A leading container and equipment manufacturer with FY13 revenue rebound. China International Marine Containers (CIMC) is dedicated to manufacturing and supplying containers, trailers, tank equipment, offshore and airport facilities. CIMC is the only supplier in the world which can provide the whole series of container products with completely owned intellectual property rights. Container sales retreated by 38% YoY in 1H12, but 3Q12 number of boxes sold picked up by 22% YoY. We expect revenue from container to rise by 15% YoY in FY13.
Other equipment business to grow gently in FY13. Despite the slowdown of vehicles in 1H12 (down 30% YoY), we expect the sales of vehicles to be flat in FY13 given the demands from domestic infrastructure construction and real estate. We estimate energy, chemical & food equipment to grow by 8% YoY in FY13. Contribution from offshore engineering is expected to improve by 376% YoY in FY12 due to the completion of certain large orders and we expect revenue in FY13 to maintain the same level given the orders on hand. Airport and other businesses are expected to grow by 15% YoY in FY13.
Initiate ‘Buy’ with TP of HK$17.35 We believe CIMC deserves a valuation premium to the rest of the sector due to its industry leadership, larger market capitalization, economies of scale, full coverage of network and geographical advantage. Moreover, the hidden land value in Qianhai may be unlocked with the impelled internationalization of RMB and the acceleration of the development in Qianhai area. We think a prudent valuation is fair. Our TP represents 16.8x, 12.5x, and 11.5x FY12-FY14 PER, or 1.7x FY13 P/B, and implies 18.8% discount to FY13 NAV. As the strong performance of the stock may advance part of the increase, we suggest investors to buy on dips.