Citigroup: Downgrades COSCO Shipping Holdings (01919) to "Neutral," target price raised to HKD 17.4.
Although the new supply in the next two years will be about 12% per year, the container shipping industry should be able to maintain freight rates above the breakeven point after taxes.
Citigroup released a research report stating that it maintains the view that inventory replenishment in Western economies will continue to drive shipping demand in the second half of this year, consistent with the guidance from Germany's Hapag-Lloyd during its second quarter earnings call. Additionally, despite an expected annual new supply increase of around 12% over the next two years, the container shipping industry should be able to keep freight rates above the breakeven point on an after-tax profit basis. Citigroup anticipates that COSCO Shipping Holdings (01919) H-shares will achieve a return on equity (ROE) that is 4 percentage points higher than the other three Asia-Pacific shipping companies covered by the bank between 2026 and 2028. Citigroup has downgraded the rating of COSCO Shipping Holdings H-shares from "Buy" to "Neutral," with the target price raised from HKD 15.9 to HKD 17.4.
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