Economic Observer Network reporter Chen Shan In the context of the current “hard to find one box” in international shipping and the sharp increase in freight rates, the Chinese shipping company, COSCO Shipping Holdings (601919.SH), known as the “king of the cycle”, once again submitted a beautiful report card.
On the evening of October 8, COSCO SHIPPING Holdings released an announcement on the pre-increasing performance of the first three quarters of this year. According to preliminary calculations, it is estimated that the company’s net profit attributable to shareholders of listed companies in the first three quarters of 2021 will be approximately 67.588 billion yuan, an increase of approximately 1650.92% compared with the same period of the previous year.
Among them, the company expects to achieve a net profit attributable to shareholders of listed companies in the third quarter of approximately 30.49 billion yuan. In other words, in the third quarter of this year, COSCO SHIPPING Holdings has an average daily profit of more than 300 million yuan.
Regarding the reasons for the expected performance increase, COSCO SHIPPING Holdings also pointed out in the report that during the reporting period, with the gradual recovery of major global economies, under the influence of multiple factors such as demand growth, repeated epidemics, and limited supply, the global logistics supply chain continued Challenged and impacted by complex situations such as port congestion, container shortages, and inland transportation delays, the relationship between supply and demand for container transportation continues to be tense. The company has overcome multiple factors such as the global epidemic and made every effort to ensure global transportation services through measures such as increasing capacity, guaranteeing containers, and providing services.
According to reports, during the reporting period, the average China Export Container Freight Index (CCFI) was 2398.80 points, an increase of 168.50% compared with the same period of the previous year; during the period, COSCO SHIPPING’s container shipping business completed a freight volume of approximately 20,447,100 TEUs. Compared with the same period of the previous year, an increase of approximately 8.03%. “Achieving both volume and price increases, and overall performance has achieved substantial growth compared with the same period last year.” COSCO Shipping Holdings said.
Wind data shows that since the beginning of this year, the largest cumulative increase in the price of COSCO Holdings is as high as 166%. However, it has entered the callback phase after reaching 25.69 yuan per share in early July. As of the close of the market on October 8, the company’s stock price closed at 16.8 yuan per share, a 35% correction from the July high. Since the beginning of this year, the stock price has risen by 78.9%, and the market performance is obviously inferior to the performance.
In fact, the performance of COSCO SHIPPING Holdings showed strong cyclicality and volatility. The data shows that from 2012 to 2020, the company’s net profit attributable to its parent will be -9.559 billion yuan, 235.5 million yuan, 362.5 million yuan, 469.3 million yuan, -9.906 billion yuan, 2.662 billion yuan, 1.23 billion yuan, 6.764 billion yuan, 9.927 billion yuan.
It is true that the substantial increase in COSCO SHIPPING’s performance this year is mainly due to the increase in freight rates. An industry insider believes that the performance of COSCO Holdings’ price reflects the market’s vigilance for the risk of its later callback. “COSCO SHIPPING Holdings is a company in a cyclical industry, and there are still many uncertainties in the future.” The person said.
“On the basis of continuous improvement on the supply side, the shipping market may face a ten-year upward cycle. Since the second half of last year, the supply chain has been chaotic, difficult to find a container, port congestion, and sky-high freight rates have frequently appeared.” Gold Company believes that the peak of freight rates may be approaching. “Once demand gradually returns to normal, the problems of supply chain tension and declining efficiency will gradually alleviate and effective capacity will be released.”
According to CICC, CMA CGM recently announced that it will stop raising spot freight rates from September to February next year. In the fourth quarter, the traditional peak season is gradually over. The peak of freight rates may be approaching, completely digesting the current accumulation of supply chain nodes. The volume may still take 1-2 quarters, so the industry returns to normalization or in 1Q22-3Q22 (the specific time depends on whether there is an additional supply shock), if the double limit policy has a substantial impact on production activities and shipments, May accelerate the arrival of the inflection point.
In an interview with reporters earlier, a public offering person in Shanghai said that the biggest investment risk of shipping stocks is the continuity and stability of profitability, which is also a common problem for most cyclical stocks. The impact of price fluctuations on performance is far greater than the volume of business itself. If the subsequent consolidation prices fall from a high point, the disorder in the supply chain will be alleviated, and the company’s performance may experience a substantial decline.
Northeast Securities also believes that as the epidemic improves, the port clogging problem will surely be alleviated and the actual capacity will return to normal levels. It is expected that the freight rate will slowly and gradually decline in the next two years, but it will still be significantly higher than the level before the epidemic.
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