HTSC·2026-03-06 01:44Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 3.50 [1] Core Views - The company reported a revenue of USD 2.08 billion for 2025, a decline of 19.4% year-on-year, and a net profit attributable to shareholders of USD 58.17 million, down 55.8% year-on-year. The lower-than-expected daily freight rates were the main reason for the profit decline [1] - The geopolitical situation in the Middle East is expected to increase concerns over global energy and trade supply chain disruptions, potentially leading to a significant rise in dry bulk freight rates and boosting the company's profitability in 2026 [1] - The company announced a new dividend policy starting in 2026, with a maximum payout ratio of 100% if the balance sheet shows net cash at year-end, reflecting a commitment to shareholder returns [2] Summary by Sections Financial Performance - In 2025, the Baltic Dry Index (BDI) and the Baltic Handysize Index (BHSI) saw average declines of 4.2% and 5.9% respectively due to weak global demand in the first half of the year. However, in the second half of 2025, freight rates rebounded significantly, with BDI and BHSI increasing by 23.4% and 9.2% year-on-year, respectively [3] - The company achieved a net profit of USD 32.57 million in the second half of 2025, which was a 56.0% decline year-on-year but a 27.2% increase quarter-on-quarter [3] Market Outlook - The geopolitical risk premium is expected to drive global shipping prices significantly higher due to increased safety risks and the reallocation of shipping capacity. The market's concerns about supply chain disruptions are likely to persist, which could lead to a rise in dry bulk freight rates [4] - Year-to-date, the BDI has increased by 107.7% compared to the previous year, indicating a strong recovery in freight rates [4] Earnings Forecast - The earnings forecast for 2026 has been revised upwards by 36% to USD 150 million, reflecting the anticipated rise in dry bulk freight rates due to geopolitical disturbances. The net profit forecasts for 2027 and 2028 are maintained at USD 130 million and USD 110 million, respectively [5] - The target price has been adjusted upwards by 17% to HKD 3.50 based on a price-to-book ratio of 1.3x for 2026 estimates, considering the current market conditions influenced by geopolitical events [5]