2025 results in line with our expectations

Zhonggu Logistics announced its 2025 results: Revenue fell 5.7% YoY to Rmb10.62bn, and net profit attributable to shareholders rose 9.03% YoY to Rmb2.001bn, implying basic EPS of Rmb0.95. In 4Q25, revenue fell 3.4% YoY and rose 6.17% QoQ to Rmb2.72bn, while net profit attributable to shareholders fell 18.72% YoY and grew 47.25% QoQ to Rmb591mn. The firm’s net profit declined YoY in 4Q25, mainly due to lower FX gains amid renminbi appreciation (financial expenses excluding interest expenses and income rose Rmb0.22bn YoY).

Full-year dividend payout ratio in 2025 was 70.32%, implying attractive dividend payments. The firm announced its shareholder return plan for 2026–2028, maintaining that cash dividends distributed over the three years should in principle be no less than 60% of the cumulative distributable profit realized in the most recent three years. Assuming a minimum dividend payout ratio of 60% and applying our earnings forecast, we estimate that the 2026 dividend yield will be 5.2%. If the firm maintains last year's 70% payout level, the 2026 dividend yield would reach 6.1%.

Trends to watch

Foreign-charter shipping profits will likely support earnings over the next two years; the expansion into self-operated international routes will likely bolster long-term profit growth. The firm continues to allocate the majority of its fleet to foreign-charter operations. Since the beginning of 2026, charter rates have risen steadily. According to Clarkson, the one-year charter rate for a 4,250-TEU vessel reached US$60,000/day, up 10% YTD. According to Alphaliner data, the firm’s foreigncharter vessel orders are largely booked through 2027–2028, supporting strong earnings visibility for the 2026 and 2027.

In addition, the firm is accelerating its self-operated international shipping business. It has launched multiple new routes including express services to India-Pakistan, the Red Sea, and Haiphong. Since the beginning of 2026, it has placed orders for 18 container ships (eight of 6,000 TEU and 10 of 1,800 TEU) to expand its self-operated fleet. The firm announced that these vessels would be delivered over 2028–2029.

We believe demand in the firm’s targeted international markets will remain robust, underpinned by economic growth. On the supply, given limited newbuilds in the small-to-medium vessel segment and a high proportion of aging ships in the industry, we think the firm will further enhance its competitiveness. As new vessels are delivered, the self-operated foreign trade business will likely become a key driver of the firm’s sustainable long-term growth, in our view.

Financials and valuation

We keep our 2026 net profit forecast largely unchanged at Rmb2.02bn, and introduce our 2027 net profit forecast of Rmb2.19bn. The stock is trading at 11.5x 2026e and 10.6x 2027e P/E. We maintain an OUTPERFORM rating and our TP of Rmb13.87, implying 14.5x 2026e and 13.4x 2027e P/E and offering 25.8% upside.

Risks

Geopolitical changes; falling foreign trade rents.