Huatai Securities Initiates Coverage of CIMC Group with "Overweight" Rating, Citing Recovery in Offshore Drilling Demand

HONG KONG, July 28, 2023 - (ACN Newswire) - Recently, Huatai Securities issued a research report pointed out that the recovery of offshore demand and the shortage in the supply side come at the same time. In light of this, offshore drilling platforms have become scarce in the industry chain. CIMC Group, having strategically laid out its offshore equipment business fifteen years ago, has emerged as the major player in deepwater platform design and construction in China. Its offshore oil drilling platforms have been successfully deployed worldwide in major offshore oil and gas production areas, showcasing an extensive product range. 

Huatai Securities has initiated coverage of CIMC Group for the first time and accorded it a "Overweight" rating. Huatai's expectations for CIMC Group's 2023-2026 PE ratio lie in the range of 23-26 times, corresponding to a target price of RMB 7.6. Taking into account the average H and A-share PE ratios from 2023 to the present at 67%, along with a Hong Kong dollar exchange rate of 0.91, the corresponding H-share 2023 PE ratio is projected at 17.7x, resulting in a corresponding H-share target price of HKD 5.63.

The report also highlights that many new container ships are expected to be delivered in 2023-2024, along with a high volume of old containers reaching the replacement stage. As a leading container producer, CIMC Group's renewal demand will provide sustained support to the industry. Concurrently, the global offshore market is gradually entering an upswing in the business cycle, leading to a significant increase in the Group's new order intake. As of March 2023, CIMC Group's new effective offshore orders have surged by 77% YoY, amounting to USD 2.56 billion, while the value of its accumulated orders in hand has grown by 122% YoY, reaching USD 3.9 billion.

Meanwhile, the Ministry of Industry and Information Technology recently issued the Fifth Batch of specialized, refinement, differential and innovation ("SRDI") "Little Giants" Enterprises. Four subsidiaries under CIMC Group (000039.SZ/02039.HK) have been selected as national-level SRDI "little giants" enterprises, recognizing their leading key technologies and outstanding product innovation capabilities. With this recent recognition, CIMC Group now boasts a total of 13 subsidiaries awarded with this honor. As a global leader in logistics and energy industry manufacturing, CIMC Group maintains a wide business layout and sustains diversified development.

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