COSCO SHIPPING Holdings is very interesting, with a market value of only 160 billion, and the monetary funds on the account in 2022 will be as high as 236.9 billion, and even now, there are nearly 200 billion. The entire stock market can't find a second one, it seems that so much money is ready to be kept for the New Year.
It's really 10 years without opening, opening for 10 years. Of course, COSCO SHIPPING Holdings cannot make so much money every year, and its net profit in 2021 and 2022 will exceed 100 billion.
A "magical" company
COSCO SHIPPING Holdings Co., Ltd. (hereinafter referred to as "COSCO SHIPPING Holdings", formerly "COSCO") is a listed flagship enterprise and capital platform of COSCO SHIPPING Group's main shipping and terminal business. The company was founded on March 3, 2005 and successfully listed on the main board of the Hong Kong Stock Exchange on June 30, 2005 (stock code: 01919.HK). HK), successfully listed on the Shanghai Stock Exchange on June 26, 2007 (stock code: 601919).
The registered capital of the company is RMB 16,012,917,249, registered place: Tianjin Airport Economic Zone, legal representative: Wan Min. As of June 30, 2023, China Ocean Shipping Co., Ltd. and its subsidiaries held a total of 43.35% of the shares of the Company.
COSCO SHIPPING Holdings is currently positioned as a global digital supply chain operation and investment platform with container shipping as the core, and is the core company undertaking the vision and goal of COSCO SHIPPING Group to "build a world-class global integrated logistics supply chain service ecology", and is committed to providing customers with full-link solutions of "container shipping + port + related logistics services".
The company says that it is simple and actually very simple, anyway, the business is to drive the ship to transport goods from one place to another, plus a little port business, and it is gone. The profit depends entirely on the shipping price and shipping costs. In fact, the cost of transportation is also good, a large cargo ship, as long as it starts, loading a little less cargo and loading a little more, the cost does not change much. This is also the reason why cargo ships are now becoming super-large.
You have to say complicated, it is difficult to predict shipping prices, and there are many reasons for the sharp rise in freight rates in the first two years, such as the Ukrainian thing, such as the epidemic and so on. But in general, COSCO SHIPPING Holdings mainly undertakes the export of domestic goods to other countries. That is, the country's economy is good, foreign trade is prosperous, the demand for export commodity transportation is large, and the shipping business will naturally be good.
However, there is also a cyclical factor in this, when the business is good, a large number of ships are bought, the entire industry has more and more capacity, once the supply exceeds demand, the freight rate drops rapidly, and a large number of ships are vacant, until some companies go bankrupt.
Such stories have been repeated, such as COSCO Shipping Holdings, which also came over like this. COSCO SHIPPING Holdings' predecessor was "China COSCO", and in the nineties, it was mainly based on "bulk cargo" transportation, such as the leading bulk cargo Nippon Yuksen at that time. Today's bulk carriers mainly transport ore and grain, and everything else is basically in containers. Because modern terminals are advanced enough to use containers with the highest efficiency. But 30 years ago, the mainland was still dominated by bulk cargo, and most of China's ocean-going cargo ships were bulk carriers. However, China's ocean business is very complicated, and real estate is done. Later, "Wei Jiafu" took office and carried out drastic reforms.
When analyzing COSCO Shipping Holdings before, I also talked about Wei Jiafu, and many people left unfriendly messages, so I didn't release them. In fact, we can't say that, and people are not in the company anymore. No matter what happened later, China COSCO was about to go bankrupt back then, and he did it single-handedly, and he couldn't erase his past achievements because of the things that followed. In 2000, he said that "China COSCO wants to enter the world's top 500", and he also worked hard for it.
At the beginning, China's ocean shipping also used bulk cargo transportation, and in those years it expanded wildly, targeting the aforementioned leading "NYK". Later, the company had 400 bulk carriers, really surpassing Japanese mail ships, and really entered the world's top 500. But the good times did not last long, the 2008 global financial crisis, the world economy was depressed, and international trade was even more miserable. No one expected the storm to come so quickly, and COSCO wanted to go to the next level, renting 200 ships ready to fight. However, demand has fallen off a cliff, and freight rates cannot be recovered, focusing on chartered ships, which have to pay high rents. COSCO has also paid a heavy price for this, and it is simply impossible to bear to look at it directly.
In those years, it lost more than 20 billion yuan, and the A-share loss king came like this, and was put on the hat of "ST", and in desperation, COSCO could only restructure in 2015. Regarding the price of restructuring, we should not be more serious, the main thing is to revitalize assets, and how much money is just a number. First, the bulk business was divested, and the bulk business sold 6.8 billion. Then it bought "China Shipping Lines" for 1.1 billion, which many people questioned. Because Zhonghai was very good that year, how could it be that it sold 1.1 billion, and it was still sold to COSCO.
This is not the point, they are all brother companies, and restructuring means that everyone is grouped together, saying that the acquisition is just financially easier to handle. After the reorganization, the company changed its name to "COSCO SHIPPING Holdings", so don't get tangled up in who acquired whom. And that restructuring was very large, Zhonghai and COSCO were just a small chess piece, and at that time it was a big chess game, integrating and planning the entire industry. I think that reorganization must have appeared in textbooks, because of its complexity, it can be said that it has never been seen before, and it has not come since.
