SITC INTERNATIONAL(01308.HK)：2024 RESULTS IN LINE; DIVIDEND ATTRACTIVE-格隆汇

机构：中金公司
研究员：Gangxian LIU/Qibin FENG/Xin YANG

2024 results in line with our expectations
SITC International announced its 2024 results: Revenue rose 26% YoY to US$3.06bn, and net profit attributable to shareholders grew 94% YoY to Rmb1.03bn, implying EPS of US$0.39. Revenue rose 49.5% YoY and 35.1% HoH to US$1.76bn in 2H24, and attributable net profit increased 206.5% YoY and 93.2% HoH, in line with our expectations.
Sales volume and prices of the firm's container shipping business grew rapidly YoY in 2024. In 2024, the firm's container shipping volume rose 10.7% YoY to 3.57mn TEU, while its average freight rate (excluding revenue from space swaps) grew 15.7% YoY to US$721.1 per container.
GM and net margin rose notably in 2024. In 2024, the firm's GM rose 11.7ppt YoY to 37.4%, and its net margin rose 11.7ppt YoY to 33.6%, thanks to rising freight rates and falling cost per container. Cost per container dropped 4.1% YoY in 2024, thanks to improved operating efficiency and a rising proportion of its own fleet. Looking ahead, we expect cost per container to decline further, thanks to falling fuel prices, delivery of the firm's own vessels, and improving operating efficiency.
Trends to watch
Incremental supply in Asia remains relatively limited, while regional industrial relocation may support demand. We believe the supply- demand dynamics will gradually improve.
Clarksons estimates that the shipping capacity of small vessels below 3,000TEU may grow 0.1% in 2025 and fall 3.4% in 2026, implying limited incremental supply. The market’s main concern is that the resumption of Red Sea routes by long-haul carriers could increase regional shipping capacity. However, we believe the reopening may face prolonged challenges. Meanwhile, vessels over 20 years old account for 24% of total capacity, and accelerated scrapping of older vessels could further tighten supply. Therefore, we see limited downside risk on the supply side. On the demand side, we expect intra-Asia cargo volume to maintain solid growth thanks to industry relocations between China and Southeast Asian countries.
Long-term contractual freight rates in 2025 to support full-year earnings; dividend attractive. Given that spot freight rates have remained high YoY recently, we expect the firm's long-term contractual prices to improve notably in 2025 compared with 2024, thereby supporting its full-year earnings. In 2024, the firm paid a total dividend of US$870mn, with a payout ratio of 85%. Given the firm’s limited future capex, assuming a 70% payout ratio, we think the 2025 dividend yield would be 7.9% based on current earnings and stock prices. If the 2025 payout ratio remains at 2024 levels, the dividend yield would be 9.6%.
Financials and valuation
As intra-Asia freight rates have been higher than expected YTD, we raise our 2025 net profit forecast 29.4% to US$751mn. We introduce our 2026 net profit forecast of US$633mn. The stock is trading at 8.9x 2025e and 10.7x 2026e P/E. Maintain OUTPERFORM. We maintain our TP of HK$24.3, implying 11.2x 2025e and 13.4x 2026e P/E with 25.9% upside, given falling sector risk appetite.
Risks
Changes in geopolitical risks; slowdown in global economic growth.