(report producer/analyst: Shanxi Securities Li Kongyi)
1. Integration accelerates, the shipbuilding leader sets sail
.1 Continuous asset integration to build a military-civilian integrated assembly leader
"Focus on the main business + develop special new" to build a military-civilian final assembly leader.
In 1998, the company's predecessor, Hudong Heavy Machinery, was registered and established in Shanghai, and was listed on on , Shanghai Stock Exchange in the same year. Since its listing, the company has focused its business through continuous integration and has deepened its efforts in the shipbuilding industry to build a global leader.
1) The first major asset restructuring has built a basic business framework for civil products.
In 2007, China Shipbuilding Industry was established by Hudong Heavy Machinery to acquire civilian ship assets, and initially build a basic framework for "ship building + ship repair + supporting" for civilian products business. After that, in about five years from 2008 to 2012, China Shipbuilding Industry Corporation achieved a large number of technological and business breakthroughs and developed rapidly.
first went deep into the original main shipbuilding business, including Waigaoqiao Shipbuilding, which built a 300,000-ton FPSO ship, and became the world's top 3 shipyards with a breakthrough in specialization. Secondly, it expanded its specialization and built competitiveness. For example, China Shipbuilding Chengxi took the lead in making breakthroughs in the offshore industry with the repair of FPSO ships, and then conquered the highly automated large-tonnage dump ship modification technology, and set a historical record in the wind tower project field. Waigaoqiao was also under construction and successfully delivered 18,000teu, 21,000teu super-large container ship and the first domestic luxury cruise ship.
2) The second major asset restructuring is moving towards a military-civilian integrated assembly platform.
Company then carried out a series of asset integration. As China Shipbuilding Group injected military assets such as Jiangnan Shipbuilding and Guangshi International into the company, in 2019, the company completed the transformation from a pure civilian ship business to an integrated military-civilian ship assembly platform. Subsequently, the State-owned Assets Supervision and Administration Commission approved the recombination of China Shipbuilding Group and China Shipbuilding Heavy Industry Group . The company suspended further asset operations, but the company's position as the new group's ship assembly platform has not changed. The business systems of its holding subsidiaries under
overlap with each other, and each has its own emphasis.
At present, China Shipbuilding mainly holds 5 subsidiaries, among which China Shipbuilding Chengxi, Jiangnan Shipbuilding and Waigaoqiao Shipbuilding are 100% controlled by the company. The company's equity holdings in Guangzhou Shipbuilding International and China Shipbuilding Power are 51% and 64% respectively, which also reaches absolute holdings . The 5 major subsidiaries support China Shipbuilding's business framework, namely "ship business + offshore business + electromechanical equipment + power business".
The corresponding businesses of each subsidiary overlap. In addition to Jiangnan Shipbuilding, which mainly focuses on ship construction and repair businesses, the other companies involve multiple business segments - for example, China Shipbuilding Chengxi and Guangchuan International also produce related mechanical and electrical equipment in addition to shipbuilding business; Waigaoqiao Shipbuilding is also an important part of the company's offshore business; China Shipbuilding is the most important grasp of the company's power business and also engaged in mechanical and electrical equipment.
In the field of ship business, except for China Shipbuilding Power, the other four companies are involved, but each has its own focus:
1) Pure civil ships: Waigaoqiao and China Shipbuilding Chengxi are the first phase acquisition analyzed above, and only cover the civilian category. The main types of Waigaoqiao shipbuilding located in Shanghai include bulk ships, container ships and large cruise ships, while Jiangyin 's China Shipbuilding Chengxi are mainly bulk ships and wood chip ships.
2) Both military and civilians: Jiangnan Shipbuilding and Guangchuan International were in the third stage mentioned above, that is, during the civilian transformation of military and civilians, the production of both military and civilian products was injected into the company, and both military and civilian products were produced. For example, Jiangnan Shipbuilding military products were mainly missile destroyer . Guangchuan International's military products are now mainly supply ships and medical ships. In the civilian field, Jiangnan Shipbuilding was originally bulk cargo ship , and its technology adjustment and upgrading has now focused on super-large container ships, scientific research ships, liquefied gas ships and other ships with higher technical difficulty and stronger professionalism. B The cabin technology has achieved a breakthrough in the field of "bottlenecks", while the civilian ship type of Guangzhou Ship International is mainly oil tankers, which is leading in-depth research in the field, and the flexible oil tanker is at the top level in the world.
performance is expected to continue to recover, with sufficient production capacity but no significant improvement in profit efficiency, and may be expected to be improved through integration.
