Investment Rating - The report maintains a cautious view on the container shipping sector, specifically placing Maersk underweight (UW) and highlighting downside risks for ZIM and Hapag-Lloyd as well [1][7]. Core Insights - The global container shipping industry is facing increased volatility, particularly in the Asia-North America trade lane, which accounts for approximately 17% of global containerized trade. Recent booking declines from China have been noted, with Hapag-Lloyd reporting a 30% year-over-year decrease in China-US bookings [1]. - Drewry has downgraded its demand forecast for 2025 to a -1% decline in container volume throughput, contrasting with a previous forecast of +3% in January. Supply growth is expected to rise by 5.4% in 2025, leading to a significant imbalance in the market [1][5]. - Drewry anticipates a 15% year-over-year decline in global freight rates for 2025, followed by an additional 18% decline in 2026. This forecast does not yet account for the potential return of capacity to the Suez Canal, which could exert further downward pressure on rates [1][5]. - The demand-supply outlook is increasingly negative, with Drewry projecting a 1% decline in container port handling volumes for 2025, driven by a 5.7% decrease in North America and a 4.5% decrease in China [1][5]. - The report indicates that while blank sailings have increased as a form of capacity management, rates have continued to decline, highlighting the challenges carriers face in maintaining schedule reliability and customer relationships [1][5]. Summary by Sections Demand and Supply Outlook - Drewry's Global Supply/Demand Index is under gradual pressure, with expectations of increased scrapping post-2026. However, order cancellations are rare, and delivery delays may occur [1][5]. - The report notes that the Asia-US contracting season is closing, with carriers offering discounts to maintain market share, despite spot rates declining since the beginning of the year [5]. Tariff and Policy Implications - The revised USTR charges on Chinese shipbuilding are viewed as less severe than initially proposed, with fees now applied based on net tonnage. Drewry advises shippers to resist accepting surcharges related to these fees [5][6]. Market Dynamics - The report highlights that the US import cliff has not yet materialized, with potential impacts expected to be seen from mid-May onwards. Utilization rates on key trade lanes have shown a material drop, indicating further challenges ahead [7][10].

Summary of COSCO Shipping Holdings Conference Call Company Overview - **Company**: COSCO Shipping Holdings Ltd (1919.HK) - **Industry**: Transportation & Infrastructure - **Market Cap**: Rmb219,403 million as of March 21, 2025 - **Stock Rating**: Underweight - **Price Target**: HK$8.50, representing a downside of 29% from the closing price of HK$11.98 Key Financial Highlights - **2024 Net Profit**: Rmb49 billion, consistent with preliminary results and estimates [1] - **Operating Cash Inflow**: Rmb69.3 billion in 2024 [2] - **Capital Expenditures**: Rmb26 billion and lease payments of Rmb13.1 billion in 2024 [2] - **Share Repurchases**: Rmb2 billion in A and H shares, representing 4% of 2024 net profit [2] - **Segment Net Profit**: Rmb50 billion in 2024, up from Rmb22 billion in 2023 [8] - **Volume Growth**: Increased by 10.1% YoY to 25.9 million TEUs in 2024 [8] Revenue Breakdown - **Total Revenue**: Rmb233.9 billion in 2024, a 33.3% increase YoY [9] - **Container Shipping Revenue**: Rmb225.97 billion, up 34.4% YoY [9] - **Container Terminals and Related Businesses**: Rmb10.81 billion, up 4.0% YoY [9] - **Operating Profit**: Rmb59.02 billion, a 139.4% increase YoY [9] - **Net Margin**: 21.0%, up from 13.6% in 2023 [9] Dividend Policy - **Dividend Payout Ratio**: Expected to remain at 30-50% for 2025-2027 [8] - **Implied Dividend Yield**: 9% on H-shares and 7% on A-shares for 2H24 [8] Market Outlook and Risks - **Market Sentiment**: Soft sentiment in the container shipping market, with uncertain export momentum due to potential trade tariffs [8] - **Down-Cycle Continuation**: Anticipated continuation of the container shipping down-cycle through 2025-2026 [8] - **Risks**: Include global trade drops amid macro headwinds, significant fuel price increases, and failure of segment capacity discipline [13][14] Valuation Methodology - **Target P/B Ratios**: - Bull Case: 0.9x - Base Case: 0.5x - Bear Case: 0.2x [10][11] - **Upside and Downside Risks**: Equal probabilities of upside from global trade recovery and downside from unfavorable supply-demand outlook [10][11] Conclusion COSCO Shipping Holdings has shown strong financial performance in 2024, with significant increases in net profit and revenue. However, the company faces challenges in the current market environment, including soft demand and potential trade issues, leading to a cautious outlook for the coming years. The stock is rated as underweight, reflecting concerns over future performance amidst ongoing industry headwinds.