A research report indicates that geopolitical factors are expected to keep full-year freight rates higher than previously anticipated. The 2026 net profit forecast for SITC has been raised by 14.7% to $1.2 billion, with a 2027 net profit estimate of $1.06 billion introduced for the first time. The current share price corresponds to a 2026 P/E ratio of 9.6x and a 2027 P/E ratio of 10.9x. An Outperform rating is maintained, with the target price increased by 11.1% to HK$40 per share. This new target implies a 2026 P/E of 11.6x and a 2027 P/E of 13.1x, suggesting a potential 20% upside from the current price.
The company's 2025 performance aligned with expectations. Revenue reached $3.412 billion, up 12% year-on-year, while net profit attributable to shareholders was $1.223 billion, or $0.45 per share, an increase of 19% year-on-year.
In 2025, the company's container shipping volume reached 3.848 million TEUs, growing 7.8% year-on-year. Revenue per TEU per day, excluding slot exchange arrangements, was $753, rising 4.5% year-on-year. Given that China-Southeast Asia routes constitute the largest portion of its volume, the company's overall freight rate performance slightly exceeded the market average in 2025. The China Containerized Freight Index (CCFI) for Japan, Korea, and Southeast Asia routes changed by +21.4%, -0.6%, and -4.1% year-on-year, respectively.
The company maintained an attractive dividend payout. The total dividend for 2025 was $1.035 billion, which included a special dividend of $240 million, representing an 85% payout ratio of net profit. Assuming the dividend payout ratio remains at the current level for 2026, the estimated dividend yield is 8.8%, based on current profit forecasts.
Geopolitical tensions between the US and Iran may further delay expectations for a resumption of Red Sea transits, supporting a favorable supply-demand outlook for smaller container vessels. According to Clarksons, annual new supply growth for smaller container ships over the next three years is projected at only 1-2%, while vessels over 25 years old now account for 12% of the fleet. Recent geopolitical developments have led to supply constraints as some vessels face loading and unloading difficulties. Market expectations for a return to Red Sea routes have been pushed back. Daily charter rates for smaller vessels have continued to edge higher, with rates for 2,500 TEU ships up 1.4% since the start of the year, underscoring tight supply conditions.
On the demand side, benefiting from supply chain relocation, import and export growth between China and ASEAN countries reached +8% year-on-year in 2025, with total export value increasing 14% year-on-year. The ongoing shift of manufacturing from China to Southeast Asia is expected to further stimulate economic growth in the region, supporting steady growth in intra-Asia shipping volumes.
Key risks include a potential slowdown in global economic growth and changes in the geopolitical landscape.
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