Container spot freight rates declined recently. Shanghai Containerized Freight Index (SCFI) decreased by 96.06 points MoM to 1,117.24 points, down 7.9% MoM. Freight rates for Europe trade reported 940 points, down 483 points MoM or 33.9% MoM.
FY12 results lifted by selling containers. CSCL’s FY12 revenue was RMB32,551 million, up 15.2% YoY. FY12 net profit was RMB525 million compared with FY11 net loss of RMB2,743 million. During the year, Total transportation turnover rose by 8.0% YoY, average freight price was RMB3,909 per TEU, up 8.9% YoY. International shipping trade average freight rate was RMB5,845, up 9.2% YoY.
Revise up FY13-FY14 earnings estimates. Revise up FY13-FY14 earnings estimates to reflect the mild recovery of the international container shipping market. Revise up FY13-FY14 earnings to RMB830 million and RMB1,791 million, respectively. Introduce FY15 net profit of RMB4,036 million.
Maintain ‘Accumulate’ with TP of HK$2.85. Reiterate that we expect certain trading opportunities in 2013 due to the earnings recovery of CSCL. We think the current share price is attractive and we maintain investment rating of ‘Accumulate’ with TP of HK$2.85. Our TP represents 31.7x FY13 PER and 14.7x FY14 PER, or 1.0x FY13 P/B ratio. Major risks are 1) the slow recovery of European and U.S. markets; 2) surge of bunker prices; 3) shipping rates plunge due to capacity excess supply.