After the reorganization, COSCO SHIPPING Holdings' business changed from bulk cargo transportation to container transportation, which is not an exaggeration to say that it was reborn from the ashes. However, rebirth is obviously also painful, and in 2013, through capital operation, 200 million profits were made to take off the "ST" hat. Immediately from 2014 to 2016, the non-net profit was lost for another three years.
In fact, if you calculate it according to non-profit, you will lose money for 6 years. In those years, shipping prices were low, for example, from Shanghai to the United States, a 40-inch standard container was only $700. That year, "Hanjin Shipping" went bankrupt, which is a top ten role in the world. Of course, COSCO SHIPPING Holdings is also miserable, with a net profit loss of nearly 10 billion. But then it finally turned a profit, but the profit was pitiful.
Even so, in 2018, it acquired Hong Kong's "Orient Overseas", which is also an old shipping giant with a purchase price of nearly HK$50 billion, Tung Chee-hwa with a huge amount of cash, out of the shipping sea COSCO Shipping Holdings also took this opportunity to leap to become a global container transportation giant. It reminds me of a passage that Wei Jiafu said: "The winter of enterprises is nothing more than the three strategies of the lower middle and upper levels: hibernation of passive waiting and inaction, winter swimming of unclear situation and blind attack, and winter training of strengthening the body and waiting for the opportunity to attack." These words are very good, and COSCO SHIPPING Holdings has also verified how long the United States has also verified.
It was during the shipping depression in those years that COSCO SHIPPING Holdings, whether it was adding ships or acquiring them, laid the foundation for the upcoming hot market. In 2019, after many years of surviving, finally under the blessing of the epidemic, the sea began to pick up money. At that time, the whole world was locked down, the goods could not be transported out at all, and it was difficult for a ship to create a fortune for COSCO Shipping Holdings, and we should thank the great motherland, because we handled it well, only China still maintained basic normal operation.
This is how the once-in-a-decade gross margin has been generated, but with the end of the epidemic, sea freight prices have been declining. In fact, from the second half of 2022, it has already begun, the most obvious is CCFI, from more than 3,000 points to 1,500 points.
COSCO SHIPPING Holdings has huge funds in its hands, does not panic at all, and is also expanding against the trend, such as buying ports. Of course, buying ships is essential, according to the announcement information, 12 new ships were bought, each 1.72 billion, a total of 20.64 billion. If you add the orders placed last year, there are a total of 44 ships waiting to be delivered. Counting this part of the transport capacity, it is second only to the "Mediterranean", ranking second in the world.
This "Mediterranean" shipping company is a real cow, crazier than COSCO Shipping Holdings, with up to 125 ships under construction. If you count the entire industry, the number of ships under construction has reached a thousand, which is already about 30% of the current size of the industry. This means that soon shipping will have to be 30% more capacity. At a time when market demand is shrinking, there is no better word to describe it than "miserable".
We know that Buffett's early investment method was to learn his theory of always Graham picking cigarette butt stocks, which roughly means to look for companies whose real value is much higher than the market value of the stock to invest.
Bashen said that it was not until he met Munger that he changed his investment style. In fact, the change in Buffett's stock selection method is an inevitability, because the "cigarette butt" stocks are becoming fewer and fewer, and the growing asset size has to make Buffett change his investment style.
Of course, this topic is a bit off topic.
To say that COSCO SHIPPING Holdings this company undoubtedly meets the requirements of Buffett's "cigarette butt" stock. The company has nearly 200 billion cash on paper, the market value of the stock is only 160 billion, and only 8% of the net assets.
If COSCO SHIPPING Holdings liquidates today, the money you get is higher than the value of the stock. What's more, the company can still make tens of billions of profits a year. So, why does the stock price keep falling for such a company with explosive cash flow and good profits?
Obviously, there are still concerns about the sustainability of the company's future performance.
In the previous analysis, COSCO Shipping Holdings mentioned many times that the shipping industry is very cyclical, the so-called industry that does not open for ten years and opens for 10 years. When analyzing Chinese ships before, I mentioned a data, that is, the cycle of shipping ships is about 20 years to replace and upgrade, although the cycle of shipping is not as exaggerated as the cycle of ships, but it cannot be ignored.
Let's take a look at the historical performance first, let's look at the 10 years:
If 10 years is too short, look at 20 years.
It's intuitive, it's just starving to death, full to support death. Compared with the sharp fluctuations in profits, the changes in revenue are much smaller, and the fluctuations in COSCO SHIPPING Holdings' profits are far greater than the fluctuations in revenue. In other words, the cyclical characteristics of the shipping industry have led to very obvious fluctuations in the company's profits, typical of the strong cyclical industry that relies on the sky to eat.
The last time profits peaked was during the global asset bubble period before the 2007 financial crisis, and the most recent time, more than 10 years later, in 2021, due to the global supply chain disruptions caused by the epidemic and the Russia-Ukraine conflict, the company ate a big meal.