According to the company's revenue and growth trend since 2015, it can be seen that after the bottoming out of 2015-2018, it began to rebound sharply in 2019, with a year-on-year growth rate of 36.82%. Although the growth rate has slowed down since then, its performance in 2020 has almost doubled, and in 2021 it has accelerated to continue its growth trend - a year-on-year growth of 8.14%, achieving a total revenue of 59.74 billion yuan, more than three times that of the end of 2018.
combined with the order situation disclosed in the announcement, we can see the recovery of industry demand. At the end of 2021, the company held a total of 220 shipbuilding orders totaling 19.93 million dwt, including 132 civilian ship orders totaling 12.11 million dwt, 95 ship repair orders worth nearly 1.4 billion yuan, 772 diesel engine orders worth 6.74 million horsepower, offshore equipment orders worth 3.984 billion yuan, and application industry orders worth 2.424 billion yuan.
Company has sufficient production capacity, exceeding the annual planned tonnage of Minpin Ships and 36% of diesel engine horsepower. However, in terms of profitability, as of the end of 2021, the company's overall gross profit margin was 10.6%, basically the same as last year.
Among them, the ship repair business accounts for 78.35% of the main business revenue, contributing 50.09 billion yuan in revenue and 4.502 billion yuan in gross profit, with a gross profit margin of about 8.99%, slightly higher than 8.58% last year; the company's power equipment business has the highest gross profit margin, at 15.7%/+3.35pct, accounting for 9.62% of the total revenue with revenue of 6.147 billion yuan in 2021; the electromechanical equipment business contributed 6.37% of the revenue with 4.076 billion yuan, with gross profit margin in the middle, at 11.2%+4.2pct. In general, the gross profit margin of the main business is relatively low, and the proportion of revenue with higher profit levels still has room for improvement. The structural integration of the company's related assets is expected to significantly improve the overall profitability.
From the perspective of the company's business operation:
1) expense side, can see that the company's management/R&D/Sales/Financial Fee Rates in 2021 are 9.86%, 5.22%, 1.03%, and -1.27% in turn; except for the significantly reduced financial expenses after 2018, other expenses are generally in a normal and stable trend, among which, the management fee rate is the highest, between 7% and 12%. After a brief increase after the epidemic, it has declined. The R&D fee rate has been stable at around 5% in the past few years, indicating that the company has continued to pay attention to and invest in R&D.
2) Operating side, Inventory turnover days have been continuously increasing since 2019, and to 216 days in 2021, accounts receivable turnover days have basically fluctuated slightly over 24 days for many years, reaching 27 days in 2021, slightly higher than in previous years; the debt-to-asset ratio has rebounded since 2019, about 66.9%/+1.5pct in 2021; the net cash flow of operating activities /operating income is around 3.4% in 2021, which is about twice that of 2018-2019.
.2 The group took the lead in restructuring to provide more favorable conditions for the company's asset integration
1.2.1 The integration of listed companies has begun to enter a substantial stage
early equity changes laid the foundation for restructuring.
In the second half of 2018, the second in charge of China Shipbuilding Group and China Shipbuilding Industry completed the position exchange. Yang Jincheng, former deputy general manager of China Shipbuilding Industry
was appointed as the general manager of China Shipbuilding Industry , and Wu Yongjie, former deputy general manager and deputy secretary of the Party Group of China Shipbuilding Industry , Wu Yongjie, , served as the director, general manager and deputy secretary of the Party Group of China Shipbuilding Industry.
After China Shipbuilding has entered the total assembly assets of Jiangnan Shipbuilding and other shipbuilding in 2019 (step 1), the original plan of Step 2 China Shipbuilding Group plans to jointly establish China Shipbuilding Power Group with China Shipbuilding, and Step 3 China Shipbuilding Defense will replace assets with the 54.5371% equity of Huangpu Wenchong and 46.3018% equity of Guangzhou Shipbuilding International with the controlling stake of China Shipbuilding and China Shipbuilding Group held by China Shipbuilding and China Shipbuilding Group, which will be temporarily suspended due to the merger of China Shipbuilding and North-South Group. However, through a series of previous asset restructuring, it means that China Shipbuilding is the platform for the final assembly and listing of China Shipbuilding Group, China Shipbuilding Defense as the listing platform for China Shipbuilding Group's ship power, and China Shipbuilding Technology's general direction as the listing platform for China Shipbuilding Group's high-tech asset listing platform is basically finalized.
