News

After market close on March 25, CIMC reported 2013 net profit ofRmb2.18bn (+12% yoy) that came in significantly above ours/Bloombergconsensus forecasts of Rmb1.25bn/1.51bn. However, the surprise wasmainly from one-off securities asset disposal gains in 4Q 2013(Rmb570mn), FX gains in 2013 (Rmb72mn) and higher-than-expectedcapitalized interests in 2013 (Rmb339mn). While top-line growth in 2013came in slightly stronger (+7 yoy% vs. GSe: 3%), EBIT came just in line withour forecasts at Rmb3.2bn, due to weaker EBIT margin of -1.3pp to 5.6% in2013 (vs. GSe: 5.7%), from the decline in container box segmental margins.

Analysis

(1) Significant non-recurring gains were recognized in 4Q 2013:CIMC’s significant investment gains of Rmb570mn in 4Q 2013 (vs. loss ofRmb62mn in 9M 2013) were mainly recognized on the disposal of itsavailable-for-sale financial assets, that included its investments in ChinaMerchants Bank and China Merchants Securities.

(2) Container box segment saw a 44% decline in segmental profitsin 2013, but slightly outperformed its closest peer Singamas (-54%yoy): CIMC’s dry box sales volumes were up 1% yoy, while ASP declinedby 13% yoy to US$1,972 per box in 2013. This compares with the secondlargest player Singamas’ 5% yoy decline in dry box sales volume and a10% yoy decline in ASP to US$2,195 in 2013. Overall box segment grossmargin came in at 17% (-1.3ppts) vs. Singamas at 5% (-2.8ppts).

(3) Offshore engineering segmental loss narrowed to Rmb297mn in2013 vs. our estimate for a loss of Rmb387mn and a loss of Rmb527mn in2012, on deliveries of more rigs and revenue recognition of new projects.

(4) Capex surged in 2013 to Rmb7.0bn (from Rmb2.4bn in 2012), due tovessel payments. Net debt/equity was at 79% at end-2013 vs. 71% in 2012.

Implications

Our rating, target price, and estimates are unchanged. We wait for detailson its outlook at the investor briefing at 4:00pm HKT on Mar 26.

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