1H25 results miss our expectations

COSCO Shipping Holdings announced its 1H25 results: Revenue rose 7.80% YoY to Rmb109.10bn and net profit attributable to shareholders grew 1.94% YoY to Rmb17.54bn, implying EPS of Rmb1.05. In 2Q25, revenue fell 3.39% YoY and 11.77% QoQ to Rmb51.14bn, and net profit attributable to shareholders fell 42.25% YoY and 50.05% QoQ to Rmb5.84bn. The results miss our expectations, mainly due to lower-than- expected realized freight rates.

In 2Q25, the firm's freight volume rose YoY and QoQ, freight rates fell YoY and QoQ, and cost per container rose YoY. In 2Q25, the firm's

container freight volume rose 5.7% YoY and 4.9% QoQ to 6.8mn TEU, with freight volume of trans-Pacific routes down 5.6% YoY and 9.3% QoQ, and that of Asia-Europe routes up 11.2% YoY and 9.5% QoQ. Per- container revenue fell 10.9% YoY and 17.3% QoQ in 2Q25, with per- container revenue falling 13.8% YoY and 13.0% QoQ for trans-Pacific routes and falling 22.8% YoY or 27.7% QoQ for Asia-Europe routes. Cost per container rose 7.3% YoY in 2Q25, mainly due to increased container purchases and higher vessel rental costs.

Trends to watch The performance of long-haul routes has been sluggish in the peak season in 3Q25. In the long term, we expect industry supply to remain under heavy pressure, and new supply is mainly scheduled for delivery over 2027-2028. We suggest watching: 1) Import demand from Europe and the US; and 2) resumption of the Red Sea shipping route.

This year's 3Q traditional peak season saw relatively lackluster freight rates of US routes, partly due to preemptive inventory restocking of some US routes in 2Q25 amid tariff adjustments of China and the US. Looking ahead, we believe the container shipping industry still faces substantial supply-side pressure. Current backlog orders account for 30.74% of existing shipping capacity, with about 5.2%, 8.2%, and 10.1% of shipping capacity to be delivered over 2026-2028 respectively. Excluding the resumption of the Red Sea route, new capacity appears to be manageable in 2026, but 2027-2028 may see greater supply risks.

According to the US National Retail Federation, import volume of US 　　routes over September-December 2025 may decline about 20% YoY. We recommend continuous monitoring of subsequent trans-Pacific cargo volumes and tariff policy developments. Should tariff policies stabilize and US demand hold steady, the demand side may still perform well. In addition, we suggest keeping an eye on the resumption of shipping in the Red Sea, which remains a major risk for the industry.

As the firm continues to increase shipping capacity and expand routes in emerging markets, we expect its long-term value to emerge, and its dividends and net cash should provide support for the firm.

As of 2Q25, the firm had orders on hand for 51 vessels with a combined shipping capacity of more than 910,000 TEU. We expect the firm to continue expanding routes in emerging markets and regional markets with rapid growth to achieve long-term growth in its shipping volume. The firm's dividend payout ratio was 50% in 1H25. Based on current earnings assumptions, its A-share and H-share dividend yields should be 5.7% and 7.1% in 2025, which are attractive. In addition, the large amount of net cash on hand should offer bottom support for the firm.

Financials and valuation

We keep our 2025 and 2026 earnings forecasts unchanged. A-shares are trading at 8.7x 2025e and 11.6x 2026e P/E, and H-shares are trading at 7.1x 2025e and 9.3x 2026e P/E. We maintain OUTPERFORM ratings and target prices for A-shares and H-shares. Our target price for A-shares implies 9.3x 2025e and 12.3x 2026e P/E and offers 6.7% upside. Our target price for H-shares implies 7.6x 2025e and 10.2x 2026e P/E and offers 7.0% upside.

Risks

Policy uncertainties; geopolitical risks; slowing global economic growth.