China Shipbuilding Industry Group's platform businesses form a rough correspondence with China Shipbuilding Industry Group. China Shipbuilding Industry Group merged with China Shipbuilding Industry Group to form China Shipbuilding Industry Group provides greater imagination space for the asset integration of listed companies.
Group's merged asset transfer and integration have begun to enter a substantial stage.
In July 2021, 9 listed companies including China Shipbuilding, China Shipbuilding Technology, China Shipbuilding Emergency, China Shipbuilding Defense, and China Heavy Industry issued a notice of free transfer of shareholder equity. China Shipbuilding Group indirectly controlled 50.42% of the equity of China Shipbuilding Group and became its indirect controlling shareholder.
In December 2021, China Shipbuilding Technology issued an announcement stating that its indirect controlling shareholder China Shipbuilding Group is planning major matters related to the company. At the same time, another listed company under China Shipbuilding Group, China Power , also issued an announcement stating that in order to further regulate the competition in its diesel engine business, it plans to jointly establish a joint venture with China Shipbuilding Group and China Shipbuilding.
The two companies are promoting capital operations at the same time. This is an accelerated integration of their listed assets after the restructuring of the two major shipbuilding groups "China Shipbuilding Industry and China Shipbuilding Heavy Industry".
In July 2022, according to the resolution and announcement of the China Ship Board of Directors, Zhang Yingdai will no longer serve as chairman and director of China Ship and will retire; Ji Jun will no longer serve as director of the company due to work transfer; the meeting added Sheng Jigang , Shi Weidong is a director of the company, and Mr. Shi Weidong was appointed as the general manager of China Ship.
Mr. Sheng Jigang is currently the deputy general manager and member of the Party Leadership Group of China Shipbuilding Group Co., Ltd. He has worked in the ship industry for a long time and has served as an executive in large shipbuilding companies such as Jiangnan Shipbuilding, Waigaoqiao Shipbuilding, and Huangpu Wenchong Shipbuilding. He has rich leadership experience.
General Manager Shi Weidong has rich experience in managing listed companies. From 1997 to 2016, he served as director of the board office, secretary of the board of directors, and deputy general manager of Jiangnan Heavy Industry Co., Ltd.; assistant general manager and secretary of the board of directors of China Shipbuilding Industry Co., Ltd.
We believe that with the in place of personnel adjustments, China Shipbuilding Group will likely accelerate the integration of ship assembly around its listed companies in the future. In order to solve the problem of competition among peers, it is also possible to package all of the group's ship assembly assets into a listed company. While the company has achieved a strong performance, it will achieve a double increase in valuation and performance.
1.2.2 The integration of the ship assembly platform may not be far away
0 The main problems in the current domestic shipbuilding industry are:
1) Shipbuilding capacity utilization detection index CCI: It has been low for many years, with overcapacity;
2) The global situation has changed significantly since the COVID-19 pandemic, and various pressures have driven the need to improve the concentration of the head and the advantage of scale. At present, we can see that the trend of orders to the concentration of the head is becoming more and more obvious, and my country's output growth rate is faster than other traditional advantageous countries.
From the perspective of my country's urgent need to gain competitiveness, the most difficult LNG field has also been broken through, which is the key direction for my country to acquire international competitiveness. my country's LNG core technology breakthroughs are mainly in , Hudong China Shipbuilding , which is an unlisted group asset.
The integration of China Shipbuilding Group's ship assembly business is accelerating.
At present, China's shipbuilding industry is mainly occupied by four shipbuilding groups, namely China Shipbuilding Group, COSCO Shipbuilding Heavy Industry, New Era Shipbuilding and Yangtze River Shipbuilding. There are two state-owned enterprises and two private enterprises. They basically occupy more than 90% of the national market share. Among them, China Shipbuilding Group is also the main manufacturer of my country's naval equipment.
ship assembly field, currently listed companies under China Shipbuilding include China Shipbuilding, China Heavy Industry and China Shipbuilding Defense; in terms of ship supporting facilities, the main ones include China Shipbuilding Technology and China Shipbuilding Defense.
The strategic orientation of first and later the army is to support naval construction with the help of civilian profit opportunities.
At present, China Shipbuilding has formulated a "three-step" high-quality development strategy before 2045, focusing on the four major industrial directions of defense industry, ship and sea industry, science and technology application industry, and proposed the development goal of building a world-class shipbuilding group.
By 2025, the gap between China Shipbuilding Group's goals and the world's leading level will be significantly narrowed, effectively supporting the Navy to achieve strategic transformation.
