JP Morgan: Lowered target price of The Pacific Shipping (02343) to HK$2.7, reiterating "overweight" rating.

JPMorgan released a research report stating that the recent selling pressure on The Pacific Shipping (02343) seems to be an overreaction compared to its fundamentals. They reiterated their "overweight" rating, with a target price lowered from 3.2 Hong Kong dollars to 2.7 Hong Kong dollars, reflecting a stable TCE (time charter equivalent basis income) and the prospects for continued fleet growth. The bank believes that the recent weakness in the stock price is based on several factors, including the completion of the company's share buyback program, market expectations that industry supply will continue to outpace demand leading to a weak outlook for next year, Caravel slowing down the pace of gathering shares without visible short-term catalysts, and year-end profit-taking. However, these factors do not reflect any deterioration in the company's competitive position or balance sheet. Although demand growth for bulk carriers is slowing down, the bank expects a 2% year-on-year growth to be maintained next year, supporting capacity utilization. In addition, the aging of the fleet is increasingly becoming a constraint, with 14% of Handysize ships and 12% of Supramax ships over 20 years old. Once the market weakens further, the supply side's response will be more asymmetric. The bank believes that with the adjusted valuation and target price, the risk-return ratio is now more favorable.