China's Number One Shipbuilder Hit Hard By Global Macro In H1 But Its EV Spin-off Is Making Record Sales

China International Marine Containers (Group) Co., Ltd. released worse-than-expected unaudited interim 2023 earnings Thursday. The company, which is a proxy for exporters in China, revealed the extent to which macroeconomic pressures have weighed on performance, with all key metrics coming in down and far below analyst forecasts.

The company reported that its unaudited revenue was 60.75 billion RMB ($8.4 billion) in the January to July period this year, down 16% from the same period in 2022. Operating profit was hit even harder, off 63% since the same year-ago period, at 1.65 billion RMB.

Earnings per share (EPS) came in at HK$0.076, around just half of analyst expectations. For the financial year 2023, analyst estimates of per share earnings are HK$0.31.  

The HK$30.43 billion ($4 billion) ship-building giant is one of China’s leading logistics and energy transportation companies and is the largest volume producer of standard dry containers, reefer containers and special-purpose containers.

“The growth of global goods trade [has] slowed down and demand in the container shipping market [has] weakened, which led to sluggish demand for new containers,” the company said in its interim earnings report.

One bright spot for the company in the first half of the year were results from its truck maker subsidiary CIMC Vehicles, in which CIMC holds a 57% equity stake. CIMC Vehicles makes industrial usage trucks, trailers and land transportation vehicles, and is heavily invested in energy-efficient vehicle production now, the company said. CIMC Vehicles increased revenue by 20% to a record 13.5 billion RMB, while net profit in the subsidiary surged 410% to another record of 1.8 billion RMB.

Still, the strong growth in CIMC’s EV business was not enough to offset the damage done from weakening macroeconomic trading conditions, the company said.

“Affected by factors such as the weakening of global economic and trade growth momentum, coupled with the backlog of containers that customers have overbought due to the recovery of supply chain efficiency, demand for containers this year has fallen to its lowest point since the financial crisis,” said CIMC.

Energy and exporter stocks are in view this week as reports emerge that Chinese companies are battling tough external pressures with overseas trading, partly due to political tensions with the US. CIMC shares were 1.6% lower in Hong Kong hours trading while shares in CIMC Vehicles (Group) Co Ltd rose 1.3%. CIMC trades under stock ticker 2039.HK and CIMC Vehicles is listed under 1839.HK on the Hong Kong Stock Exchange. 

Exporter-related shares Fosun International Limited FOSUF, Sinopec Shanghai Petrochemical Limited, PetroChina Company Limited PCCYF, Alibaba Group Holding Limited BABA and CMOC Group Limited CMOC were mixed in Hong Kong trading Thursday.

Energy efficient vehicle stocks were showing strength with BYD Company Limited BYDDY 0.6% higher, Li Auto Inc. LI up 1.4%, NIO Inc. NIO jumping 2.3% and XPeng Inc. XPEV leaping 5% in Hong Kong afternoon-hours trading.