By 2035, China Shipbuilding Group will basically become a world-class shipbuilding group, and the new generation of naval weapons and equipment supply guarantee capabilities will be fully built; by 2045, China Shipbuilding Group will provide first-class equipment for building a world-class navy and become a global leader in the shipbuilding industry.
In the field of military ship under China Shipbuilding, Jiangnan Shipbuilding has the leading technical strength coefficient. A number of national heavy weapons such as domestic aircraft carriers, strategic nuclear submarines, amphibious landing ship , new destroyer , and Struggler manned submersibles were successfully developed and delivered. It may be similar, but the diesel engine business was the same as that of the time. Through the planning of the equity structure, the effect of integrating and utilizing the group's resources to the greatest extent.
According to the experience of CRRC , that is, China CRRC absorbs and merges China CRRC to carry out professional restructuring of related assets, three aspects need to be focused on:
First of all, the choice of the two parties to merge. If you learn from the CRRC model, you will take the current business overlapping more and in the face of a limited market. There may be bad competition, and mergers can obtain scale advantages and resource restructuring as the merger target;
The second is that in the selection of the dominant party of absorption and merger, the more advantageous party will be the dominant party. For example, the financial indicators such as CRRC at that time were higher than CRRC, and the advantages of CRRC in overseas market channels can just make up for CRRC's shortcomings; according to our above-mentioned integration judgment on the CRRC 's business, own Subsidiaries of core technologies such as LNG and military ships are expected to become active absorbers.
The implementation method of the three mergers is based on the current asset securitization orientation of state-owned enterprise reform, it is more likely to use existing A-share listed companies as the main body of the merged assets to conduct share exchange merger . If it is an unlisted asset, it is possible to complete the new establishment and reorganization by packaging and then listing as a whole.
If we learn from the case of Baowu , the difference between the restructuring of Baowu Group's is that the situation between the two before the restructuring is greater. If till the north and south vehicles are basically considered to be quite a part of the market, Baowu's merger was absorbed by Baosteel, which was ranked, assets and production capacity when Wuhan Iron and Steel 's performance declined sharply.
If China Shipbuilding Group and China Shipbuilding Industry Corporation adopt a similar restructuring plan, then first of all, in the selection and dominance of the merger, assets with poor performance and weak growth will be screened out in business areas with small space for technological iteration and industrial upgrading in the short term, and then concentrated them into the stronger assets under the same business area to achieve the effect of removing redundancy and improving efficiency.
Secondly, for the way and time of merger implementation, due to the lack of competitiveness, compared with the overall merger and listing of CRRC, it is more likely to choose to divest good assets and business parts, and become a new listed company with the absorber, and hold the unlisted part of the absorber as a holding subsidiary.
Finally, from the perspective of time nodes and investment returns, in Baowu's case, there were rumors of merger since the supply-side reform proposed steel capacity reduction in 2015, but it was not only for these two central steel enterprises. The market was difficult to determine the target entity for the merger during the speculation stage. Even 10 days before the announcement of the suspension of of the two , the senior management of the involved parties still publicly denied the relevant matters. We speculate that for such reforms, the matching of target assets is a major internal dispute point, involving specific and micro sub-industry details, and it is difficult to make judgments through external clues before the announcement is issued; but once the announcement is issued, the promotion will be faster than the case of CRRC, and the restructuring may be officially implemented within a few months, which will be faster for market investment. (Report source: Yuanzhan Think Tank)
2. A new round of shipbuilding industry is coming
The shipbuilding industry is a relatively long-term industry, and the economic cycle lasts for a long time.
So, what kind of performance does the shipbuilding market perform?
We believe that only the increase in volume and price can be considered a prosperous cycle. According to the existing data, from the number of newly received orders, delivery volume and new ship prices, we can roughly divide ship manufacturing over the past half century into three relatively complete cycles by time, each cycle has a period of economic cycle of up to five or six years and a adjustment cycle for the next decade.
First round (1968-1975-1985):
Starting in the late 1960s, with the continued prosperity of the global economy and rapid growth in trade after the war, the shipping and shipbuilding markets entered a super prosperous cycle. The 1967 war between Arabia and Israel led to the closure of the Suez Canal. In the past, ships that detoured the Suez Canal had to go far to the Cape of Good Hope. This situation brought huge opportunities to the global shipping industry. Subsequently, the sharp rise in oil prices led to a rapid expansion of the supply of in the shipping market, especially the tonnage of oil tankers. In 1964, the number of new ship orders received was only 20 million dwt, the growth rate was 43 million dwt in 1968. When the peak of this shipbuilding cycle reached 130 million dwt in 1973, the global economy was then deeply involved in stagflation and . The shipbuilding market also entered a long-term downturn. From 1974 to 1978, the new orders continued to be lower than the delivery volume, and it did not recover slightly until 1979 to 1981. The new ship price index even hit a new high after the peak in 1973.
