Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 7.90, down 24% from the previous target price [7][5]. Core Views - The company reported a revenue of RMB 12.58 billion for 1H25, a year-on-year decrease of 4.9%, and a net profit of RMB 2.12 billion, down 14.9% year-on-year, which was below the expected RMB 2.32 billion [1][5]. - The decline in profitability is attributed to the weak international oil and bulk cargo markets, leading to a drop in freight rates [1][5]. - The container shipping segment performed well due to tariff disruptions, resulting in a year-on-year increase in freight rates in the Asian region [1][5]. - Looking ahead to the second half of the year, seasonal demand is expected to boost oil and bulk freight rates, with a potential recovery in the market [1][5]. Summary by Sections International Oil Shipping - The company's oil tanker business generated revenue of RMB 4.44 billion in 1H25, down 10.5% year-on-year, with a net profit of RMB 1.29 billion, a decrease of 22.8% [2]. - The decline in the international oil shipping market is primarily due to increased geopolitical uncertainties affecting production consumption and crude oil replenishment demand [2]. - The Baltic Dirty Tanker Index (BDTI) averaged a year-on-year decrease of 21.4% in 1H25, with VLCC, Suezmax, and Aframax rates down 4.6%, 11.3%, and 32.3% respectively [2]. - There is an expectation for a recovery in oil shipping rates in the second half of the year, driven by seasonal demand and replenishment needs [2]. International Dry Bulk Shipping - The dry bulk shipping segment reported revenue of RMB 3.70 billion in 1H25, down 6.5% year-on-year, with a net profit of RMB 420 million, a significant drop of 47.3% [3]. - The profit decline is attributed to weak macro demand, putting pressure on the global dry bulk market, with the Baltic Dry Index (BDI) averaging a year-on-year decrease of 29.7% [3]. - Despite the weak spot market rates, the company has strengthened project cooperation with key clients, securing stable long-term earnings from its VLOC fleet [3]. - There is an expectation for marginal improvement in demand and a potential stabilization of dry bulk freight rates in the second half of the year [3]. Container and LNG Shipping - The container shipping business saw a net profit of RMB 630 million in 1H25, a remarkable increase of 161.5% year-on-year, driven by significant increases in freight rates due to tariff disruptions [4]. - The company has accelerated its LNG business development, achieving a net profit of RMB 320 million in 1H25, with 23 LNG vessels in operation and 41 on order, all under long-term charter contracts [4]. - The roll-on/roll-off shipping business reported a net profit of RMB 110 million in 1H25, down 37.4% year-on-year, primarily due to increased vessel supply and declining freight rates [4]. Market Outlook - The report suggests that the international oil and bulk shipping sectors may have reached a bottom in 1H25, with potential recovery driven by the US interest rate cut cycle and economic recovery in China, which could boost global commodity demand [5]. - The profit forecasts for 2025, 2026, and 2027 have been revised down by 29%, 18%, and 9% respectively, to RMB 4.72 billion, RMB 5.23 billion, and RMB 5.69 billion [5].

Core Viewpoint - Pacific Shipping reported a significant decline in net profit for the first half of 2025, primarily due to weak global dry bulk market demand and falling freight rates [1][2]. Group 1: Financial Performance - The company’s net profit attributable to shareholders was $25.6 million, down 55.6% year-on-year [1]. - The adjusted net profit was $21.9 million, a decrease of 50.1%, which was below expectations [1]. - Average daily freight rates for the company's handy and super handy bulk carriers fell by 6.8% and 10.7%, respectively, due to weak demand and oversupply [1][2]. Group 2: Market Outlook - The company anticipates a seasonal demand increase in the second half of 2025, which may stabilize freight rates [1]. - Long-term prospects depend on the U.S. interest rate cuts and a boost in China's domestic demand, which could enhance global bulk demand and freight rates [1][2]. - The global dry bulk shipping market is expected to see a slight recovery in profitability from 2026 to 2027, driven by improved market conditions and liquidity in the Hong Kong stock market [1][3]. Group 3: Operational Metrics - The number of operating days for the company's handy and super handy vessels decreased by 7.4% and 5.5%, respectively, due to the disposal of older ships [2]. - The fleet capacity as of June 30 was 108 owned vessels, down 6.1% year-on-year, with long-term chartered vessels also declining by 11.8% [2]. Group 4: Profit Forecast Adjustments - The profit forecasts for 2025, 2026, and 2027 have been revised downwards by 53.0%, 39.9%, and 24.4%, respectively, reflecting the current market conditions [3]. - The price-to-book (PB) ratio has been adjusted upwards to 0.9x for 2025, leading to a target price increase of 19% to HKD 2.5 [3].