COSCO SHIPPING Holdings (.SS)_ Up to Neutral on structural supply chain complexity supporting higher valuation; assessi...

COSCO SHIPPING Holdings (601919.SS) Conference Call Summary Company Overview - Company: COSCO SHIPPING Holdings - Ticker: 601919.SS - Current Price: Rmb15.71 - 12-Month Price Target: Rmb13.80 - Downside: 12.2% - H-Share Price Target: HK$10.70 - H-Share Current Price: HK$13.04 - H-Share Downside: 17.9% Key Industry Insights - Supply Chain Complexity: Increased geopolitical tensions have led to higher supply chain complexity, benefiting select China Container Shipping companies through elevated freight rates amid disruptions [4][23]. - Freight Rate Sensitivity: A potential labor strike at US East Coast ports could lead to a rebound in spot rates, driven by frontloading before tariff hikes and seasonal factors [4][9]. - Historical Context: Past disruptions have shown that P/B valuations for COSCO Shipping increased post-disruption, suggesting a similar trend may occur with current supply chain challenges [22][23]. Financial Performance and Projections - Revenue Forecasts: - 2024E Revenue: Rmb175.45 billion - 2025E Revenue: Rmb230.34 billion - EBITDA Forecasts: - 2024E EBITDA: Rmb38.84 billion - 2025E EBITDA: Rmb74.18 billion - EPS Projections: - 2024E EPS: Rmb1.48 - 2025E EPS: Rmb2.62 - P/E Ratio: - Current: 6.9x - 2025E: 6.0x - P/B Ratio: - Current: 0.7x - Target for 2025E: 0.8x (up from 0.6x) [3][5]. Valuation Adjustments - Target Price Adjustments: - H/A share target prices raised to HK$10.70/Rmb13.80 from HK$7.90/Rmb10.30, implying total return upside of 1%/8% [3][26]. - Market Cap vs. Net Cash: Current H-share market cap is close to net cash, supporting valuations [3][26]. Risks and Opportunities - Upside Risks: - Unexpected events could reduce effective capacity, driving higher SCFI and revenue upside [31]. - Potential for special dividend payouts due to significant cash reserves (Rmb174 billion as of 1H24) [31]. - Downside Risks: - Prolonged port operation suspensions could negatively impact profitability, with potential earnings upside of Rmb1.2-4.9 billion if capacity is reduced by 4% [10][11]. Conclusion - Rating Upgrade: COSCO Shipping shares upgraded to Neutral from Sell, reflecting improved long-term ROE expectations and valuation support from historical trends during supply chain disruptions [3][27].