Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][8]. Core Views - The company is positioned to benefit from the global shipbuilding cycle and its own capacity release, with projected net profits for 2025-2027 at 1.1 billion, 1.7 billion, and 2.8 billion CNY respectively, corresponding to PE ratios of 18, 11, and 7 times [8]. - The current market capitalization to order book ratio stands at 0.42 times, significantly below the 10-year average of 0.53 times, indicating a historical low valuation [8]. - The company is expected to see a substantial increase in production in 2028 compared to 2027, with significant growth in order volumes and profit margins anticipated [7][8]. Summary by Sections Company Overview - The company is a listed entity under the China Shipbuilding Group, primarily engaged in shipbuilding, marine engineering, and electromechanical equipment manufacturing, with shipbuilding as its core business [7]. - The company’s revenue from shipbuilding accounted for 92% of total revenue in the first half of 2025 [7]. Market Dynamics - The shipbuilding industry is experiencing a tight supply-demand balance, driven by the need to replace aging vessels and the impact of new environmental regulations [7]. - The report notes a shift in sentiment in the Chinese shipbuilding market, with new orders rebounding after a period of decline due to trade tensions [7]. Financial Projections - Revenue projections for the company are as follows: 16.146 billion CNY in 2023, 19.402 billion CNY in 2024, 21.727 billion CNY in 2025, 23.820 billion CNY in 2026, and 29.047 billion CNY in 2027, with growth rates of 26.2%, 20.2%, 12.0%, 9.6%, and 21.9% respectively [6]. - The company’s gross profit margin is expected to improve from 6.1% in 2023 to 16.6% in 2027, reflecting enhanced profitability [6]. Competitive Landscape - The report emphasizes the importance of addressing competition within the China Shipbuilding Group, with commitments made to resolve competitive issues within five years [7]. - The company’s core shipyards, Huangpu Wenchong and Guangzhou Shipyard International, are highlighted as key assets with significant production capabilities [7][33]. Order Book and Production Capacity - The report indicates that the company’s order book is robust, with significant increases in production capacity anticipated for 2028, driven by high-value orders and favorable cost conditions [7][8]. - The company is expected to maintain a leading position in the market, with a focus on environmentally friendly ship designs and technologies [38].

Core Viewpoint - The merger between China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Corporation (CSSC) marks a significant consolidation in the Chinese shipbuilding industry, with the approval from the China Securities Regulatory Commission (CSRC) and the upcoming stock suspension indicating a major shift in the sector [1][2][5]. Group 1: Merger Details - The merger involves a share swap where CSSC will absorb CSIC, leading to CSIC's delisting [1]. - The dissenting shareholders of both companies have the option to cash out at prices of 30.01 CNY per share for CSSC and 4.03 CNY per share for CSIC, totaling approximately 5.56 billion CNY and 13.02 billion CNY respectively [1]. - The merger is expected to enhance resource synergy and operational efficiency within the shipbuilding sector [2][4]. Group 2: Financial and Operational Impact - Post-merger, the combined total assets of CSIC and CSSC are projected to exceed 400 billion CNY, surpassing the 300 billion CNY asset scale of the previous "South-North Train" merger [4]. - For the year 2024, CSIC and CSSC are expected to achieve revenues of 785.84 billion CNY and 554.36 billion CNY respectively, with combined profits exceeding 50 billion CNY [4]. - The order backlog for CSIC stands at 322 vessels with a total weight of 24.61 million tons valued at 216.96 billion CNY, while CSIC holds 216 vessels with a total weight of 30.31 million tons valued at 233.76 billion CNY, together accounting for 15% of the global order backlog [4]. Group 3: Market Context and Future Outlook - The merger is seen as a response to the ongoing consolidation trend in the state-owned enterprise sector, with a rapid approval process of just 71 days highlighting the supportive regulatory environment [5]. - Analysts predict that the successful merger will lead to increased activity in the M&A market, potentially accelerating further consolidation in the industry [6]. - The global shipbuilding industry is entering a new growth cycle, with Chinese shipyards expected to benefit from a robust order book and improved capabilities compared to previous cycles [8].