Second round (1986-1991-2001):
Starting from the mid-1980s, as the world emerged from the haze of stagflation, the continued economic recovery brought about a new round of rapid growth in international trade . The shipping and shipbuilding market entered a new round of prosperity. In this cycle, the global shipbuilding new orders received was limited, but the new ship price index rose from 90 points in 1986 to 158 points in 1991, an increase of 75%. Then the price of new ships fell into a long-term downturn again, but the overall global shipbuilding new orders received in the 1990s continued to rise, and a new round of super-prosperity cycle began to brew.
The third round (2002-2008-2019):
2001 China successfully joined WTO , adding an important member to globalization, China's manufacturing industry began to integrate into the world, and China's economy and the world economy have integrated development, becoming one of the important engines to promote the development of the world economy.
Globalization is moving forward at a rapid pace, and the shipping and shipbuilding markets have entered a new super prosperous cycle. In 2001, the new orders received were about 48 million dwt. When it reached the high point of this shipbuilding week and period in 2007, the number of new orders received was as high as 274 million dwt, an increase of 4.7 times. During the same period, the new ship price index rose from 106 points to 186 points, an increase of 76%, which is basically the same as the previous round.
2009-2019, the overcapacity in the early stage and the global demand plummeted after the bursting of the financial crisis bubble. The shipbuilding industry experienced a decade-long trough. In 2009, the global new orders received were only 58 million dwt, a sharp drop of 67.8% year-on-year. In the following years, it gradually declined, and by 2016, the new orders received reached a bottom of 30 million dwt.
2016-2019, although new orders were still lower than the delivery volume, the price index of new ships did not hit a new low again, and a new round of prosperity began to brew again.
The fourth round (2020-2025?-2035?):
Starting from 2020, with the continued spread of the epidemic, the normal operation of the global shipping market has been greatly affected, with shortage of transportation capacity, and the continuous surge in container shipping prices, which has brought about a big explosion in demand for container ships. Container ship orders were the first to usher in explosive growth in 2021. The prices of new ships have risen month-on-month for 20 consecutive months, pushing the entire ship manufacturing industry into a new round of prosperity cycle.
According to the forecast of the China Shipbuilding Industry Association, "Looking forward to 2022, the uncertainty of the impact of the new crown pneumonia epidemic on the world economy still exists, and the external environment becomes more complex and severe, but the confidence of the shipping and shipbuilding industries has been significantly boosted. In addition, the new international maritime and environmental protection regulations are about to take effect and the market opportunities brought by decarbonization demand, it is expected that global new ship order demand will not shrink significantly in 2022, and the transaction volume will be around 90 million deadweight tons.
2022, it is expected that my country's shipbuilding completion volume will exceed 40 million, and the new order volume will decline to a certain extent."
.1 Maritime transportation is undoubtedly the best leading indicator for the shipbuilding industry
From the demand side, the prosperity of the ship manufacturing industry is mainly affected by economic cycles, international trade volume and global shipping market prosperity, and is also affected by ship renewal, showing strong cyclicality. International trade and maritime markets are undoubtedly the best leading indicators to observe the prosperity of the shipbuilding industry.
1990~2002, after accumulation and development since the 1980s, by the 1990s, Japan and Asian four little dragons economy had reached a high point of prosperity. The addition of emerging economies extended the distance between global maritime freight and promoted the growth of global maritime trade. The economic improvement slowly restored the sea industry to the upward cycle. However, overall, due to the limited scale of the demand side and the outbreak of the Asian financial crisis in 1997, the entire climbing trajectory of sea freight was relatively flat.
Since 2002, as China integrates into the process of globalization, the global shipping market has officially entered a super prosperous cycle.
2002-2007, the economies of emerging economies such as the four countries led by China have developed greatly. The rising new economies have become a new driving force for world growth. The supply and demand imbalance of crude oil has pushed up the steady growth of oil prices, especially on the eve of the 200 financial crisis, the growth rate reached a high point - in January 2007, the Brent crude oil 4.3/barrel, and by July 2008, the oil price reached US$133.87/barrel, an increase of 146.54%.
oil freight prices were the first to hit record highs in 2005, while dry bulk freight rates continued to hit record highs. Since then, the freight rates of the two have remained at high levels for quite some time.
