CCB International released a research report stating that the initial “superior to the market” rating was given to China Shipbuilding Defense (00317). Referring to the 2001-2010 cycle, the target price was HK$14 based on a net market ratio of 1.0 times. The bank said that due to the shipbuilding industry's boom cycle, rising new ship costs, and benefiting from its technical advantages and sufficient on-hand orders of RMB 60 billion, its profits will enter an explosion period. It predicts that China Shipping Defense's net profit for 2025 and 2026 will be RMB 0.8 billion and RMB 1.15 billion, respectively. As China continues to expand its share of the new ship market and enhance its high-end manufacturing capabilities, China Shipbuilding Defense will also benefit in the long term.
According to CCB International, China Shipbuilding's defense orders are full, and rigid production capacity supports the prospects for ship prices. By the end of 2024, Huangpu Wenchong, a subsidiary of China Shipbuilding Defense, and Guangzhou Shipbuilding International each had orders of about 4 million DWT, which is enough to cover construction requirements until 2028. China's cost advantage and RMB exchange rate advantage will help the company obtain new ship orders in the future. Furthermore, even if new orders fluctuate, the bank expects that the rigidity of production capacity will keep the price of new ships high. China Shipbuilding Defense's R&D investment and technology upgrades enable it to expand new shipping markets such as medium-sized container ships, and improve order quality and profitability.
The bank also indicated that the stock price correction brought opportunities. Due to issues such as the restructuring of the parent company, the stock price has recovered significantly since 4Q24. The bank believes that the company's fundamentals are still strong, and expects that as its profits improve, negative sentiment will gradually dissipate and stock prices will resume their upward trend.
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