Core Viewpoint - The merger between China Shipbuilding and China State Shipbuilding has received official approval from the China Securities Regulatory Commission, marking a significant step in the restructuring of China's shipbuilding industry [2][5]. Group 1: Merger Details - The merger involves a share swap where China Shipbuilding will absorb China State Shipbuilding, leading to the latter's delisting [2]. - The stock of both companies will be suspended from trading starting August 13, with no specified date for resumption [2][4]. - Dissenting shareholders have the option to cash out at prices of 30.01 yuan per share for China Shipbuilding and 4.03 yuan per share for China State Shipbuilding, with total values of 5.56 billion yuan and 13.02 billion yuan respectively [5]. Group 2: Financial and Operational Impact - The combined total assets of the two companies will exceed 400 billion yuan by the end of 2024, surpassing the 300 billion yuan asset scale of the previous "South-North Train" merger [7]. - In 2024, China Shipbuilding and China State Shipbuilding are projected to achieve revenues of 78.58 billion yuan and 55.44 billion yuan, respectively, with combined annual revenues exceeding 100 billion yuan [7]. - The order backlog includes 322 vessels for China Shipbuilding valued at 216.96 billion yuan and 216 vessels for China State Shipbuilding valued at 233.77 billion yuan, totaling 15% of the global order backlog [8]. Group 3: Market Context and Future Outlook - The merger is seen as a response to the ongoing consolidation trend in the state-owned enterprise sector, with a streamlined approval process taking only 71 days [8]. - The merger is expected to enhance resource synergy, improve bargaining power, and facilitate the integration of green ship technology and military-civilian fusion experiences [7][11]. - Analysts predict that the Chinese shipbuilding industry will remain busy due to a long-term supply-demand imbalance, benefiting from a new cycle of demand in the global shipbuilding market [11].

Core Viewpoint - The merger between China Shipbuilding and China State Shipbuilding has received regulatory approval, marking a significant step in the restructuring of China's shipbuilding industry, with the aim of enhancing resource synergy and market competitiveness [1][4][8]. Group 1: Merger Details - The merger involves a share swap where China Shipbuilding will absorb China State Shipbuilding, leading to the latter's delisting [1][4]. - The merger has been in the works for over a year, with the approval process taking only 71 days, indicating strong support for state-owned enterprise consolidation [8]. - Following the merger, both companies will halt trading on August 13, with a resumption date yet to be determined [1][3]. Group 2: Financial and Operational Impact - Combined assets of the two companies will exceed 400 billion yuan, surpassing the asset scale of previous major mergers in the industry [7]. - In 2024, the two companies are projected to achieve combined revenues exceeding 1 trillion yuan and net profits over 50 billion yuan [7]. - The order backlog for China Shipbuilding stands at 322 vessels with a total weight of 24.61 million tons, valued at 216.96 billion yuan, while China State Shipbuilding has 216 vessels valued at 233.77 billion yuan, together accounting for 15% of the global order backlog [7]. Group 3: Strategic Advantages - The merger will facilitate the integration of complementary technologies and enhance bargaining power in the market [7][11]. - The consolidation is expected to reduce internal competition and improve supply chain resilience, positioning the new entity to better capitalize on the upcoming shipbuilding cycle [11]. - The merger aligns with the trend of state-owned enterprises leveraging capital markets for integration, potentially leading to more M&A activities in the future [8][11].

21世纪经济报道记者赵云帆 中国船舶与中国重工的造船业"世纪大重组"，终于在历时一年的协调与审批后，步入了"临门一脚"环 节。 8月5日晚间，两公司同时发布公告称，中国船舶换股吸收合并中国重工的交易早前已获证监会正式批 复。接下来，两家公司股票将自8月13日起停牌，复牌日期不定。此后中国船舶将正式通过换股吸并方 式，向中国重工所有股东发行股份并收购其全部资产，中国重工将撤牌退市。 值得注意的是，在审议两船合并的股东大会中，有部分异议股东对所有议案全部投出反对票，他们将有 权获得两公司大股东中国船舶集团提供的现金选择权，可在8月13日前提交执行现金选择权的申请。根 据两公司公告，中国船舶、中国重工的异议股东持有股份数量分别为1853.85万股和32305.32万股，对应 现金选择权价格为30.01元/股和4.03元/股，总价值分别为5.56亿元和13.02亿元。 不过，以上现金选择权或大概率不会被异议股东执行——从当前股价来看，截至8月5日，吸并主导方中 国船舶股价已经来到35.01元/股，其较现金选择权溢价16.6%。而只有中国船舶股价低于或接近现金选 择权时，两家公司的现金选择权才可能被异议股东大额执行。 ...

