Foreign investors in Asia are calling for Evergreen Shipping (2603), and the target price is revised up to 185 yuan. (Information photo, Associated Press)
[Reporter Zhuo Yijun/Taipei Report]Quickly admit his mistake! Asian foreign investors just downgraded Evergreen (2603) rating to “Neutral” at the end of last month, but Asian foreign investors issued the latest Evergreen Investment Report today and re-assigned Evergreen’s “Buy” rating. The target price was revised up from RMB 165 to 185. In view of the continuous increase in global freight rates, the SCFI freight index has increased by 26% since the third quarter, and Evergreen’s fourth quarter profits have increased. Visibility has increased significantly, and the profit growth can continue in the future. Earnings are estimated at 15%, and rising profits will boost Evergreen’s share price performance, raising Evergreen’s rating from “Neutral” to “Buy”.
Asian foreign investors are optimistic about Evergreen’s future growth potential with three characteristics: stronger, younger, and faster. Evergreen’s fleet capacity will increase by 18% this year, 33 new ships and 260,000 TEUs (20-foot containers) will be added. The investment in new ships is the best in the industry. In the future, the fleet capacity will increase by 48% to 670,000 TEUs. The proportion of Evergreen ships equipped with desulfurization towers is quite high. By June 2021, the proportion will be 65%. Optimize management costs through these young new fleets.
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Foreign investors in Asia bluntly said that the previous downgrading of Evergreen’s rating to neutral was mainly due to the possible slowdown in strong profit growth momentum. However, it now appears that operations in the fourth quarter are strong, and freight rates in the third quarter have risen better than expected. Evergreen’s profit is expected to increase. With the increase in profit visibility in the fourth quarter and beyond, Evergreen’s strong profit growth will boost its share price performance. Evergreen’s rating will be raised to “buy” and the forecast for this year’s net profit will be revised upwards by 15%. It is estimated that this year’s earnings per share is 38.12 yuan, and this year’s Evergreen yield rate is as high as 17%. It is expected that as the visibility of the strong operation performance in the fourth quarter increases, Xiu Evergreen’s profit in the fourth quarter will gradually become a consensus in the market.
Asian foreign companies pointed out that at the beginning of the third quarter, Evergreen delivered a monthly revenue increase of 22% in July, which is better than the monthly increase of 6% during the same period in 2012-2020. The SCFI freight index has risen for 14 consecutive weeks. It is estimated that the operation in the third quarter will be better than that in the second quarter. If the port is eased, the operation in the fourth quarter is expected to continue to strengthen. Hapag-Lloyd previously proposed that the port may not be relieved until the Chinese Lunar New Year in February next year.
Asian foreign investors pointed out that there have been new emergencies in the port congestion issue recently. The Meishan Port Area of Zhoushan Port, Ningbo, China has been closed due to the epidemic on August 11, and the scale is about half of China’s Yantian Port. This puts greater pressure on port container digestion. According to the latest survey, the number of container ships waiting to enter the port near Zhoushan Port has increased from 28 on August 10 to 39.
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