Core Viewpoint - SITC International reported strong 1H25 results, with revenue and net profit significantly exceeding expectations, driven by high freight rates and robust container shipping volume growth [1][2]. Financial Performance - Revenue for 1H25 increased by 28.0% YoY to US$1,664 million, while net profit attributable to shareholders rose by 79.7% YoY to US$630 million, resulting in an EPS of US$0.24 [1]. - The gross margin and net margin improved notably YoY, with gross margin rising by 9.3 percentage points and net margin increasing by 10.9 percentage points in 1H25 [1]. Dividend Policy - The company announced an interim dividend payout ratio of approximately 70%, which aligns with its 2024 interim payout ratio, offering attractive dividend yields of 9.5% for 2025 and 7.9% for 2026 [2]. Market Trends - There is a tight supply in the market for small vessels below 3,000 TEU, with only 5.4% of current orders for such vessels, while 11.2% of the fleet consists of vessels older than 25 years [3]. - Demand for small vessels in the container shipping industry has strengthened, leading to high time charter rates and longer charter periods, diverging from spot freight rate trends [4]. Intra-Asia Trade Growth - China's imports and exports to ASEAN countries and Japan grew by 9.4% and 4.5% YoY in the first seven months of 2025, indicating strong intra-Asia freight volume growth [5]. - As a leading player in intra-Asia routes, the company is expected to benefit from this growth, with Clarksons estimating a 3.6% and 3.0% YoY increase in intra-Asia container freight volume for 2025 and 2026, respectively [5]. Financial Forecasts - Due to better-than-expected freight rates, the company's net profit forecasts for 2025 and 2026 have been raised by 38.9% each to US$1.26 billion and US$1.06 billion, respectively [6]. - The stock is currently trading at 7.4x 2025 estimated P/E and 8.8x 2026 estimated P/E, with a target price increase of 15.2% to HK$28, implying 7.7x 2025 estimated P/E and 9.2x 2026 estimated P/E [6].

Investment Rating - The report maintains a cautious outlook on container shipping, downgrading the sector due to structural headwinds and demand uncertainty beyond August [9][10]. Core Insights - The report highlights that US tariffs have limited direct impact on the bulk and tanker markets, while the Baltic Dry Index (BDI) increased by 2% week-on-week, driven by higher Panamax earnings [9][10]. - The report suggests a buy rating for Maersk, a hold for SITC, and a reduction for several other companies in the container shipping sector, indicating a selective investment approach [9][10]. Summary by Sections US Tariff Updates - The Trump administration delayed the 10% baseline tariff and set various tariffs for key trading partners, with significant implications for trade dynamics [2]. - Tariffs on copper and other commodities are set to take effect, which may influence demand in the bulk market [4][53]. Container Shipping Trends - The Shanghai Containerized Freight Index (SCFI) dropped 1.7% week-on-week, marking the fifth consecutive week of decline, although rates to the US showed some recovery [33][34]. - The report notes that while front-loading may temporarily boost cargo flows, significant demand uncertainty looms due to potential tariff impacts [3][9]. Baltic Dry Index and Dry Bulk Market - The BDI rose 2% week-on-week, with Panamax rates increasing by 14% due to strong demand in the Atlantic basin, while Capesize rates fell by 12% due to weak iron ore demand [52][58]. - The report anticipates a 3% growth in the dry bulk fleet but expects flattish demand, leading to a softening of freight rates in the coming years [58]. Freight Rates and Market Dynamics - Container shipping freight rates have shown variability, with the SCFI composite index reflecting a significant year-on-year decline of 43.3% [50]. - The report indicates that bunker prices and time charter rates are also trending, with specific rates for different vessel types being monitored closely [50][57].