Starting the first half of 2020, due to the impact of the epidemic, container capacity has been subject to various restrictions. However, demand has recovered rapidly due to the rapid recovery of economic stimulus in Europe and the United States, container freight rates have risen sharply, from around US$10,000 per day to US$85,000 per day within half a year. The average price of oil tankers has also risen twice. The freight rates of dry bulk carrier have also increased significantly, and the demand side of sea ships has begun to show signs of recovery.
From the perspective of the growth rate of maritime trade, dry bulk cargo, containers, oil and sea transportation have generally experienced a major trough in 2020, but it was quickly repaired and returned to positive growth in 2021. According to Clarkson's forecast, the growth rate from 2022 to 2023 is expected to continue to maintain a slight growth.
.2 The supply side is facing pressure to rise, and the bargaining power of shipyards is expected to continue to improve
From the supply side, looking around the world, in the past three cycles, each cycle has been accompanied by the shift in the shipbuilding industry and technological changes. In the first cycle since the 1960s, the world shipbuilding center was transferred from Europe and the United States to Japan, the second round was transferred from Europe and Japan to Japan, and the third round was transferred from Japan and South Korea to China and South Korea.
At present, Europe is still dominant in only a very small number of high-value-added ship markets and key supporting systems; Japan's overall market share has dropped to less than 10%, and it relies more on the domestic market, and overseas markets are basically divided by China and South Korea; South Korea's shipbuilding has long received government policies and financial support, and currently has a large competitive advantage in some high-end ship types, and has efficiently seized market share at low prices and high efficiency; China's shipbuilding has benefited from the dividends of economic development and is gradually transforming from a shipbuilding power to a shipbuilding power.
. In the current fourth ship cycle that has entered, only China's leading shipyards have the capacity expansion capacity.
The continued downturn between 2009 and 2020 has led to a large amount of production capacity being eliminated. The number of shipbuilding stations and docks with more than 10,000 tons in China has dropped from 736 in 2010 to 472. After the current land and labor costs have increased significantly compared with ten years ago, domestic shipyards are unlikely to expand significantly in the future. So far, China and South Korea have shown no signs of foreign transfer. The integrity of the industrial chain of Southeast Asian countries is significantly different from China. The requirements for ship technology and technology under the background of carbon neutrality have reached a new level. No country has the ability to undertake the transfer of the shipbuilding industry yet. This also means that in this new cycle, the release of shipbuilding supply side will be very slow. Even if the demand side of this cycle is ultimately weaker than the previous round, the profitability and sustainability of the leading shipyards will most likely exceed market expectations.
From the perspective of capacity utilization, China's shipbuilding capacity utilization monitoring index (CCI) between 2013 and 2020 continued to be below 700 points, which was in a cold range. Domestic shipbuilding companies have also experienced a long process of decapacity.
Until 2021, with the recovery of the global shipbuilding market, China's shipbuilding capacity utilization monitoring index (CCI) rose to 742 points, an increase of 64 points compared with 2020 and a year-on-year increase of 9.4%, and rebounded above the normal level for the first time since 2013.
In the first quarter, global container ship freight costs increased significantly, and new container ship orders increased explosively. Affected by the rapid rise in raw material prices, indicators such as main business income and profit margins of shipbuilding companies have dropped significantly month-on-month. At the end of the quarter, the CCI fell slightly to 652 points, down 26 points from the fourth quarter of 2020.
In the second quarter, the international shipping market continued to recover, the global new shipbuilding market continued to be active, and the prices of new ships steadily rebounded. Focus on monitoring shipbuilding companies' handheld ship orders rebounded for six consecutive months. The CCI gradually rebounded to 706 points at the end of the quarter, and has rebounded above the normal level for the first time since 2012.
In the third quarter, the international comprehensive freight index increased by 40.6% month-on-month, and the freight rates of container ships and bulk carriers continued to rise, focusing on monitoring shipbuilding companies' handheld ship orders rebounded to more than 90 million deadweight tons. The CCI rose rapidly to 752 points at the end of the quarter, the highest point in nearly nine years. In the fourth quarter, the international shipping market fluctuated and fell at a high level, and the new ship price index rose inertia. The key monitoring of shipbuilding companies with sufficient hand-held orders and full production tasks, but the company's efficiency decreased year-on-year. At the end of
html, CCI fell back to 742 points, a month-on-month decrease of 10 points, and remained in the normal range. Outlook In 2022/2023, the uncertainty of the impact of the new crown pneumonia epidemic on the world economy still exists, and the external environment remains complex and severe, but the confidence of the shipping and shipbuilding industries has been significantly boosted. Coupled with the imminent entry into force of new international maritime and environmental protection regulations and market opportunities brought by decarbonization demand, global demand for new ships will not shrink significantly and will remain at a certain scale. According to comprehensive analysis, CCI is expected to gradually rise in the next two years and remain fluctuating within the normal range.