Core Viewpoint - The company is strategically positioned in the shipping industry, benefiting from both cyclical and stable revenue streams, with a focus on enhancing profitability through various business segments and maintaining high cash reserves for financial stability [1][2][3]. Group 1: Business Segments - The company operates in the shipping service industry, including paint production, ship trading agency, insurance consulting, and supply of ship equipment and parts [1]. - The paint business is expected to see continuous profit growth due to increased shipbuilding volumes and reduced raw material costs from lower oil prices [1]. - The insurance and agency businesses provide stable earnings, benefiting from the shipbuilding renewal cycle and increased global shipping rates [1]. - The ship equipment and parts business has shown consistent growth in scale and stable profit margins due to rising ship delivery volumes [1]. Group 2: Financial Performance - The company maintains a cash reserve of approximately HKD 6 billion, with financial income primarily from bank deposit interest, which has increased from HKD 0.05 billion in 2021 to HKD 0.27 billion in 2024, accounting for 38% of annual net profit [2]. - The company has a high dividend payout ratio, maintaining around 100% from 2020 to 2024, indicating strong cash flow and commitment to shareholder returns, with a projected dividend yield of about 9% in 2025 [2]. Group 3: Strategic Initiatives - The company is proactively investing in green methanol to capture opportunities in the shipping industry's transition to alternative fuels, with a joint venture established to focus on biomass-coupled green methanol production, expected to start production in 2026 with a capacity of 200,000 tons per year [2]. - The company is rated "Buy" with projected net profits of HKD 740 million, HKD 760 million, and HKD 800 million for 2025-2027, corresponding to PE ratios of 11, 11, and 10 times, respectively [3]. - The absolute valuation using FCFF suggests a reasonable market value of HKD 10.7 billion, indicating a potential upside of 29% [3].

Investment Rating - The report indicates a positive outlook for the shipbuilding sector, particularly in light of the potential exemptions from the U.S. 301 tariff measures, which could benefit the shipping companies and the shipbuilding industry overall [2][11]. Core Insights - The U.S. 301 tariff hearings concluded, with specific measures expected by April 17. There is a possibility of exemptions for certain types of vessels, which could lead to increased shipping rates if implemented strictly, benefiting container shipping [2][11]. - The report highlights that Hengli Heavy Industry's order book has increased, with a total order value of approximately $13.4 billion, which is significant compared to its competitors [2][12]. - The performance forecasts for major Chinese shipbuilding companies for Q1 2025 are generally in line with expectations, indicating a recovery in the sector [2][24]. Group 1: U.S. 301 Tariff Impact - The U.S. 301 tariff measures could impose significant fees on Chinese vessels docking at U.S. ports, with potential costs reaching up to $1 million per vessel depending on the circumstances [5][7]. - The report suggests that if the tariff measures are implemented, it could lead to increased shipping rates due to port congestion and adjustments in shipping routes [11][12]. Group 2: Company Updates - Hengli Heavy Industry has seen a significant increase in its order book, with a hand-held order value of approximately $13.4 billion, which is about 49% of China Shipbuilding's and 66% of China State Shipbuilding's order values [12][19]. - The company is expected to achieve a production capacity of 230,000 tons of steel annually and produce 180 engines, covering four types of dual-fuel engines [12][23]. Group 3: Market Trends - The new ship price index decreased by 0.49% month-on-month, while the second-hand ship price index increased by 1.15% [36][40]. - The global shipbuilding order book increased by 1% month-on-month, with container ships and oil tankers being the primary contributors to this growth [45][46].