2026-01-14 05:05Summary of Conference Call Notes Industry Overview - Industry Focus: Hong Kong/China Transportation and Infrastructure - 2026 Outlook: More opportunities than risks, with a focus on supply-side opportunities in airlines, tanker shipping, and express delivery, while container shipping faces oversupply concerns [1][2][3] Airlines - Pricing Trends: Pricing inflation resumed since October 2025, supported by supply-side constraints and demand recovery from business travel, outbound travel growth, and inbound travel [2][11] - Demand Drivers: Business travel recovery positively correlated with capital expenditure, and inbound travel expected to grow, benefiting airlines [2][21] - Airlines' Up-Cycle: Chinese airlines are in a multi-year supply-driven up-cycle, with margin upside if pricing performance exceeds expectations [2][11] - Key Stocks: Overweight ratings on Air China (0753.HK), China Eastern Airlines (0670.HK), China Southern Airlines (1055.HK), and Spring Airlines (601021.SS) [9][10] Shipping - Tanker Market: Increasing demand for compliant tankers due to geopolitical tensions, with limited new supply additions due to low capital expenditure over the past decade [3] - Container Shipping Risks: Remains conservative on container shipping due to oversupply concerns [3] - Key Stocks: Overweight on COSCO Shipping (1138.HK) and China Merchants Energy Shipping (601872.SS), underweight on COSCO Shipping Holdings (1919.HK) and Orient Overseas (0316.HK) [3] Airports - Bargaining Power: Airports are regaining bargaining power through duty-free contract renewals, breaking monopoly dynamics, and increasing shareholdings in duty-free operators [4][54] - Duty-Free Spending: Expected upside in duty-free spending with expanded product categories and higher offline sales [4][58] - Key Stocks: Equal-weight ratings on Shanghai International Airport (600009.SS), Hainan Meilan Airport (0357.HK), and Guangzhou Baiyun International Airport (600004.SS), underweight on Beijing Capital International Airport (0694.HK) [53] Express Delivery - Market Consolidation: ZTO (ZTO.N) and YTO (600233.SS) are consolidating market share, leading to cost-efficiency gains and margin expansion [5] - International Expansion: J&T (1519.HK) expected to consolidate market share in overseas markets through e-commerce partnerships [5] Key Risks and Considerations - Airlines: Risks include faster-than-expected aircraft delivery, deterioration in travel demand, unfavorable RMB depreciation, and surging oil prices [52][51] - Airports: Continued underperformance in duty-free business due to weak consumption and competition from other channels [54][55] Conclusion - The transportation sector in Hong Kong/China is poised for growth in 2026, driven by supply-side opportunities in airlines and shipping, while airports are regaining power in duty-free operations. However, risks remain, particularly in container shipping and overall economic conditions.