Shenwan Hongyuan Group: Maintains "buy" rating on CSSC SHIPPING (03877) with high dividend yield building a moat

Shenwan Hongyuan Group released a research report stating that they maintain a "buy" rating for CSSC SHIPPING (03877). The fleet structure and cost control are of high quality, and the high dividend yield builds a moat. Taking into consideration changes in tax policies in OECD countries, the effective income tax rate for the company for the years 2025-2027 is raised to 15%, resulting in corresponding net profits attributable to shareholders of HK$20 billion, HK$22 billion, and HK$24 billion for 2025-2027 (compared to the original forecasts of HK$23 billion, HK$26 billion, HK$28 billion), with corresponding PE ratios of 5.8, 5.5, and 5.0 times. The report cited the company's interim report, stating that in the first half of 2025, the company completed orders for 6 newly-built ships with a total contract amount of US$308 million, with 100% of them being medium to high-end ship types, including 4 MR tankers and 2 methanol dual-fuel MR tankers. As of June 30, 2025, the company's fleet size was 143 ships, with 121 ships in operation and 22 under construction. The average age of the operating ships is approximately 4.13 years, making the fleet competitive. The average remaining term of leases exceeding one year is 7.64 years, which enhances the stability of the company's performance. The company's ships are mainly built in China, which enhances their market competitiveness under the background of waived port fees. Furthermore, according to the interim report, as of the end of June 2025, the company has maintained its overall financing cost at 3.1%, a decrease of 40 basis points from the beginning of the year. As of June 30, 2025, the group's asset-liability ratio was 65.2%, a decrease of 2.3% from the end of the previous year. The amount of interest-bearing loans is about HK$25.55 billion, a decrease of 7.4% from the end of 2024, including approximately US$1.6 billion in loans, RMB 9.06 billion in loans, HK$2.02 billion in loans, and 140 million in loans, which diversifies the currency of the loans, effectively reducing the interest expenses brought by high-interest US dollar debts. The company distributed a dividend of HK$0.05 per share in the middle of 2025, higher than the previous mid-year dividend of HK$0.03 per share. The company had a dividend payout ratio of 30% at the end of 2024, and if the payout ratio remains unchanged at the end of 2025, combined with the mid-year dividend, the annual dividend yield is about 7.7%.