But just the profits of the two years in 2021 and 2022 let the company directly eat, and the current cash on the book is close to 200 billion, mainly earned in two years.
Let's talk about the company's current performance and some future expectations.
Let's start with the company's half-year report: in the first half of the year, COSCO SHIPPING Holdings achieved operating income of 91.84 billion yuan, down 56.4% year-on-year; The net profit attributable to the parent was 16.56 billion yuan, down 74.5% year-on-year.
Among them, the operating income in the second quarter was 44.49 billion yuan, a year-on-year decrease of 57.7%; The net profit attributable to the parent was 9.43 billion yuan, down 74.6% year-on-year. It looks worse, right, but even so, the second quarter also achieved a net profit of nearly 10 billion, and the company's performance compared with the peak period is very bad, but it achieved a net profit of tens of billions in a single quarter, and there are few A-shares in the entire A-shares, right. Under the background of the decline in freight rates, net profit in the second quarter increased month-on-month, mainly due to the recovery of cargo volume and the decline in unit cost.
Since July, due to the seasonal peak season and the effective capacity control of the industry, the container freight rate has stopped falling and rising. Since the beginning of this year, the destocking cycle of overseas manufacturing has continued, global container shipping demand has declined, and the company's collection and transportation volume has been under pressure, and the year-on-year decline in the second quarter has narrowed and rebounded month-on-month.
From the perspective of demand and gross profit: weak demand leads to a decline in volume and prices
Since 2023, the global economy has entered a new stage of high inflation and low growth, and the container shipping market has been weakened by demand, and the company's container freight volume in the second quarter was 5.942 million TEU, down 5.8% year-on-year. At the same time, the congestion of the container shipping market eased, the supply recovered, the overall supply exceeded demand, the market freight rate level fluctuated at a low level, the average CCFI index in the second quarter was 938 points, down 70.3% year-on-year, down 13.7% month-on-month, and it was estimated that the company's foreign trade route unit box revenue was $1055/TEU, down 62.5% year-on-year.
From the perspective of gross profit, gross profit margin decreased year-on-year, but the exchange gain was obvious. Affected by the sharp decline in foreign trade freight rates in the second quarter, the company's gross profit margin was 22%, down 31.8pct year-on-year, due to the depreciation of RMB against the US dollar and the sharp increase in interest income in the second quarter. The company's exchange income in the first half of the year was 2.1 billion yuan, mainly reflected in the second quarter, compared with 760 million yuan in the same period last year, and interest income in the second quarter was 1.95 billion yuan, compared to 1 billion yuan in the same period last year. Interest income, that is, lie to earn, of course, the dividends are also good.
The old question, presumably what everyone is most concerned about is, is COSCO SHIPPING Holdings still worth investing? Let's continue with several aspects.
(1) If the debt ratio decreases, the cycle may be weakened
Although shipping is a strong cyclical industry, because the company has made too much money in the past two years, in order for COSCO SHIPPING Holdings to have a strong ability to make some smoothing of the company's performance in a legal state in terms of financial arrangements.
We can clearly see from the changes in the company's operating cash flow and liability structure:
It is clear that due to the significant improvement in cash flow in the past two years, the company's debt ratio has fallen from a high debt ratio to less than 50%, which means that the financial situation will improve significantly in the future.
In the first half of this year, the company's interest income alone exceeded 2 billion, which was unimaginable before, and the tight cash flow used to be a pain that accompanied the shipping company for a long time, but now it is the other way around, there is money, and the pain of the past has become the current honey.
(2) The boom cycle of maritime transport has not completely ended
Although the decline is larger than the performance in 2021 and 2022, the company still has a net profit of nearly 10 billion yuan in a single quarter, which means that the dividend of this cycle is still there.
(3) Investment value
Although the company's performance fluctuates greatly, the current price-earnings ratio of 0.8 times and up to 200 billion monetary funds can not only ensure the company's long-term dividend rate for a long time in the future, but also the company's ability to resist cyclical risks is obviously stronger.
Even in the event of a downturn, the company's exaggerated cash on paper can be used for counter-cyclical investment and expand market share. If we are a full-cycle investment, there is no problem with the high probability.
In terms of the scale and global competitiveness of Haikong, the company's market value of about 160 billion yuan is obviously relatively cheap. As long as you eat meat once in a few years, you can be enough for the company to chew for many years.
In addition, the company formulates the shareholder dividend return plan from 2022 to 2024, clarifying that the total cash dividends distributed during the year should account for 30%-50% of the company's net profit attributable to shareholders of listed companies realized in the current year. On the basis of the guarantee, there are also expectations.
Generally speaking, in the current environment where interest rates continue to fall and risk-free yields are in a downward trend for a long time, companies with high dividends such as COSCO Shipping Holdings, Shenhua and CNOOC will inevitably be sought after by arbitrage funds for a long time.
It can be said that there is a guarantee and an expectation, and in the long run, it should be a matter of earning more and earning less.
The above analysis only represents personal views and does not constitute specific investment advice. The stock market is risky, and investment needs to be cautious. Some of the materials come from the Internet, if it is inconsistent with the actual situation or there is infringement, please contact to delete, welcome to leave a message in the comment area to discuss!