Investment Rating - The report assigns an "Outperform" rating to CSSC Offshore & Marine Engineering with a target price of HKD 14.00, indicating a potential upside of approximately 53% from the current price of HKD 9.11 [5][9]. Core Insights - CSSC Offshore & Marine Engineering is positioned to enter a profit explosion period due to the shipbuilding industry's cyclical recovery, rising new ship prices, and a strong order backlog of RMB 60 billion, with projected net profits of RMB 800 million and RMB 1.15 billion for 2025 and 2026, respectively [1][2]. - The company benefits from a robust order book, with subsidiaries holding around 4 million deadweight tons of orders sufficient to meet demand until 2028, supported by China's cost advantages and currency strength [2][9]. - The stock price has seen a significant correction since Q4 2024 due to issues related to the parent company's restructuring, but the fundamentals remain strong, and the report anticipates a recovery in stock price as earnings improve [2][9]. Financial Forecasts and Valuation - Revenue projections for CSSC Offshore & Marine Engineering are as follows: RMB 12.8 billion in 2022, RMB 16.1 billion in 2023, RMB 21.2 billion in 2024, RMB 24.8 billion in 2025, and RMB 28.1 billion in 2026, reflecting a compound annual growth rate (CAGR) of 16.9% from 2025 to 2026 [3]. - Net profit forecasts show a dramatic increase from RMB 688 million in 2022 to RMB 1.15 billion in 2026, with a notable recovery from a low of RMB 48 million in 2023 [3]. - The report suggests a price-to-book ratio of 1.0 times for valuation, aligning with historical trends from 2001 to 2010, and indicates that the stock is currently undervalued [2][9].
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