The global shipbuilding pattern is concentrated, and the benefits of China's leading ships are remarkable

Overall, at the income level, the price of new shipbuilding continues to rise, while the company is currently full of orders in hand, the schedule has reached 2026, and the capacity of its shipyards is also relatively full. With the gradual construction of high-priced orders in 2021, the company's performance is expected to usher in greater flexibility and achieve a rise in volume and price.

1) Shipbuilding prices continue to rise. From the comprehensive price index of new shipbuilding, ship prices have continued to rise since 2021, as of 2M23, the comprehensive price index of new shipbuilding is 162.88, an increase of 5.3% compared with 3M21, an increase of 25.1%. According to Clarksons data, the new shipbuilding price index of dry bulk cargo/tanker/container was 156.4/192.1/102.2, an increase of -3.0%/4.8%/2.7% compared with 3M21, an increase of 17.4%, 27.0% and 22.8%. According to China Ocean Shipping statistics, as of 2M23 each typical ship type of new ship prices remained basically stable, VLCC, 23,000 TEU container ship and 174,000 cubic meters of LNG carrier new ship prices were $120 million, $215 million and $250 million, respectively.

2) The current shipbuilding cycle has entered the stage of volume reduction and increase, and the price of new shipbuilding is still likely to rise. Combined with the rhythm of the current upward cycle, the major shipyards are currently full of orders in hand, and the capacity schedule has been arranged to 2025-2026. We believe that the capacity expansion of the supply side of this cycle is more cautious than that of the previous cycle, and the volume and price rise stage of this cycle starts from 1M21 left to right and ends around 4M22. The maintenance time is close to 14 months, and the current time node is in the stage of volume price reduction and increase, and it is expected that the current round of volume parity increase stage will last longer, and even due to the rigid factors of shipbuilders' capacity, volume price reduction and increase begin to occur, we judge that there is still room for upward movement in the price of new shipbuilding.

3) The company has plenty of orders in hand, new ship orders have increased significantly, and it is expected that the delivery of new ships in 2023-2024 is expected to increase significantly. According to the company announcement, in 2020 and 2021, the company undertook new ship orders of 634 million and 12.11 million deadweight tons, respectively, with year-on-year growth of 130% and 91%. The company has plenty of orders in hand, as of 1H22, the company has orders for 20.75 million tons of cargo. Ship construction from new to delivery generally takes about 2-3 years, the company is expected to 2023-2024 new ship delivery is expected to peak. At the same time, with the continued high price of new shipbuilding of some ship types, the subsequent is expected to promote the company's new shipbuilding orders to increase.

On the profit side, the operating profit of the shipyard is mainly affected by the market form, raw material prices, exchange rate fluctuations, etc., and the price of shipbuilding plate steel falls, and the company's profitability is expected to continue to be repaired.

1) Ship manufacturing costs generally include equipment, raw materials, labor costs, etc. Marine supporting equipment mainly includes main propulsion, main engine, emergency engine and electrical conduction. According to the company announcement, the ratio of steel required for different ship types is different, generally accounting for about 20%-30% of the total construction cost. Due to the closed contract property of shipyards, the change of steel price has an important impact on the profit level of shipyards.

2) The company's operating costs are basically consistent with the growth of revenue scale. According to the company's announcement, the company's operating costs in 2021 increased by 8.3% year-on-year, which is basically consistent with the growth of revenue scale. Among them, in the ship repair and Marine engineering business in 2021, the material cost reached 31.897 billion yuan, accounting for about 70%. Overall, the proportion of Marine steel in the material is about 30%-40%.

3) The ship price is basically locked when the order is signed, and its cost fluctuation is mainly borne by the shipyard itself during the ship construction cycle. According to the company announcement, the main raw materials of the ship are 6mm and 20mm Marine steel plates. At the end of 2020, the price of new shipbuilding has gradually increased, but at the same time, the price of shipbuilding steel has risen with the current price of new shipbuilding. The price of shipbuilding board began to fall after reaching a peak in 5M21, and by the end of 2022, the price of 20mm shipbuilding board in Shanghai was 4,480 yuan/ton, down 17.8% year-on-year, and nearly 35% lower than the peak in 2021. The decline in the price of shipbuilding plates is conducive to increasing the company's gross profit on orders in hand, and profitability is expected to continue to repair.