\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 685 Cssc Offshore & Marine Engineering (Group) Company Limited(600685) )
Event: on March 31, the company released its annual report for 2021. During the reporting period, the company realized an operating revenue of 11.672 billion yuan (+ 0.54%); Net profit attributable to parent company: 79 million yuan (- 97.83%); The net profit deducted from non parent company is – 51 million yuan. The comprehensive gross profit margin is 10.23% (+ 3.74pcts).
Key investment points:
The number of orders received increased significantly, and the actual profitability increased steadily
In 2021, the company achieved an operating revenue of 11.672 billion yuan (+ 0.54%); The net profit attributable to the parent company was 79 million yuan (- 97.83%), a year-on-year decrease of 3.583 billion yuan, mainly due to the impact of non operating profits and losses; In 2020, the company disposed of part of the equity of Guangzhou shipbuilding international and lost the control of Guangzhou shipbuilding international. The remaining equity was measured at fair value, resulting in a total investment income of 3.390 billion yuan; The disposal of CSSC Chengxi Yangzhou Shipbuilding Co., Ltd. resulted in an equity gain of 322 million yuan. The net profit deducted from non parent company was – 51 million yuan and the loss was 232 million yuan. The company’s asset impairment loss in the current period (99 million yuan, – 64.29%) decreased significantly.
With the recovery of the global shipbuilding industry in 2021, the company achieved operating orders of 32.524 billion yuan, a year-on-year increase of 248.3%. Meanwhile, on September 30, 2021, the company disclosed that its subsidiary Huangpu Wenchong had signed a contract of US $1043 million, with us $207 million fulfilled in 2021 and US $837 million to be fulfilled. In addition, the company disclosed that the amount of revenue corresponding to the performance obligations that have signed contracts but have not been performed or completed at the end of 2021 is 43.658 billion yuan, of which 9.595 billion yuan is expected to be recognized in 2022. We judge that the company’s main business shipbuilding business has full orders. Although the ship manufacturing cycle is relatively long, not all orders may be completed in 2022, it will have a positive impact on the company’s business revenue scale and profit in 2022 and 2023.
The revenue of special ships grew rapidly, and the gross profit margin of bulk carriers and container ships rebounded sharply
In terms of business, the company’s main business can be divided into shipbuilding business, steel structure engineering business, marine engineering business, ship repair business, electromechanical products and other businesses. The details are as follows:
\u3000\u30001. Shipbuilding business is the main revenue source of the company. In 2021, the operating revenue was 9.192 billion yuan (- 2.83%), which decreased slightly, mainly from 2020, including the revenue of Guangzhou shipbuilding international from January to February. The gross profit margin (9.22%, + 5.59pcts) is significantly higher than the gross profit margin of 3.63% in 2020.
\u3000\u30002. The business income of steel structure engineering (1.637 billion yuan, + 0.89%) increased slightly, and the gross profit margin (10.68%, + 0.86cpts) increased slightly.
3. The revenue of marine products is 356 million yuan, the 20-year revenue is – 292 million yuan, and the gross profit margin is (0.69%, + 0.35pcts).
4. The revenue from ship repair business (124 million yuan, – 72.45%) decreased significantly, mainly because the completion of ship repair of the company in 21 years decreased significantly compared with 20 years, and the gross profit margin (7.87%, – 10.59 PCTs) decreased, mainly because of the adjustment of product structure and the increase of cost.
5. The revenue from mechanical and electrical products and other businesses (145 million yuan, – 8.47%) decreased slightly, and the gross profit margin (36.52%, + 1.63 PCTs) was the highest among all categories of businesses of the company.
The company’s expenses changed greatly in 2021, among which the sales expenses (RMB 132 million, + 837.23%) increased significantly, mainly due to the large number of ships completed in 2021 and the large increase of warranty fees accrued; Financial expenses (- 41 million yuan, – 270.99%) decreased significantly, mainly due to the decrease in net exchange loss caused by exchange rate changes in 2021; Management expenses (RMB 484 million, – 5.65%) decreased slightly, mainly because the data of 2020 include the data of Guangzhou shipbuilding international from January to February; R & D expenses (617 million yuan, + 4.59%) and R & D expense ratio (5.29%, + 0.2pcts) show that the company continues to increase R & D efforts in 2021.
In terms of cash flow, the net increase of the company’s cash and cash equivalents (- 302 million yuan, + 93.92%) was significantly higher than that of last year, but it was still negative. Among them, the net cash flow from operating activities increased significantly, from -1.024 billion yuan in 2020 to 4.365 billion yuan, the highest since the release of the data, with obvious improvement, mainly due to the large amount of ship progress payment received in 21 years.
In terms of other data, at the end of the reporting period, the company’s contract liabilities (RMB 9.349 billion, + 80.75%) increased significantly.
The company’s main shipbuilding business involves the Growth Logic of military and civil ship construction, and the performance is expected to be further realized during the 14th Five Year Plan period
Shipbuilding business is the most important business of the company. In 2021, the operating revenue of shipbuilding business accounted for 78.76% of the company’s total revenue. The company adopts the mode of military civilian joint construction, complementary advantages and rapid development with reform and innovation as the driving force and integration, performs the primary responsibility of protecting the army, fully undertakes military tasks, and grasps the recovery trend of military civilian ship market at the same time. The company is mainly in the process of final assembly and construction in the shipbuilding and offshore engineering industry chain. At the front end of the industry chain, it has been extended to ship and sea supporting products, and at the back end of the industry chain, it has been extended to ship life-cycle guarantee.
