Zheshang Securities released a research report stating that the shipbuilding industry is still in a stage of structural recovery, with container ships and LNG ships leading the recovery. Later, oil tankers and bulk carriers, which are the main types of ships, are expected to take over, and the upward trend of the industry is clear. Moreover, the bottleneck of supply will continue to push up ship prices. As high-priced and high-quality new ship orders enter the concentrated delivery period, the rapid release of performance in the next 2-3 years will provide strong support for the sector. At the same time, the rapid increase in China's shipbuilding market share is expected to further increase the elasticity of the leading performance during the uptrend period. External sudden shocks leading to shipping rate increases are expected to drive the recovery of shipowners' profits, and the favorable shipbuilding and container orders will continue to recover.

Recommended stocks include China CSSC (600150.SH) (the world's leading shipbuilding industry is expected to benefit from the industry's uptrend and performance will gradually be released), China International Marine Containers (000039.SZ) (container recovery and the decline in the business of the marine engineering sector) and China Shipbuilding Industry Group Power(600482.SH) (a leading company in the ship power system, with expected diesel engine performance elasticity); other companies in the shipbuilding industry chain are also expected to fully benefit.

Zheshang Securities' main points of view are as follows:

The global shipbuilding market: the new ship price index continues to rise, and the new orders for container and bulk carriers have increased significantly compared to the previous month.

Price: The new ship price index continues to rise, and the secondhand ship price index has significantly increased. In June 2024, the global new ship price index reached 187.2 points, a year-on-year increase of 9.5% and a month-on-month increase of 0.4%. Among them, the new ship price index for container ships, bulk carriers, tankers, and gas ships were 114.4, 173.6, 223.1, and 204.9 respectively, with year-on-year increases of 9.3%, 6.2%, 8.7%, and 9.4%, respectively, and month-on-month increases of 0.5%, 0.5%, 1.4%, and 0.1%. The new ship price index for the four major types of ships has increased significantly. As far as the secondhand ship price is concerned, the global secondhand ship price index in June 2024 was 179.9 points, a year-on-year increase of 18.3% and a month-on-month increase of 3.8%.

In terms of orders on hand and capacity: the hand-held orders-to-capacity ratio of bulk carriers and tankers remains low. As of June 2024, the global ship hand-held orders totaled 0.296 billion DWT, a year-on-year increase of 14.16% and a month-on-month decrease of 1.19%; the hand-held orders-to-capacity ratio for global ships is 12.45%, among which, the hand-held orders-to-capacity ratios for container ships, bulk carriers, and tankers are 19.77%, 9.49%, and 10.50%, respectively. The hand-held orders-to-capacity ratio of bulk carriers and tankers is lower than that of global ships, ranking in the 21.8% and 27.0% percentile since 2005.

In terms of the type of ship products, as of June 2024, the container ships delivered by China reached 4.24 million CGT, accounting for 49%, and are expected to increase sharply by 47% for the whole year; bulk carriers accounted for 22%, tankers accounted for 24%, container ships accounted for 13%, and gas ships accounted for 22% among new ships. Tankers, container ships, and gas ships are expected to increase compared to the previous year, and new orders are expected to be strong.

China's new contract signed orders reached 6.046 million DWT, accounting for 85.7% of the total. In terms of the amount of new contract signed orders, the global ship's newly signed contract orders were US$7.628 billion in June 2024, a year-on-year decrease of 42.16% and a month-on-month decrease of 44.05%; among them, the new contract signed orders for tankers were US$1.737 billion, a year-on-year decrease of 19.28% and a month-on-month increase of 16.95%. China's new contract signed order amount reached US$5.735 billion, accounting for 75.2%.

China's shipbuilding industry: The delivery speed of container ships is accelerating, and new orders for oil tankers, container ships, and gas ships are expected to increase throughout the year.

According to Clarkson data, as of June 2024, China's shipbuilding delivery volume reached 21.5 million DWT in terms of deadweight tons, its hand-held volume reached 174.1 million DWT, and its new intake reached 34.1 million DWT by the end of May. China's shipbuilding delivery volume, new order intake, and hand-held order volume accounted for 53%, 61%, and 52% of the world market share according to the CGT caliber.

In terms of ship product types, as of June 2024, container ships delivered by China reached 4.24 million CGT, accounting for 49%, and are expected to increase sharply by 47% for the whole year; bulk carriers accounted for 22%, tankers accounted for 24%, container ships accounted for 13%, and gas ships accounted for 22% among new ships. Tankers, container ships, and gas ships are expected to increase compared to the previous year, and new orders are expected to be strong.

In terms of industry concentration, the top 10 shipyards in China accounted for 67.4% of the completed shipbuilding volume in the first quarter, and the top 10 in terms of new orders accounted for a combined 61.2%. Yzj Shipbldg Sgd continued to rank first in terms of new orders, while Shanghai Waigaoqiao Free Trade Zone Group and Jiangnan Shipyard, both subsidiaries of China CSSC, were among the top ten in terms of new orders.

Risk Warning: Fluctuation risk of major raw material prices; risk of downturn in shipping market sentiment.