3Q25 results largely in line with our expectations

The firm announced its 3Q25 results: In 1–3Q25, revenue fell 6.46% YoY to Rmb7,898mn; net profit attributable to shareholders rose 27.21% YoY to Rmb1,410mn, implying EPS of Rmb0.67. In 3Q25, revenue fell 5.3% YoY and 7.5% QoQ to Rmb2.56bn, and attributable net profit fell 3.7% YoY and 35.4% QoQ to Rmb339mn, largely in line with our expectations.

Earnings fell markedly QoQ in 3Q25, as the firm did not receive government subsidies for 3Q25 and the freight rates and earnings of the domestic trade sector dropped. Earnings of the foreign trade sector remained solid.

GM fell QoQ but improved YoY in 3Q25 due to QoQ decline in domestic freight rates. In 3Q25, the firm's GM fell 0.9ppt QoQ to 19.9% (+5.3ppt YoY), mainly due to the decline in domestic freight rates (down 8.9% QoQ in 3Q25). The firm's GM rose YoY in 3Q25 thanks to a 9.8% YoY rise in the domestic freight rate index and a rising proportion of the higher-margin foreign trade business. In addition, we think the firm's percontainer cost increased compared to last year, as its domestic trade volume and self-owned shipping capacity decreased.

Trends to watch

Foreign trade charter market remains prosperous; upbeat on the upside potential of domestic trade in peak season and cost reduction. Prices for small- and medium-sized vessels in the foreign trade market remained high. According to Clarksons, as of end-October 2025, charter rates of major small container ships remained high, with freight rates of 4,250 TEU vessels and 3,500 TEU vessels up 2.9% and 5.4% YoY from high bases last year. Alphaliner data shows that charter rates of the firm's foreign trade vessels have remained high YTD, and most of them have been booked for the next two years or more, which we think will provide visible support for the firm's earnings in 2025 and 2026. In the domestic trade sector, freight rates have rebounded since the start of the peak season in 4Q25. We are upbeat on freight rates in the domestic trade market in the peak season amid shrinking supply, and expect this to boost the firm's full-year growth. In addition, as the firm further improves domestic routes and cargo volume, we expect the per-container cost of domestic trade to decline, thereby improving the profitability of the domestic trade segment.

Financials and valuation

We keep our 2025 and 2026 earnings forecasts. The stock is trading at 11.2x 2025e and 11.5x 2026e P/E. We maintain an OUTPERFORM rating and our target price at Rmb13.87, implying 14.0x 2025e and 14.5x 2026e P/E and offering 25.4% upside.

Risks

Geopolitical changes; falling foreign trade rents; slowing domestic economic growth.