SITC(HK:01308)2025-05-15 15:05Summary of Haifeng International Conference Call Company Overview - Haifeng International has established a cost advantage through counter-cyclical capacity expansion and is benefiting from the upward market cycle. The company maintains a self-owned ship ratio of 85%-90% to enhance its anti-cyclical capability [2][12][3]. Industry Dynamics - The U.S.-China trade friction is accelerating the transfer of industries to Southeast Asia, breaking the original logistics cluster effect and increasing international trade transportation demand. The Twin Star Alliance has adjusted its routing model from a pendulum to a hub-and-spoke system, which increases the demand for small vessel transportation, benefiting Haifeng International [2][4]. - The small container ship market has a better supply structure compared to other shipping markets, with 70% of the capacity in Asia being small vessels under 3,000 TEU, and only 3.6% of orders being for new builds. The aging issue is prominent, limiting future supply growth [2][6]. Financial Projections - Haifeng International's projected net profit for 2025-2027 is $1.048 billion, $860 million, and $790 million, with year-on-year growth rates of 1.3%, -18%, and -8% respectively. If performance expectations recover, valuations could rise from 5-7 times to 10-15 times, with a potential market cap increase of 40%-110% [2][7]. Market Misconceptions - The market underestimates the positive impact of China's industrial transfer on feeder shipping volumes and the potential benefits of uncertainties in the Red Sea route for the container shipping market. Factors such as tariff changes, better-than-expected performance from peers, off-peak season resilience, port congestion, and ongoing Red Sea crises could catalyze stock price increases [2][10][8]. Competitive Advantages - Haifeng International focuses on the Asian market, with 82% of its capacity deployed in this region, making it the largest regional shipping company globally. The company has created a cost advantage superior to its peers through deep market engagement and counter-cyclical shipbuilding [3][4][17]. Demand Highlights - The demand side has two main highlights: the frequent U.S.-China tariff frictions leading to the transfer of Chinese manufacturing to Southeast Asia, and the shift in shipping routes by the Twin Star Alliance, which enhances the demand for small vessel transportation [4][5]. Supply Side Analysis - The supply side for small container ships is favorable, with a strong flexibility advantage. The aging problem is severe, with 24% of small feeder ships being over 20 years old, and 11% over 25 years old. The supply growth for small feeder ships is projected to be limited in the coming years [6][26][28]. Revenue and Cost Structure - The company primarily engages in container shipping, with over 90% of its revenue derived from this segment. Key cost components include transportation costs (22% for voyage costs and 13% for vessel operating costs) [29][30]. Future Growth and Valuation - Effective capacity growth is expected to be 6%, 0.6%, and 4.1% from 2025 to 2027. The company anticipates container trade growth in Asia of 3.2% and 3% for the same period, which will positively impact freight volumes [31][32]. - Historical PE valuation has fluctuated between 10-20 times, with a potential recovery to 10-15 times based on recent performance, suggesting a market cap increase of 20%-60% [35]. Conclusion - Haifeng International is well-positioned to capitalize on the shifting dynamics in the shipping industry, particularly in the Southeast Asian market, with strong financial projections and a favorable supply-demand balance in the small container ship segment. The company’s strategic focus on self-owned vessels and regional specialization enhances its competitive edge in a challenging market environment [2][4][17].