3. China's ships are expected to usher in a double improvement in valuation performance
2009~2016, a large number of ship orders brought about by the economic prosperity before the 2008 financial crisis and the delivery peak in the following years. Coupled with the global economic downturn caused by the economic crisis of in the later period, the demand for shipping was sluggish. Although orders and delivery were repeated between 2016 and 2019, they remained at a low level overall, with volume and price reduction. Until the second half of 2020, with the recovery of the maritime market, the shipbuilding industry ushered in a new round of prosperity, and the company's profits are expected to usher in sustained and rapid growth from 202.
At the same time, after China Shipbuilding Industry Corporation and China Shipbuilding Heavy Industry Corporation were successfully reorganized into China Shipbuilding Group in 2019, they entered the asset integration period at the listed company level since 2021. China Shipbuilding Technology took the lead in integrating the group's wind power assets. It is expected that the integration of ship assembly assets will not be far away. As the core platform for ship assembly, China Ship is expected to usher in a Davis double-click.
.1 The company's performance has entered a period of continuous high growth
China Shipbuilding's core business is ship repair, including military ship and civilian ship departments. The company's marine engineering business has also been incorporated into ship repair since 2021, accounting for as much as 84% of the business structure in 2021. In addition, there are power equipment, electromechanical equipment and other businesses, accounting for 10.3% and 6.8% respectively.
Shipbuilding and repair business: Due to the sharp rise in sea freight prices, especially container freight rates, the prosperity of the shipbuilding industry has increased significantly. According to China Shipbuilding Industry Association data, in 2021, my country received 67.07 million dwt of new ship orders, and the cumulative year-on-year increase of 131.8%.
China Ship received a total of 132 civilian ship orders throughout the year, with a total of 12.1117 million dwt, achieving a year-on-year increase of about 100%; in 2021, the company's cumulative handheld orders were 22 ships, with a total of 19.9343 million dwtts.
Depending on the type of ship, the delivery cycle of ships varies greatly, usually between 16-36 months. With the significant increase in the number of new orders in 2021, we believe that according to the previous order situation and capacity status, the company's current order production cycle may have reached 2026.
Therefore, starting from 2023, new orders in 2021 have entered the batch delivery period, and the company is expected to achieve significant growth and maintain a high growth rate in the future.
At the same time, the price of new shipbuilding orders has continued to increase month-on-month since 2021. We speculate that the prices and profit margins of ships delivered by 2024 may be higher than in 2023. In terms of revenue, we expect the company's ship construction and repair business to expect the company's ship construction and repair business to increase the number of new ship orders delivered by the end of 2022. In 2021 and the first half of 2022, the main delivery of low-priced orders undertaken from 2018 to 2019 will be the delivery of small batches of high-gross profit orders starting from the fourth quarter of 2022, and it will achieve significant growth in 2023. Therefore, we expect the company's shipbuilding business to increase by 7.00%/32.00%/45.00% year-on-year in 2022-2024; in terms of gross profit margin, according to wind data, the average price of shipbuilding plates in 2021 has increased by 38% compared with 2020. Usually, the proportion of steel plates to shipbuilding costs is About 30%, the increase in the price of shipbuilding plates by 30% means the total cost will increase by about 10%. Considering the long-term cooperation between shipyards and upstream steel mills and the large procurement volume, we expect that the actual impact of the shipbuilding cost of Chinese ships will be less than the calculated situation. In 2021, the gross profit margin of the company's shipbuilding business dropped from 9.27% in 2020 to 8.99%, which is a slight range. The gross profit margin of the construction business is mainly related to the price of new ships. We expect the gross profit margin of the shipbuilding business in 2022 will rebound slightly, and is expected to rise to around 10%. The ships delivered from 2023 are mainly ships signed this year. According to Clarkson, the new ship cost index this year has increased by 22.4% year-on-year. We speculate that the company's gross profit margin will increase significantly in 2023.
Therefore, we assume that the company's ship repair gross profit margins will be 10.2%/11.5%/14.8% respectively from 2022 to 2024.
Figure 15: Shipbuilding plate price in 2008-2022
Power equipment business: From 2018 to 2020, the company's power equipment business continued to decline, but with the recovery of the shipbuilding industry in 2021, power equipment increased by 69.6% year-on-year, but the gross profit margin fell sharply, which is highly likely related to the settlement cycle. We expect the increase in power equipment business in 2022-2024 to be similar to shipbuilding business, with gross profit margins of 15.2/16.3%/16.5% respectively. .
