2Q25 results slightly beat our forecast

Sinotrans announced its 1H25 results: Revenue fell 10.37% YoY to Rmb50.52bn. Net profit attributable to shareholders was Rmb1.95bn, implying EPS of Rmb0.27, up 0.10% YoY. In 2Q25, the firm's revenue fell 16.6% YoY and rose 12.5% QoQ to Rmb26.75bn, gross profit grew 4.2% YoY and 24.9% QoQ, and net profit attributable to shareholders grew 14.0% YoY and 101.9% QoQ to Rmb1.30bn, slightly beating our expectations as issuance of REITs boosted profit.

Trends to watch By business, sea freight forwarding saw solid volume and profit, while earnings of integrated logistics services and DHL-Sinotrans remained under pressure.

Freight forwarding business: In 1H25, revenue fell 15.5% YoY to Rmb29.63bn, mainly due to the impact of trade policies and pressure on air and sea freight rates. Operating profit edged down 1.2% YoY to Rmb1.22bn.

Business volume of sea freight, air freight and railway freight forwarding changed +6%, -14% and -25% YoY. Volume and profit of sea freight forwarding business remained solid, while unit profit of air and rail freight forwarding businesses fell YoY.

DHL-Sinotrans: In 1H25, revenue fell 12% YoY to Rmb8.76bn and net profit fell 39% YoY to Rmb912mn, mainly due to the impact of tariff policies and rising cost pressure.

Integrated logistics services: In 1H25, revenue fell 5.9% YoY to Rmb14.32bn and operating profit fell 22.4% YoY to Rmb318mn. Parcel volume stayed largely stable YoY, but sluggish industry demand and warehouse rental weighed on earnings of this segment, in our view.

Investment income rose 182.5% YoY to Rmb863mn in 2Q25 as issuance of REITs offset falling profit of main business. BOC Sinotrans

REIT was listed on the Shanghai Stock Exchange, raising Rmb1.31bn with a premium rate of 16.2%, notably boosting investment income. The firm’s 1H25 net profit rose about Rmb370mn, benefiting from the issuance.

Cash flow improves markedly; interim DPS remains stable; payout

ratio rises to 77%. Net operating cash inflow reached Rmb168mn in 1H25　　(vs. an outflow of Rmb1.65bn in 1H24). At end-1H25, cash and cash equivalents rose 31% YoY to Rmb11.7bn, as cash flow improved markedly thanks to strengthened receivables management and optimized debt structure.

The firm declared an interim dividend of Rmb0.145/sh, and its dividend per share (DPS) has remained stable since 1H23. The dividend payout ratio reached 76.7% in 1H25 (vs. 54% in 1H23), considering the firm's share buybacks in 1H23.

We believe the disposal of Loscam International could boost net profit by Rmb1.35bn and generate Rmb4.44bn in cash. Assuming a 50% payout ratio on the enhanced profit, we estimate full-year dividends could rise 17% YoY, implying dividend yields of 6.0% for A-shares and 8.0% for H- shares.

Financials and valuation

We maintain our 2025 and 2026 earnings forecasts. At present,

Sinotrans' A-shares are trading at 11.5x 2025e and 11.1x 2026e P/E. Sinotrans' H-shares are trading at 8.7x 2025e and 8.2x 2026e

P/E. We maintain OUTPERFORM for A-share, and raise our target price 12.1% to Rmb6.50 (13.3x 2025e and 12.8x 2026e P/E with 15.3% upside), due to rising market risk appetite. We maintain OUTPERFORM for H-shares, and raise our target price 15.8% to HK$5.50, implying 10.3x 2025e and 9.8x 2026e P/E with 18.8% upside.

Risks

Sharper-than-expected decline in freight rates; uncertainties over global trade policies; divestment slower than expected.