, but this had little impact on riders who used electric vehicles as a means of transportation; restaurants were not allowed to dine in but takeout was allowed, and the city's demand for instant delivery did not be greatly affected. According to the National Bureau of Statistics, the total retail sales of consumer goods nationwide increased by 6.7% year-on-year from January to February (catering revenue increased by 8.9% year-on-year), but the total retail sales of consumer goods in March/April fell by 3.5/11.1% year-on-year (catering revenue decreased by 16.4/ 22.7%). Considering that catering takeout accounts for approximately 65% of orders in my country's instant delivery industry (2020; iResearch), the decline in national catering revenue may imply that the volume of takeout orders is also declining, but the latter may decline less than the former.
Under the epidemic, non-meal scenes (such as fresh food and supermarket retail) are expected to accelerate expansion. The epidemic has accelerated residents’ online consumption. During the epidemic, consumers have used intra-city retail (mainly fresh food and supermarket product delivery) and errand running (mainly delivery/pickup/buying/helping services) services more frequently. Consumers’ mental development may be The demand for intra-city delivery services will continue to be boosted in the long term. iResearch estimates that the CAGR (compound annual growth rate) of orders in the intra-city delivery industry from 2021 to 2025 is about 28%. With the popularity of "hourly delivery" and the penetration of new scenarios, non-meal delivery is expected to have a greater impact than takeout delivery. Growth potential. Referring to Meituan's 2021 annual report, the average unit price of food delivery is about 50 yuan; the unit price of fresh food home delivery and supermarket retail is usually more than 50 yuan. The average value of non-meal delivery is higher than that of catering takeout, and the degree of competition among delivery service providers is lower. We believe that the long-term gross profit margin level of non-meal delivery may be higher.
Analysis of key enterprises
China Southern Airlines A/H
1) The recovery of domestic demand supports the company's profit recovery. 2) After the epidemic, the introduction of aircraft in the industry is expected to slow down, which will drive continued improvement in industry supply and demand. 3) The company has scale and resource advantages on domestic routes. Combined with the full price increase of economy class, it will benefit from the flexibility of fares.
YTO Express
1) Based on policy stability + leading prices + user payments, we are optimistic about the mid-term boom in e-commerce express delivery. 2) Continue to optimize product and customer structure, and the international business is booming. 3) Post-epidemic repair + performance release + comparative advantage are threefold catalysts, and the valuation will be attractive after absorbing the impact of the epidemic and oil prices.
Juneyao Airlines
1) The recovery of domestic demand supports the company’s profit recovery. 2) Incremental quality improvement will help improve the company's profitability. 3) Carry out capital cooperation with China Eastern Airlines Group, and the cooperation with China Eastern Airlines is expected to gradually deepen.
Beijing-Shanghai High-speed Railway
1) Shanghai has fully resumed work and production, and combined with the summer peak season, travel demand is expected to continue to rebound. 2) High-speed rail price increases will open up room for long-term profit upside. 3) The new related-party transaction agreement has been re-signed, and the market's concerns about rising costs have been lifted.
Shanghai Airport
1) In the short term, as the epidemic in Shanghai is under control, the company's traffic bottoms out.2) The advantages of gateway ports remain unchanged, and international routes are expected to gradually pick up, promoting the recovery of the company's profitability. 3) Hongqiao Airport and other assets are expected to be injected into listed companies to improve overall efficiency and continue to provide increments for the company's profits in the medium and long term.
Zhongtong Express
1) Based on policy stability + leading prices + user payments, we are optimistic about the mid-term boom in e-commerce express delivery. 2) The company's pricing power is stronger than that of its peers, and the capital expenditure peak is coming to an end. 3) Post-epidemic repair + performance release + comparative advantages are triple catalyses, and the valuation will be attractive after absorbing the impact of the epidemic and oil prices.
Shenzhen Expressway H shares
1) The epidemic in the Pearl River Delta region has subsided, and highway traffic volume is expected to continue to rebound; 2) Environmental protection businesses such as wind power operations and solid waste treatment are in an expansion period; 3) High dividends are attractive. Target price 11.60 Hong Kong dollars, based on SOTP valuation: 1) We value the company’s equity holdings in listed companies based on market value; 2) For the company’s wind power business and solid waste treatment business, we give 14.1/14.0x 2022E PE, and The industry valuation center is consistent; 3) For the company's expressway and other businesses, we calculate based on WACC = 7.19%; 4) Considering the company's mixed business operations, we give a 30% multiple discount to the SOTP valuation.
SITC International
1) The company focuses on the container transportation market in Asia. Benefiting from the high prosperity of the container shipping market, profits have increased significantly. 2) The supply and demand structure of the industry will improve in 2022, and the increase in long-term freight rates is expected to further boost the company's profits in 2022; in the medium and long term, economic growth in the Asian region will be resilient and container trade demand will be solid.
Pacific Shipping
1) Benefiting from the high prosperity of the dry bulk shipping market, the company's profits have increased significantly. 2) The company’s small bulk cargo fleet ranks first in the world in terms of size and has high profitability elasticity; in the medium and long term, compared with the strong volatility of the bulk cargo market, the demand for small bulk cargoes is resilient
(This article is for reference only and does not represent our For any investment advice. For relevant information, please refer to the original report)
Selected report source: [Future Think Tank] Future Think Tank - Official website .
