Citi Research: First rating of "Buy" for Cssc Offshore & Marine Engineering (00317) with a target price of HK$14.

Industrial Bank International released a research report stating that they have given Cssc Offshore & Marine Engineering (00317) an "outperform" rating, with a target price of HK$14 based on a price-to-book ratio of 1.0 times from the period of 2001-2010. The bank mentioned that due to the cyclical nature of the shipbuilding industry, rising cost of new ship construction, and benefiting from its technological advantages and a solid backlog of orders worth 60 billion RMB, its profits will enter a period of explosive growth. The bank predicted that Cssc Offshore & Marine Engineering's net profit for 2025 and 2026 will be 800 million RMB and 1.15 billion RMB respectively. As China continues to expand its market share in new ship construction and improve its high-end manufacturing capabilities, Cssc Offshore & Marine Engineering will also benefit in the long term. Industrial Bank International pointed out that Cssc Offshore & Marine Engineering has full orders and rigid production capacity to support future ship prices. By the end of 2024, the subsidiaries Huangpu Wenchong and Guangzhou Shipyard International under Cssc Offshore & Marine Engineering each have orders for approximately 4 million deadweight tons, enough to cover demand until 2028. China's cost advantage and favorable exchange rate of the RMB will help the company secure new ship orders in the future. Furthermore, even with fluctuations in new orders, the bank expects the rigid production capacity to keep new ship prices at high levels. Cssc Offshore & Marine Engineering's investment in research and development and technological upgrades allow them to expand into new ship markets such as medium-sized container ships and improve order quality and profitability. The bank also mentioned that the recent price pullback presents an opportunity. Since the fourth quarter of 2024, the stock price has significantly declined due to issues such as parent company restructuring. The bank believes that the company's fundamentals remain strong, and they expect negative sentiments to gradually dissipate as profitability improves, leading to a recovery in the stock price.