CMSC has released a research report indicating a divergence in performance across transportation subsectors for 2025 and Q1 2026. The infrastructure segment maintained stable fundamentals, with key company results largely meeting expectations. Within the shipping sector, international geopolitical turbulence has driven a sustained increase in tanker freight rates for 2025 and Q1 2026. Container shipping rates saw a slight decline in 2025 but improved sequentially in Q1 2026. In the express delivery sector, prices have risen against a backdrop of reduced internal competition. For the aviation sector, a combination of gradual supply-demand improvements, a narrowing decline in domestic airfares, and lower oil prices contributed to enhanced profitability for airlines in 2025 and Q1 2026. The future impact of international geopolitics on oil prices warrants continued monitoring. CMSC's key views are as follows:
For the full year 2025, the aviation, shipping, and logistics sectors led gains, while infrastructure performance was relatively weak. From the start of 2026 to date, shipping, ports, and logistics have been the top performers, whereas aviation/airports and railways have underperformed.
Reviewing 2025, the Shenwan transportation sector rose 6.5%, underperforming the CSI 300 index. By subsector, Shenwan air transport, Shenwan shipping, and Shenwan logistics led with gains of 22.4%, 21.2%, and 7.1%, respectively. Infrastructure sectors underperformed, with Shenwan railways, Shenwan expressways, and Shenwan ports declining by 13%, 10.6%, and 1%, respectively.
From the beginning of 2026 to date, the Shenwan transportation sector is up 5.2%, again underperforming the CSI 300. Shenwan shipping, Shenwan ports, and Shenwan logistics are the leading gainers, up 39.3%, 4.6%, and 1.4% respectively, with shipping and ports primarily benefiting from geopolitical conflicts. Shenwan aviation, Shenwan airports, and Shenwan railways have declined by 23.5%, 12.6%, and 2.9%, respectively, with aviation likely impacted by a sharp rise in oil prices.
**Infrastructure**: Fundamentals for the infrastructure sector remained broadly stable in 2025 and Q1 2026, with the full-year trend expected to persist. Looking ahead to 2026, expressway earnings are projected to stay stable. Port container throughput is expected to continue outperforming bulk cargo, while railway passenger traffic should maintain growth and freight remain steady. Leading expressway companies are anticipated to deliver robust full-year results with stable dividend expectations, suggesting a selective stock-picking approach. Regarding ports, as stable and perpetual cash-flow assets, their current valuations are relatively low within the infrastructure asset class. The HALO concept could provide a catalyst. Coupled with intensifying international geopolitical conflicts, which position ports as strategic resources second only to shipping, their allocation value is seen as increasing. For railways, coal transport corridors may benefit from improved coal demand, and high-speed rail could gain from spillover effects following high aviation surcharges. Recommended stocks: Anhui Expressway, China Merchants Expressway, Beijing-Shanghai High Speed Railway, Daqin Railway, Qingdao Port, China Merchants Port.
**Shipping**: Container shipping demand softened year-on-year in 2025 but showed sequential recovery in Q1 2026. The tanker sector achieved high prosperity in 2025, and freight rates are expected to remain elevated in 2026 due to geopolitical conflicts. Looking at 2026: 1) **Container Shipping**: Geopolitical turmoil from the US-Iran conflict (coupled with surcharge implementation) is expected to drive a further sequential rise in freight rates in Q2 2026 (implying sequential profit growth). Medium-to-long term, delayed Red Sea rerouting is expected to support mainline freight rates. Furthermore, the supply-demand dynamics for small and medium-sized vessels are more favorable, suggesting better 2026 performance for feeder container shipping companies. 2) **Tanker Shipping**: Against the geopolitical backdrop, energy transportation prices are high. Should strait transits resume, triggering a global restocking phenomenon, tanker sector prosperity could reach a new high, with Q2 earnings for tanker companies expected to hit record levels. Medium-to-long term, industry concentration is increasing with favorable supply-demand trends. 3) **Dry Bulk**: Increased demand for alternative energy sources like coal, alongside continued release of iron ore cargoes, is expected to boost dry bulk demand, suggesting improved sector prosperity in 2026. Regarding investment targets, focus on container shipping stocks: COSCO SHIPPING Holdings, Zhonggu Logistics, T.S. Lines, SITC International. Next, focus on tanker stocks like COSCO SHIPPING Energy and China Merchants Energy Shipping, as the tanker sector remains in an upward cycle in 2026. Medium-term tracking is advised for COSCO SHIPPING Specialized Carriers and Haitong Development.
**Express Delivery**: Express parcel volume maintained rapid growth in 2025, while the push against internal competition drove a bottoming and recovery in industry prices. Q1 2026 saw a recovery in demand growth and a year-on-year turn to positive pricing. Outlook for 2026: 1) **Volume**: With a higher base and a relative reduction in low-price parcels post anti-competition measures, industry growth is expected to moderate to mid-to-high single digits. 2) **Price**: Benefiting from anti-competition policies, the industry's average price is expected to recover year-on-year in 2026. 3) **Cost**: Benefiting from technological advancement and economies of scale, costs are expected to continue optimizing. Overall, total profits are expected to see significant year-on-year growth, with particularly high growth anticipated in the first half due to a low base. Recommended stocks: ZTO Express, YTO Express Group, STO Express, SF Holding.
**Logistics & Supply Chain**: In 2025, cross-border air freight demand demonstrated strong resilience despite tariff impacts. Freight forwarding demand grew overall, while contract logistics demand faced some pressure. Outlook for 2026: 1) **Cross-border Air Freight**: Civil aviation international cargo demand is expected to maintain relatively fast growth. Monitor the impacts of geopolitics and the EU's planned cancellation of tax exemptions for small parcels under 150 euros in 2026. 2) **Freight Forwarding**: Demand is expected to grow steadily. Under fixed-price models, forwarding business profits are expected to benefit from rising freight rates, recovering year-on-year. 3) **Contract Logistics**: Demand is expected to remain under pressure, with focus on operational and cost optimization. Recommended stocks: China Eastern Air Logistics, Sinotrans.
**Aviation**: Aviation demand maintained rapid growth from 2025 into Q1 2026, with improving supply-demand dynamics and yields gradually stabilizing and recovering. Monitor the impact of international geopolitics and oil prices on industry profitability. In 2025, airlines' operating performance improved year-on-year, benefiting from lower oil prices and demand growth. In Q1 2026, profitability saw significant year-on-year improvement, achieving collective profitability post-pandemic for the first time, aided by demand growth, lower oil prices, stabilizing domestic route yields, and a substantial increase in international route yields. Looking ahead to 2026, influenced by the US-Iran situation, international oil prices have risen sharply, suggesting significant pressure from rising fuel costs in Q2. The impact of international geopolitics and oil prices on industry profits requires close attention. Current oil price levels pose a substantial challenge to profitability, especially for domestic routes. If high oil prices persist for an extended period, overall industry profit pressure will be significant. Should the international situation later improve, leading to a decline in oil prices and a release of pent-up demand, industry profitability could recover.
**Airports**: Benefiting from the comprehensive relaxation and optimization of visa-free policies and a steady recovery in international passenger traffic, airport operational data continued to improve year-on-year. Looking ahead to 2026, amid the impact of sharply rising fuel costs, growth in civil aviation passenger traffic is expected to moderate. Focus will be on the contribution of non-aeronautical revenue growth and cost optimization to profits.
**Risk Warning**: Significant depreciation of the RMB, a sharp rise in oil prices, escalation of express delivery price wars, major safety incidents, disease outbreaks, major natural disasters, etc.
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