Shenwan Hongyuan Group Co., Ltd. has released a research report maintaining its net profit forecasts for COMEC (00317) at RMB 1.5 billion, RMB 2.4 billion, and RMB 4.3 billion for the years 2026 to 2028, corresponding to price-to-earnings ratios of 12, 8, and 4 times for those years, respectively. The company's current price-to-order (PO) ratio, calculated as market capitalization divided by the value of its order backlog, stands at only 0.29, which is at a relatively low level in the cycle. With the gradual delivery of high-value orders and efficiency improvements from batch shipbuilding, the company's profits are entering a phase of accelerated growth, and a valuation recovery is anticipated, leading to the maintained "Buy" rating. The key points from Shenwan Hongyuan are as follows:
The company released its first-quarter 2026 report, showing a net profit attributable to shareholders of RMB 396 million, a 115% year-on-year increase. After excluding non-recurring items, the adjusted net profit was RMB 364 million, up 104% year-on-year. The performance was near the midpoint of the pre-announced range, with accelerated delivery schedules for commercial vessels from its controlling shipyard, Huangpu Wenchong, and its equity-invested shipyard, Guangzhou Shipyard International, leading to faster profit realization, which aligns with expectations.
Advantages in serialized products are continuously strengthening, and batch construction is driving profitability improvements. The construction cycle for the company's core vessel types has further shortened, supporting steady revenue growth and a sequential improvement in gross margin (Q1 2026 gross margin increased by 1.5 percentage points compared to Q4 2025). The company holds a leading position in the feeder container ship segment, having established the "Honghu" brand series of vessels, and is progressively achieving scaled order intake and continuous construction. Batch production helps amortize per-vessel costs, promoting an upward trend in profit margins.
The feeder container ship market is experiencing a rapid upswing, from which the company is benefiting significantly. Frequent geopolitical disruptions are accelerating the regional restructuring of global supply chains, leading to denser near-sea routes and expanding demand for feeder container shipping. Shipowners' enthusiasm for ordering small and medium-sized container vessels has notably increased. As of the end of March 2026, the average new orders for 3,000 to 6,000 TEU container ships over the past 12 months, measured in compensated gross tonnage (CGT), were 291% higher than the average of the past decade, highlighting the strong demand characteristics. Huangpu Wenchong, under the company, holds a significant advantage in the 3,000 to 6,000 TEU segment, accounting for 19% of the global order backlog and 41% of new global orders in 2026, ranking first globally in both metrics. This positions the company as a core beneficiary of the current release of demand for small and medium-sized container vessels.
Long-term commercial vessel production scheduling shows substantial incremental growth, with an increasing proportion of high-value orders, indicating the shipbuilding profit realization phase is accelerating. In terms of volume, the company's scheduled production for 2028 already exceeds the levels of 2025-2027. Specifically, Huangpu Wenchong and Guangzhou Shipyard International's 2028 production schedules have increased by 135% and 60%, respectively, compared to 2025, indicating significant room for medium-to-long-term capacity release. In terms of price, there is typically a 2-3 year lag between shipbuilding order signing and delivery. Vessels delivered from 2026 to 2028 primarily correspond to high-value orders signed between 2023 and 2025. Furthermore, the proportion of more profitable container ships in the production schedule is increasing year by year (23%, 47%, and 85% for 2026-2028, respectively). Under the combined effect of growing delivery volume and rising order prices, the company's shipbuilding business profits are expected to accelerate their release.
The upward momentum in new shipbuilding prices is strengthening, with downstream market buoyancy continuing to transmit to the shipbuilding sector. New shipbuilding prices have gradually stabilized and are expected to enter an upward trajectory. Since early 2026, the tanker shipping market has seen a significant improvement, with spot freight rates surpassing historical highs and time charter rates maintaining high volatility. Improved profitability for shipowners is driving an acceleration in new order placements. As different vessel types share shipyard capacity, growth in tanker orders and new shipbuilding prices is expected to drive the overall new shipbuilding price index upward. The new shipbuilding price index has already risen sequentially for six consecutive weeks and is anticipated to maintain an upward trend, supporting an upward revision of the company's long-term earnings expectations.
Risk factors include: risks associated with commercial vessel new order intake falling short of expectations, risks of impairment on non-commercial product orders, risks of a downturn in shipping market conditions, and risks related to significant increases in steel prices.
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