Investment Rating - The report maintains a "Buy" rating for Zhonggu Logistics [1] Core Views - The small container ship market remains highly prosperous, benefiting from the foreign trade leasing business [1] - The company reported a revenue of 11.258 billion yuan in 2024, a year-on-year decline of 9%, with a net profit of 1.835 billion yuan, a year-on-year increase of 7% [7] - In Q1 2025, the company achieved a revenue of 2.569 billion yuan, down 8% year-on-year, while net profit rose by 41% to 547 million yuan [7] - The company is optimizing its capacity allocation between domestic and foreign trade to enhance operational efficiency [7] - The demand for small container ships is strong due to the shift of the industrial chain from China to Southeast Asia and ongoing trade tensions between China and the US [7] - The company plans to distribute a cash dividend of 0.79 yuan per share for 2024, with a payout ratio of 90%, leading to an estimated dividend yield of about 9% for 2025 [7] - The earnings forecast for 2025-2027 has been raised, with expected profits of 2 billion, 1.8 billion, and 1.7 billion yuan respectively [7] Financial Data and Profit Forecast - Total revenue forecast for 2025 is 13.148 billion yuan, with a year-on-year growth rate of 16.8% [6] - The gross profit margin is expected to be 17.7% in 2025 [6] - The return on equity (ROE) is projected to be 17.4% in 2025 [6] - The price-to-earnings ratio (PE) is estimated at 10 for 2025 [6]

Financial Data and Key Metrics Changes - The company reported an increase in earnings and cash flow compared to Q1 2024, which was already a strong quarter [14] - Gross debt increased to just under $778 million due to financing of recently acquired vessels, while cash position stood at $428 million, with $90 million restricted [14][15] - The net debt to EBITDA ratio has improved to under 1, down from 8.4 times at the end of 2018, indicating significant deleveraging [15][16] Business Line Data and Key Metrics Changes - The company added 19 charters worth approximately $352 million in contracted revenues during Q1 2025, bringing total contracted revenues to nearly $1.9 billion with an average remaining contract cover of 2.3 years [11][12] - The charter market remains strong, with the company’s breakeven rate at approximately $9,300 per vessel per day, significantly lower than current market charter rates [33][36] Market Data and Key Metrics Changes - The container ship charter market has remained exceptionally tight, with essentially zero idle capacity globally [6] - The overall order book for ships over 10,000 TEU is 54.3%, contrasting with only 11.5% for ships under 10,000 TEU, indicating a limited replacement capacity for the company’s focus segment [32] Company Strategy and Development Direction - The company aims to maximize optionality and financial resilience while maintaining a disciplined approach to fleet renewal and capital allocation [12][36] - The strategy includes opportunistically monetizing older ships to build cash reserves for future investments [8][36] Management's Comments on Operating Environment and Future Outlook - Management highlighted the macroeconomic uncertainty and its impact on the container shipping industry, noting that the situation remains fluid with potential uneven effects from tariffs and trade barriers [6][7] - The company is well-positioned to capitalize on opportunities as they arise, with a strong balance sheet and increased return of capital to shareholders through a raised dividend [9][36] Other Important Information - The company has successfully reduced its cost of debt to a blended rate of 3.99%, despite rising interest rates in the broader market [16] - The company’s fleet includes 10 Chinese-built ships, with only four larger than 4,000 TEU, minimizing exposure to potential U.S. tariffs on Chinese-built vessels [25] Q&A Session Summary Question: Interest in extending existing charters at better rates - Management indicated that while some charters fixed during the super cyclical high of COVID may see a reduction in rates, there is still appetite for attractive new charters [43][44] Question: Acquisition front and asset prices - Management stated they are always looking at deals but maintain strict criteria for acquisitions, focusing on financial sense rather than growth for its own sake [47][48] Question: Charter market dynamics and recent activity - Management noted a temporary slowdown in the charter market in April, but recent interest has picked up following a surge in spot freight rates [55][56] Question: Cash position and future plans - Management emphasized the importance of maintaining a robust cash position for flexibility and resilience, while continuing to deleverage and manage risks [60]