Core Viewpoint - Hapag-Lloyd is proceeding with an investment plan for 22 small container ships despite a significant decline in profits this year, aiming to modernize its fleet and support its transition to net-zero emissions [1][2]. Investment and Fleet Modernization - The company plans to acquire medium-sized vessels with a capacity of less than 5000 TEU through a combination of long-term leasing and owned ships, with preliminary contracts signed with two Chinese shipyards valued at approximately $1.58 billion [1]. - The new vessels will have capacities ranging from 3500 TEU to 4500 TEU, built by Yantai Raffles CIMC Offshore and Taizhou Sanfu Ship Engineering [1]. Financial Performance - In Q3, Hapag-Lloyd's profit dropped to €138 million (approximately $160 million), a decline of over 85% compared to €955 million in the same period last year, with revenue decreasing from €5.2 billion to €4.6 billion [1]. - For the first nine months, overall profit fell to €846 million, nearly halving from €1.6 billion in the previous year [1]. Market Environment and Strategic Response - CEO Rolf Habben Jansen noted that the market environment has been highly volatile due to geopolitical developments and trade policy uncertainties, but strong customer demand has led to significant volume growth [2]. - The company has narrowed its profit expectations for FY2025, with EBITDA projected between €2.8 billion and €3.2 billion, and EBIT between €500 million and €1 billion [2]. Pricing and Competitive Position - Average freight rates remain under pressure, with the price per TEU at $1397, a decrease of 4.8% year-on-year [3]. - The Gemini network, a collaboration with AP Moller-Maersk, has improved schedule reliability and is expected to yield cost advantages by 2026 [3]. Long-term Outlook - Hapag-Lloyd's investment decision reflects strategic foresight, enhancing the flexibility of its feeder network and contributing to decarbonization efforts, which is crucial for maintaining competitiveness during low freight rate periods [3]. - The company remains cautiously optimistic about a recovery in global trade, signaling a commitment to sustainable development in the shipping industry [3].

Group 1: Industry Overview - The oil shipping sector is currently undervalued, with companies showing elasticity and dividend support, suggesting a focus on left-side opportunities and seasonal demand improvements [1] - Recent shipping price updates indicate a rebound in container shipping prices for the US routes, while European routes have declined; SCFI prices changed by +17.0% for US, -11.2% for Europe, and +5.3% for Southeast Asia week-on-week [1] - The dry bulk index (BDI) has shown a week-on-week increase of +7.0%, with specific indices like BCI and BSI rising by +8.2% and +4.3% respectively [1] Group 2: Supply Dynamics - There is a persistent tight supply of small container ships in the Asian region, with only a 1-2% annual increase in supply expected over the next three years, while the proportion of ships over 25 years old has reached 11.2% [2] - The majority of new small container ships are being ordered for routes bypassing the Red Sea, with limited new supply expected in the Asian region, which only saw a 2.2% increase in small ship capacity [2] - The top ten shipping companies in the Asian region hold approximately 70% of the capacity share, with a high reliance on chartered vessels, indicating a competitive landscape focused on larger vessels [3]

Investment Rating - The report maintains an "Overweight" rating for the transportation industry, indicating expectations for the industry to outperform the overall market [11]. Core Insights - The shipping sector is expected to see performance improvements driven by a shift in oil production policies and a tightening supply of older vessels, with demand for small container ships increasing due to regional industrial shifts [1][2]. - The shipbuilding market is anticipated to recover as demand is expected to rebound following the easing of trade tensions, with new orders and ship prices likely to rise [2]. - The aviation sector is experiencing steady growth in passenger traffic, with a narrowing decline in ticket prices, suggesting a recovery in airline revenues [2]. - The express delivery industry is facing a decline in growth rates, with increased competition in the mid-to-high-end e-commerce segment, but companies like SF Express are expected to maintain strong growth [2][3]. Shipping Sector Summary - The demand for oil tankers and bulk carriers is improving, with Q2 performance estimates showing significant increases for companies like COSCO Shipping Energy and China Merchants Energy [2]. - The small container ship market is experiencing rising charter rates and second-hand prices, with a tight supply situation expected to persist until at least 2030 [2]. Shipbuilding Sector Summary - The easing of the 301 tariffs is expected to release pent-up demand in the shipbuilding market, with new orders likely to increase as trade relations improve [2]. - The report highlights that China's shipbuilding industry is recovering from previous pressures, with new orders returning to a leading position [2]. Aviation Sector Summary - The aviation market is entering a peak season with stable growth in passenger numbers, and airlines are expected to benefit from improved cost structures due to lower fuel prices [2]. - Recommendations include major airlines such as China Southern Airlines and China Eastern Airlines, which are projected to return to profitability [3]. Express Delivery Sector Summary - The express delivery industry is seeing a decrease in growth rates, with competition intensifying in the e-commerce segment, particularly for mid-to-high-end services [2]. - Despite the overall slowdown, SF Express is expected to continue its high growth trajectory, driven by operational expansions and new service offerings [2]. Road and Rail Sector Summary - The report anticipates stable growth in highway traffic and toll revenues, with recommendations for companies like Zhejiang Expressway and Ninghu Expressway [2]. - Rail passenger traffic is also expected to grow, albeit at a slower pace, with recommendations for high-speed rail companies [2].