China Shipping Development Co. Ltd.

Public (SHA: 600026)

Company Facts:

China Shipping Development Company Limited was known as Shanghai Haixing Shipping Company Limited that was initiated by Shanghai Sea Transportation (Group) Company in year 1994 and listed in Hong Kong Stock Exchange in the same year. The company’s current parent company is China Sea Transportation Group that was established in Shanghai on July 1997, which is also the parent company of Shanghai Sea Transpiration (Group) Company, Guangzhou Sea Transportation Group Company and Dalian Sea Transportation Company at the time it was set up. On December 1997, China Sea Transportation Group took over Shanghai Haixing Shipping Co. Ltd. and changed its name into China Shipping Development Co. Ltd. The company was listed in Shanghai Stock Exchange in year 2002.

China Shipping Development Co. Ltd. is the largest Chinese domestic costal sea-transporter for petrol and coal bulk containers. The company plays crucial role in China as well as Far East region. Moreover, the company has long-term transportation contracts with China Petroleum, which secures the stable growth in the company’s business and also allows the company to resist risks better in the highly competitive market.  In addition, the company recently has signed a 15 year international sea transportation service contract with China Capital Steel & Iron Co. Ltd. and thus officially entered iron mine transportation field, which has also effectively extended the company’s business scope.

In order to improve the company’s transportation capacity, the company has invested USD 0.46 billion for purchasing 4 VLCC (Very Large Crude Oil Carriers) on total carriage of 308 thousand tons. The orders will be delivered on the fourth quarter of year 2009 and in year 2010.

Financial Overview:

Related Companies:

-- Holding Shareholder:

China Sea Transportation (Group) Corporation

-- Collaboration:

Shanghai Shidai Sea Transportation Co. Ltd.

-- Subsidiaries:

China Shipping Development (Hong Kong) Vili Co. Ltd.

China Shipping Development (Hong Kong) Hangyun Co. Ltd.

Shanghai Yinhua Shipping Co. Ltd.

Zhuhai New Era Shipping Co. Ltd.

Shanghai Friendship Shipping Co. Ltd.

-- Invested by same holding company

China Sea Transportation (Southeast) Holding Co. Ltd.

China Shipping Telecom Co. Ltd.

Jade Queen Navigation Inc.

Guangzhou Shipping (Group) Co. Ltd.

China Shipping (European) Holding Co. Ltd.

China Shipping (Hainan) Haisheng Carrier Co. Ltd.

China Shipping Industry Co. Ltd.

China Shipping (Australia) Agency Co. Ltd.

China Shipping (Hong Kong) Holding Co. Ltd.

China Petroleum China Shipping Fuel Supply Co. Ltd.

Dalian Shipping (Group) Company

China Shipping Container Transportation Co. Ltd.

China Shipping Japan Corporation

Shanghai Shipping (Group) Company

China Shipping International Trading Co. Ltd.

China Shipping (North American) Holding Co. Ltd.

China Shipping International Carrier Management Co. Ltd.

China Shipping Carrier Agency Co. Ltd.

Stock Health:

As on 11 August, 2008

Open: 16.09    High: 16.38   Low: 14.90   Close: 15.25   Vol.: 7,062,771                 

Key Stats & Ratios

     Unite: RMB 10,000 Yuan

Daily Stats (last one month):

Performance Analysis

From the light of the above data, the stock price of China Shipping Development Co. Ltd. has slipped notably in the past one month. It is partially caused by the overall depression of the stock market; more importantly, it shows market’s worry towards continuous increase of the global petrol price and the possibility of BDI (Baltic Dry Index)’s reduction.

However, in my opinion, the above factors have limited impacts on the company’s performance since the recent petrol price reduction has not brought up the stock performance and changes in the global sea transportation price will potentially influence all related industries rather than China Shipping Development Co. Ltd. itself.

Personally, I believe, there are three other motivating factors that drove the stock price down recently. Firstly, the company is fighting for market shares with global sea transportation giants in the increasingly fierce international stage. Unlike some other industries such as Telecom, Insurance or Petroleum, Chinese shipping market is totally open-up to the global giants without protection from the government, which has left the company no geographic advantages. Moreover, the global wide competition in shipping industry is heating up; therefore, the company has to continuously improve itself in order to maintain the current customers and to gain more market shares, which demands heavy capital investments as well.  Secondly, the global economy has shown slowed down path, which effectively reduced the international trade and sea transportation demands. Thirdly, under river pipe has been built up for transporting fuel in China, thus, the alternative way of fuel transportation has taken some domestic business from the company.

To conclude, China Shipping Development Co. Ltd. is the largest fuel and coal transporter along the Chinese coast, and has entered iron mine transportation service in the field of international market as well. The company’s business performance has influenced by global petrol price increase, international carrier price reduction, and fierce competition with global shipping giants, global economy recession and alternative fuel transportation options; however, the comprehensive strength of the company has been developed over the years and it will secure the future growth of the business.

Personally, I believe the stock price of China Shipping Development Co. Ltd. has dropped to historical new low, thus, investors whom interested in shipping plate can make a move. However, investors are also suggested to avoid risks and operate their stock accordingly.  Existing shareholders probably have to wait for quite long time for a break-even, thus, should gradually reduce holdings during the stock’s turbulences.