Core Viewpoint - Haifeng International reported strong financial performance for 1H25, with revenue increasing by 28.0% to $1.66 billion and net profit rising by 79.7% to $630 million, exceeding expectations of $600 million [1] Financial Performance - The company announced an interim dividend of HKD 1.3 per share, with a payout ratio of 72%, resulting in a current dividend yield of 4.8% [1] - Gross margin and net profit margin improved to 40.2% and 37.8%, respectively, reflecting increases of 9.3 and 10.9 percentage points year-on-year [1] - The average container shipping price for the company was $776 per TEU, up 22.8% year-on-year, while the shipping volume reached 1.83 million TEUs, a 7.3% increase [1] Market Dynamics - The supply of small and medium-sized container ships is tightening, leading to a significant increase in rental rates, with a 1-year lease for a 2,000 TEU vessel rising by 83.6% to $26,610 per day [2] - The demand for small and medium-sized vessels is driven by industry restructuring, red sea detours, and adjustments in shipping routes [2] - The supply growth for small and medium-sized ships is projected at 2.2% for 2025, while demand is expected to grow by 3.6%, indicating a favorable supply-demand balance in the Asian container market [2] Future Outlook - The company has raised its net profit forecast for 2025 by 7% to $1.17 billion and maintained profit forecasts for 2026 and 2027 [3] - The target price has been increased by 11% to HKD 31.0, based on a 9.2x PE ratio for 2025, reflecting a strong investment case [3] - The company maintains a 70% dividend payout assumption for 2025-2027, with current stock prices corresponding to dividend yields of 8.8%, 6.9%, and 8.3% for the respective years [3]

Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 31.00 [6][7]. Core Views - The company reported a strong performance in 1H25, with revenue increasing by 28.0% year-on-year to USD 1.66 billion and net profit rising by 79.7% to USD 630 million, exceeding expectations [1][2]. - The increase in profitability is attributed to tariff disruptions and a significant rise in container shipping rates in Southeast Asia, with the average container shipping price increasing by 22.8% year-on-year [1][2]. - The company is expected to benefit from a tightening supply of small and medium-sized container ships, which enhances the resilience and growth potential of the Asian shipping market [1][3]. Summary by Sections Financial Performance - In 1H25, the company achieved a gross margin of 40.2% and a net profit margin of 37.8%, reflecting an increase of 9.3 and 10.9 percentage points year-on-year, respectively [2]. - The company’s container shipping volume reached 1.83 million TEUs, up 7.3% year-on-year, while the cost per container was USD 476, a 3.3% increase due to a rise in chartered vessels [2]. Market Dynamics - The supply of small and medium-sized container ships is tightening, with a 1-year average charter rate for 2,000 TEU vessels increasing by 83.6% to USD 26,610 per day [3]. - The demand for small ships is driven by industry restructuring and adjustments in shipping routes, which favor smaller vessels for regional market needs [3]. Industry Outlook - The company focuses on the Asian market, benefiting from trade growth in the region, with demand for small to medium-sized ships expected to outpace supply growth in the coming years [4]. - The net profit forecast for 2025 has been raised by 7% to USD 1.17 billion, with the target price adjusted upward by 11% to HKD 31.00, reflecting strong mid-term performance [4].

Core Viewpoint - The company anticipates stable cargo volume growth in the Asian region, driven by tariff policy changes and industry restructuring, which will enhance long-term potential for cargo flow [1][3]. Group 1: Tariff Policy and Market Dynamics - Since April, tariff policies have fluctuated, but cargo volume in the Asian region has shown resilience, with expectations of stable performance in April and May [1]. - The easing of tariffs between China and the U.S. in mid-May led to a surge in shipping demand, resulting in a significant increase in freight rates for routes to the U.S. [2]. - In May, the Shanghai Export Container Freight Index (SCFI) rose by 18.4% month-on-month, with specific routes to the U.S. experiencing increases of 47.6% and 30.1% for West and East Coast respectively [2]. Group 2: Regional Market Performance - The Southeast Asian market has benefited from industry restructuring, with cargo volume rebounding after initial disruptions, showing a week-on-week increase since April 10 [1]. - The average container freight index for Southeast Asia showed a month-on-month increase of 6.9% in April and a decrease of 6.1% in May, with year-on-year increases of 60.1% and 2.3% respectively [1]. Group 3: Shipping Capacity and Rental Trends - There is a tightening of capacity for small and medium-sized container ships, leading to rising rental prices, with a year-on-year increase of 78.9% for 1,000 TEU container ships in the first four months of 2025 [2]. - As of May, new container ship orders accounted for 29.4% of existing capacity, with a low order ratio for small and medium-sized vessels [2]. Group 4: Future Outlook - The company expects continued high demand and rising freight rates in June, supported by seasonal factors and tariff easing [3]. - Long-term growth is anticipated due to the company's focus on the Asian market and the flexibility of small vessel operations, enhancing competitive strength [3]. - Net profit forecasts for the company are set at $1.09 billion, $910 million, and $1.1 billion for 2025, 2026, and 2027 respectively, with a target price of 28.0 HKD based on a PE ratio of 8.9x for 2025 [3].

Investment Rating - The investment rating for the company is maintained as "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, driven by concentrated shipments from cargo owners [3] - The company is optimistic about the long-term growth potential in cargo volume due to regional market dynamics and the reshaping of industries, which will enhance the circulation of raw materials, semi-finished, and finished products [1][5] Summary by Sections Market Dynamics - The Southeast Asian market has benefited from the easing of tariffs, with cargo volume and shipping rates showing a positive trend since April 10. The average container shipping price index for Southeast Asia increased by 6.9% in April and decreased by 6.1% in May, with year-on-year increases of 60.1% and 2.3% respectively [2] - The average container shipping price index for Asia increased by 2.3% month-on-month in April, with a year-on-year increase of 24.0% [2] Shipping Rates and Capacity - The tightening of capacity for small and medium-sized container ships has led to an increase in charter rates, with a 78.9% year-on-year rise in the average charter rate for 1,000 TEU container ships from January to April 2025 [4] - As of May, the global new container ship orders accounted for 29.4% of existing capacity, with large container ships (over 8,000 TEU) having a higher order ratio of 46.0% compared to smaller vessels [4] Financial Projections - The company forecasts net profits of USD 1.09 billion, USD 905.56 million, and USD 1.10 billion for the years 2025, 2026, and 2027 respectively. The revenue projections for the same years are USD 3.27 billion, USD 3.10 billion, and USD 3.42 billion [5][7] - The estimated earnings per share (EPS) for 2025 is USD 0.40, with a projected return on equity (ROE) of 39.78% [7][28]

Investment 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]