Taiwan Container Shipping:2Q17results point to a stronger 2H recovery

类别:行业研究 机构:香港上海汇丰银行有限公司 研究员:香港上海汇丰研究所 日期:2017-08-21

Evergreen recorded a recurring profit of TWD2.1bn (16.3% annualised ROE) in2Q17vs a loss of TWD2.4bn in 2Q16and profit of TWD487m in 1Q17, driven byhigher operating profit and a higher profit contribution from associates and JVs. Ledby market share gain (thanks to the Hanjin Shipping bankruptcy) and freight rateincrease, its revenue grew 27% y-o-y growth (highest since 1Q13) in 2Q17. This ledto EBIT margin of 4.7% (+14ppt y-o-y and +3ppt q-o-q). A higher profit contributionfrom associates and JVs was partly driven by Eva Air (2618TT, NR) in whichEvergreen holds a 16.31% stake. Eva Air reported profit of TWD1.6bn in 2Q17,compared to a loss of TWD739m in 1Q17and a profit of TWD1.2bn in 2Q16.

    Yang Ming sees a significant improvement and turns profitable at EBIT level:Yang Ming had a recurring loss of TWD506m (-12.6% annualised ROE) vs a loss ofTWD5.0bn in 2Q16and a loss of TWD1.7bn in 1Q17. Yang Ming registered 20%y-o-y revenue growth in 2Q17driven by a rebound in freight rates and market sharegain while operating costs were largely flat, reflecting continued improvement in costefficiencies. As a result, operating margin turned positive at 0.4% in 2Q17(+18ppty-o-y and +4ppt q-o-q) but higher leverage remains a drag on the bottom line.

    We increase 2017e Evergreen ROE to 11.0% (from 1.3%) and YMM to -7.8% (from-31.1%). We increase our earnings forecasts for both Evergreen and Yang Ming, drivenby the expectation of a strong peak season ahead and the full impact of higher annualcontract rates. We now forecast profit of TWD5.9bn (11.0% ROE) for Evergreen and aloss of TWD1.3bn (-7.8% ROE) for Yang Ming in 2017. We are ahead of consensus onour 2017earnings forecasts for Evergreen and Yang Ming. Recent losses have gearedshipping lines’ balance sheets and unsurprisingly a 1ppt improvement in EBIT marginwould increase 2017e ROE by 3% for Evergreen and 9% for Yang Ming.

    Upgrade Evergreen to Buy from Hold and Yang Ming to Hold from Reduce: Weraise our TP to TWD21.1from TWD16.3for Evergreen on 1.20x 2018e PB (was1.12x 2017e PB) as ROE is improving. We value Yang Ming at 1.17x 2018e PB (was0.78x 2017e PB) and arrive at a higher TP of TWD12.8vs TWD6.50.

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