SITC(HK:01308) HTSC·2025-06-05 09:48Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 28.00 [8] Core Views - The company has shown resilience in cargo volume within the Asian region despite fluctuating tariff policies since April. The cargo volume is expected to remain stable and improve in April and May [1] - The easing of tariffs between China and the US in mid-May led to a surge in shipping rates for routes to the US due to a mismatch in supply and demand as shippers concentrated their shipments [3] - The company is optimistic about the long-term growth potential driven by regional industrial restructuring, which will enhance the circulation of raw materials, semi-finished products, and finished goods [1][5] Summary by Sections Market Performance - The Southeast Asian market has benefited from the easing of tariffs, with container freight rates showing a month-on-month increase of 6.9% in April and a year-on-year increase of 60.1% [2] - The average container freight rate index for the Asian region increased by 2.3% month-on-month and 24.0% year-on-year in April [2] Shipping Rates and Volume - In May, the Shanghai Export Container Freight Index (SCFI) saw a significant month-on-month increase of 18.4%, although it was down 38.7% year-on-year due to a high base from the previous year [3] - Specific routes such as China to the US West Coast and East Coast experienced substantial increases in freight rates, with month-on-month rises of 47.6% and 30.1% respectively [3] Fleet and Capacity - There is a tightening of capacity for small and medium-sized container ships, leading to an increase in charter rates, with a year-on-year rise of 78.9% for 1,000 TEU vessels from January to April 2025 [4] - As of May, new orders for container ships represented only 29.4% of existing capacity, indicating a low order book for smaller vessels [4] Future Outlook - The company anticipates continued high demand and rising freight rates in June due to seasonal peaks in Europe and the US, alongside the benefits from tariff reductions [5] - Long-term, the company is expected to maintain resilience in cargo volume and growth potential, supported by its focus on the Asian market and flexible operations with smaller vessels [5] - Profit forecasts for the company are set at USD 1.09 billion for 2025, with a target price based on a PE ratio of 8.9x for 2025 [5]