Key Takeaways from the Global Container Shipping Call Industry Overview - **Industry**: Global Container Shipping - **Key Players**: Adani Ports, Concor, Maersk, Matson, ZIM Core Insights 1. **Geopolitical Impact**: Geopolitical tensions and recent tariffs by the USA administration are influencing global container freight volumes and rates, which are expected to remain strong in CY25 [1][3][10] 2. **Volume Correlation**: India Port Container volumes show a high correlation with global GDP and container growth, indicating potential benefits for Adani Ports and Concor from rising container trade [1][4][10] 3. **Rate Fluctuations**: Asia-US West Coast rates spiked by 40% following the China-US trade agreement, despite a 30-40% YoY drop in China-US volumes in April [2] 4. **Demand Dynamics**: Non-China-US trade lanes experienced a 4-5% demand growth, offsetting the decline in China-US volumes, leading to overall positive demand growth globally [2] 5. **Future Projections**: Global container rates increased by 136% YoY in CY24 due to Middle East tensions, but are expected to moderate by 30% YoY in CY25, with rates remaining elevated [3][10] Company-Specific Insights 1. **Adani Ports Performance**: In FY25, Adani Ports' container volumes rose by 22% YoY, contributing to 42% of its total volume mix, while overall port volumes increased by 11% YoY [4][10] 2. **Concor's Volume Growth**: Concor's volumes are heavily reliant on EXIM trade, which constitutes 81% of its total volumes, although its growth was impacted by a weak rail modal share [4] 3. **Trade Deal Potential**: An interim trade deal between India and the US is anticipated by June 25, which could further boost port container volumes ahead of the peak season [5] Additional Considerations 1. **Inventory Trends**: US retail inventories have been building at a moderate pace of +4.5% YoY, compared to sales growth of +4%, indicating a key dynamic to monitor [2] 2. **Capacity Adjustments**: Approximately 12% of global container capacity has been removed due to rerouting around the Cape of Good Hope, impacting Asia-Europe trade significantly [3][10] 3. **Suez Canal Normalization**: A return to normalcy in the Suez Canal could lead to excess capacity and a potential decline in container rates [3] This summary encapsulates the critical insights from the global container shipping call, highlighting the interplay between geopolitical factors, trade dynamics, and company-specific performance within the industry.

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies Core Insights - The China Export Tracker focuses on the dynamics of China exports to the US amid tariff escalations, analyzing data from 48 corporates representing nearly 70% of China export value to the US [2][41] - Export orders from the US to Chinese corporates have stabilized at 92% of pre-tariff levels as of April 28, 2025, showing a slight recovery from 90% in mid-April [3][12] - The report indicates that nearly 20% of corporates have seen improvements in exports to non-US regions, particularly in sectors like pet treats and construction machinery [4] - China shipments and production are in substantial decline, with 35% of US orders being filled from China and 57% from ex-China facilities [11][17] - Corporates report that 40% of their products are experiencing high impacts on shipments to the US, with a significant portion seeing declines of over 50% [12][18] Summary by Sections Export Orders and Shipments - Export orders from the US have largely remained unchanged, with a slight increase noted [3] - Shipments from China are significantly impacted, with many corporates reporting a decline in production and shipments [5][12] Supply Chain Adjustments - Corporates are adjusting supply chains, with many utilizing ex-China production facilities to fulfill US orders [11][13] - Nearly half of the corporates have reported stable or increasing inventory levels in the US, providing a buffer against supply chain disruptions [21][23] Pricing Discussions - Approximately 60% of corporates are engaged in pricing negotiations, with expectations that end users will absorb most tariff costs [25][29] - There is a consensus that tariffs above 30-40% could become unmanageable for the global supply chain [26][31] Capital Allocation and Expansion Plans - Nearly 60% of corporates have ex-China production facilities, with 63% planning to expand or establish overseas capacity despite tariff uncertainties [32] - Corporates are cautious about capital expansion plans, particularly in Mexico and the US, due to ongoing uncertainties [59][61] Container Shipping and Import Data - US container imports from China showed a year-on-year increase of 9% in Q1 2025, but projections indicate a decline of 15% in Q2 and 27% in Q3 2025 [33][35] - Container shipping data has not yet reflected the anticipated decline, with current volumes still showing positive growth [35][36]