Mechanical and Mechanical Business: Electromechanical equipment has maintained rapid growth overall in the past few years, with a growth of 27% in 2021. We expect the electromechanical sector to continue to maintain rapid growth from 2022 to 2024, with the expected revenue growth rate of 20.00%/25.00%/25.00% respectively. The gross profit margin refers to historical situation and has a large fluctuation. On the grounds of caution, we expect the gross profit margins from 2022 to 2024 to be 10%/11%/11.5% respectively.
.2 Report summary
With the recovery of the prosperity of the shipbuilding industry, the upward trend of new ship orders in 2021 is obvious. Although there was a decline in the first half of 2022, the new ship price index continues to rise. China Shipbuilding (Hudong Zhonghua is not listed company) accounts for about 20% of the national market share, which will continue to benefit from the recovery of the industry and the upward prosperity.
Due to the strong cyclical nature of the shipbuilding industry, new orders in 2021 showed a significant bottom upward trend. The industry has experienced many years of sluggish periods, but referring to the previous two cycles, the upward trend of orders is not linear. After the long-term downturn of the industry, the sudden explosion of orders will lead to huge differences in expectations of shipowners and shipyards. Subsequent orders will generally decline for a short period of time, but because demand has risen, the prices of new ships can often continue to rise.
2021 The company's new shipbuilding orders and handheld orders both increased significantly, indicating that China's shipbuilding as the industry leader has strong strength in the period of industry recovery.
At the same time, since the orders in 2021 are mainly concentrated on container ships, based on the current fleet's age and the increasingly strict environmental protection requirements, we believe that orders for oil transport tankers and dry bulk carriers will be gradually released in the near future, and the shipbuilding market is expected to continue in the next 2-3 years.
Referring to the company's historical PB and PE situation, the fluctuations in Chinese ship PE are very large, and there is no obvious trend, while the PB is relatively smooth, and it is obvious that the rapid increase in PB during the economic stage is obvious. At the same time, referring to comparable companies, we chose our main business for ship repair, and also had shipbuilding business. Listed companies include China Heavy Industry, China Shipbuilding Defense, Jianglong Boats and Asia Star Anchor Chain. It can be found that due to the influence of the industry cycle, China Heavy Industry and Jianglong Boats have very low market attention. There is basically no researcher coverage on WIND recently, and there is no corresponding profit forecast. From the perspective of valuation, it is significantly higher than that of Chinese Ship.
Overall, the ship manufacturing industry has come out of a downturn and is marching towards a prosperous stage. For ship manufacturing companies, the profitability of the company is hugely different during the recession period and during the prosperous period. Orders in 2021 will mainly start delivery in 2023. At the current point of time, the company's profit is about to usher in the release period. We expect China's ship revenue from 2022 to 2024 to be 65.31, 86.07 and 108.97 billion yuan, respectively, an increase of 9.32%, 31.79% and 26.61% year-on-year; net profit attributable to shareholders is 992, 2.596 and 5.981 billion yuan, an increase of 364%, 162% and 130% year-on-year, corresponding to EPS RMB 0.22, 0.58 and 1.34, PE is 88, 34, 15 times.
4. Risk increases
Global economic recession and stagflation risks:
In the context of international geopolitical conflicts and repeated invasions of the epidemic since the beginning of this year, global market confidence is insufficient, international decoupling risks intensify, economic liquidity and downward risks continue, the world is facing the reorganization of the political situation and industrial chain structure, and the risk of stagflation in Europe and the United States is rising, and beware of the chain reaction of economic recession and stagflation.
cost side faces price risks:
1) Bulk raw material price risks: Since last year, international commodity prices have continued to rise, while ship construction and offshore engineering projects require metal bulk raw materials such as steel;
2) The company has a lot of overseas projects and foreign currency settlement orders. The unstable international environment increases the probability of exchange rate fluctuations beyond expectations, which may have a negative impact on performance and profits.
The epidemic continues to expand the risk:
The domestic epidemic has repeated many times this year, invading Guangdong, Shanghai, Beijing and other places one after another, causing a large number of manufacturing industries to stagnate, poor logistics, and the suspension of key transportation hubs across the country to reduce travel across the country. Although the country has gradually returned to normal track, BA5 has made a comeback overseas, and we still need to be wary of the counterattack of the epidemic, which has led to the hindrance of normal business activities and the promotion of integration.
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