In terms of military products business, the company is a large backbone shipbuilding enterprise subordinate to China Cssc Holdings Limited(600150) group and a national core military production enterprise. The holding subsidiary Huangpu Wenchong was founded in 1851 and has a military industry history of more than 130 years. It is the main construction base of Chinese military ships, special engineering ships and marine engineering; The company’s main military products include defense equipment products represented by military ships, marine police equipment and official ships. It is the most important military ship production and support base in South China and an important official ship construction base in China. We believe that the naval force is an extremely important point in China’s national defense force and China’s arms construction. In the white paper “China’s national defense in the new era”, it is defined as “playing a very important role in national security and overall development”. The construction of military ships is of great significance to sea power and the great rejuvenation of China and the Chinese nation. With the improvement of China’s economic, military and other hard power, it is undoubtedly in China’s national interest to develop into ocean going and blue water navy. China’s one belt, one road China Maritime Silk Road Construction and the protection of the navigation freedom of the Malacca Straits, which are extremely important to China’s maritime transport, all need China’s support for a strong ocean blue water navy. This is also a crucial defense line for protecting China’s overseas economic interests and people’s safety. Undoubtedly, it is the most powerful factor in the process of building military ships.
In terms of civilian ship business, the company has characteristic products such as feeder container ships, dredging dredgers and other high value-added products such as scientific research ships; At the same time, it has the core technology of independent intellectual property rights of special ships and other ships. The company is in a leading position in the field of multi-functional deep-water survey ships, feeder container ships and dredging engineering ships. Especially in the field of bulk carriers, the gross profit margin of bulk carriers of the company reached 28.59% (+ 20.15pcts) in 2021, with a significant increase, mainly due to the improvement of the shipping market and the increase of the price of new main ship types. According to the company’s 2021 semi annual report, in the first half of the year, the price of some bulk carriers and container ships increased by more than 20% in total; At the same time, the company actively invested in the research and development of bulk carriers. During the reporting period, the development expenditure of the company on the bulk carrier project includes the research on the key technology of the design and construction of 85000 ton new Panamax bulk carrier of 215965 million yuan, the research on the key technology of the design and construction of 95000 ton bulk carrier of 151796 million yuan and the research on the optimization and upgrading of 85000 DWT bulk carrier of 3.3249 million yuan.
In the field of container ships, the gross profit margin reached 9.24% (+ 18.26pcts) in 2021, and the price of some new container ships increased by more than 20% in the first half of the year; At the same time, the 1900teu and 3000teu branch line containers independently developed by the company have been recognized by the market, and science and technology drive has formed a support for business development. The branch line container ships of the company are high value-added ships. At the same time, the company has become the largest and strongest production base of branch line container ships in China.
For China’s civilian ship market, we believe that there are two main growth logics at present. First, the next business cycle of the civilian ship market may be coming. From the perspective of ship age, the peak delivery period of the last round of new ships is 20032011. At present, when the ship age is aging for nearly 20 years, it can be predicted that the alternation period of ships is coming; Second, there is an obvious trend for China to move forward to the field of high-tech shipbuilding industry. The China Cssc Holdings Limited(600150) industry is moving forward from low value-added ship type to high value-added ship type. In the future, the gross profit margin of civil shipbuilding industry is expected to increase as a whole.
Investment suggestions:
In 2001, the company’s actual profitability was improved, and the company’s current main business orders were full. In 2021, the company achieved operating orders of 32.524 billion yuan, a year-on-year increase of 248.3%; By the end of 2021, orders on hand amounted to 43.658 billion yuan, of which 9.599 billion yuan is expected to be converted into revenue in 2022. As the main construction base of Chinese military ships, special engineering ships and offshore engineering, the company has a stable position in the industry. We believe that the overall certainty of the company’s future performance is high.
The Growth Logic of the company’s main shipbuilding business is obvious, and the performance is expected to be further realized during the 14th Five Year Plan period Military ship business is accompanied by the demand for naval equipment construction brought by the protection of China’s overseas economic interests and people’s security; With the possible boom cycle of the civil ship market and the progress of China’s shipbuilding industry towards high value-added ship types, the civil ship business supports the continuous growth of the company’s main business performance.
The integration process of China shipbuilding group was further promoted. At the same time, China Shipbuilding Group issued the letter of commitment on avoiding horizontal competition with China Shipbuilding marine defense and Equipment Co., Ltd. on June 30, 2021, promising to steadily promote the integration of relevant assets and businesses that meet the requirements of being injected into listed companies, so as to solve the problem of horizontal competition.
Based on the above point of view, we predict that the operating revenue of the company from 2022 to 2024 will be RMB 11.881 billion, RMB 12.186 billion and RMB 12.583 billion respectively, the net profit attributable to the parent company will be RMB 98 million, RMB 138 million and RMB 260 million, and the EPS will be RMB 07 million, RMB 10 million and RMB 18 million respectively. The target price of 20242022 is 116.00 times and the target price of 20222022 is 300.00 times.
Risk tip: the scene of ship market is not as generous as expected, and the prosperity of marine industry is not as good as expected.
