As the leasing arm of China’s largest shipbuilding conglomerate, CSSC Shipping owns a vessel portfolio of 157 ships as of end-1H22, with 132 vessels in operation and 25 vessels under construction. Given the strong demand of offshore clean energy, CSSC Shipping is expanding its exposure to green shipping and clean energy segment. In 1H22, its clean energy equipment vessels generated HK$746mn revenue, up 83.5% YoY, accounted for around 50% of the company’s total revenue (vs 39% in 1H21). As complementary business to its ship & marine equipment leasing business, CSSC Shipping also has built a self-operated bulk carrier fleet and jointly-operated fleets. We believe CSSC Shipping has the capabilities to capture excess return through shipping cycles via investment in the self/jointly-operated fleets. Moreover, the company has a cash collection rate of charter hire of 100% and a vessel utilization rate of 100%, reflecting healthy balance sheet and sound operating efficiency.
Diversified vessel portfolio with focus on clean energy sector. CSSC Shipping’s vessel portfolio is well diversified across different segments, i.e. marine clean energy equipment, container vessels, bulk carriers and special tonnage carriers. As one of the first ship leasing companies to tap into green shipping, CSSC Shipping has a relatively high exposure to clean energy segment. Its 20 clean energy equipment vessels accounted for 36% of the contract value of its vessel portfolio at end-1H22, which generated 49.6% revenue in 1H22.
Robust growth of self/jointly-operated fleets. Leveraging CSSC’s insight and expertise in shipping industry, the company invested to build a self- operated fleet of 8 vessels and jointly-operated fleets of 34 vessels, which accounted for 21.6% of its total vessel portfolio value. The joint-operated oil tankers fleet generated HK$92mn investment gains in 1H22, up from the HK$10mn losses in 1H21; while the net profit from self-operated fleet increased 95% YoY to HK$171mn.
Sound asset quality and financial strength. The asset quality remained sound, with zero NPL formation and HK$23.5mn reversal of impairment in 1H22. Given that 1) the gearing ratio stood at a low level of 73.6% and 2) the company aims to optimize the liability cost by diversifying its funding sources, we expect there is room for further improvement of ROE.