UBS Raises SITC Price Target to HK$33.80, Maintains "Neutral" Stance

Deep News05-28 12:40

UBS has released a research report, increasing its profit forecasts for SITC (01308) for 2026 to 2027 by 1% to 6%. This adjustment reflects stronger-than-anticipated volume and freight rates for the current year. However, the bank remains cautious regarding overall industry feeder fleet expansion beyond 2027. UBS reiterated its "Neutral" rating on the stock, raising the target price from HK$30 to HK$33.80.

The report indicates that both shipping volume and freight rates are expected to resume year-on-year growth in the second quarter of 2026. UBS recently invited SITC's management to participate in an Asian investment forum. Management expressed confidence in intra-Asia shipping demand and plans to continue expanding the company's fleet capacity. Regarding the geopolitical tensions in the Middle East, management anticipates limited downside risk and expects SITC to benefit from the rebound in container freight rates observed since March.

Management disclosed that freight rates were under pressure in the first quarter of this year, declining approximately 5% year-on-year. However, with the escalation of Middle East geopolitical tensions, freight rates have experienced a strong rebound, surpassing last year's levels. It is anticipated that both freight rates and shipping volume will achieve year-on-year growth in the second quarter. Furthermore, despite bunker fuel costs nearly doubling from the lows seen earlier this year, SITC can currently pass on the entire cost increase to customers through fuel surcharges. Management noted that fuel costs constitute about 20% of total operating costs, with the average fuel price in April around $630 per ton, compared to $520 per ton for 2025.

Regarding competitiveness, the company maintains a cost advantage of approximately $100 per twenty-foot equivalent unit (TEU) compared to its peers, while also commanding an average freight rate premium of about $100 per TEU. According to the vessel delivery schedule, SITC is set to receive two 1,800-TEU vessels in 2026, 11 vessels in 2027, 13 vessels in 2028, and 6 vessels in 2029.

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