1. SITC International Holdings: a new star in the industry through the cycle

SITC International Holdings is a leading regional transportation company in Asia, and its performance has maintained steady growth. The company has made profits for 14 consecutive years since its listing (including the 2007-2009 fiscal year independently disclosed by the company). The level of net interest rate continues to rise counter-cyclically, and the historical annualized ROE is as high as 21.15%, which is unique in the collection and transportation industry with strong cycle.

2. Being in a high-quality subdivision track with multiple inherent management advantages

2.1 Industry β:

The advantages of ① Asian market are as follows: first, there is plenty of space. The regional market in Asia is the second largest container market in the world, leading the industry in terms of volume growth all the year round. Second, supply and demand are relatively balanced. The main operating ships in the Asian market are feeder vessels below 3000TEU, and the problem of oversupply faced by such ships is relatively minor.

② regional market competition is small: large international liner companies focus on the share of the trunk market, while the participation in the regional market is relatively low, so the competitive pressure faced by the company is relatively small.

2.2 Company α:

① service differentiation: business focus on high-frequency shipping services, service content and peer differentiation, freight is relatively higher and more stable.

② logistics integration: integrate land and sea logistics network, provide land-side logistics support to customers on the basis of shipping services, so as to build an one-stop logistics service platform connecting land and sea.

③ operation efficiency: through the unique route operation strategy to effectively improve the turnover level of ship assets, and the use of ship ownership strategy to continuously strengthen the stability of the cost side.

3. The short-term high boom in the market continues, and RCEP will bring long-term increment to the market in Asia.

In the short term, the company will fully benefit from the high business cycle of the transportation industry. Due to the capacity siphon effect caused by the supply chain crisis in Europe and the United States, and the rapid recovery of economies in Asia, especially Southeast Asia, intra-Asian freight rates have continued to soar recently. After relevant calculations: for every $50 increase in revenue per box, the corresponding net profit will increase by $119 million. Under the background of high prosperity in the industry, SITC International Holdings is expected to maintain a high profit level in the short and medium term.

In the long run, the supply side of the market is still facing greater disassembly pressure, while the demand side driven by RCEP may once again usher in a period of high growth. At present, the share of capacity of detachable vessels older than 20 years old in the current regional ship market is as high as 26.3%, the demand for disassembly at the supply side is huge, and the actual supply increment in the market in the next three years is very limited. At the same time, the official implementation of RCEP is expected to reopen the incremental space of the shipping market in Asia. SITC International Holdings, as the leading integrated logistics service provider in Asia, will fully benefit, and the company's long-term profit center may continue to rise steadily.

4. Profit forecast and investment rating

SITC International Holdings is not only the largest private shipping and logistics company in China, but also the third largest shipping company in China and the 16th largest shipping company in the world. In the short term, benefiting from the high market boom, the company is expected to create excellent performance in the past two years. In the long run, as the leading integrated logistics service provider in Asia, the company will continue to benefit from the long-term incremental dividend brought by the formal entry into force of RCEP, and the performance center is expected to continue to rise. We expect SITC International Holdings's operating income from 2021 to 2023 to be US $2.873 billion, US $3.357 billion and US $2.781 billion, respectively, and its net profit to be US $1.151 billion, US $1.482 billion and US $900m, respectively, and the corresponding PE in US dollar terms are 9.2,7.1 and 11.8 respectively. It is covered for the first time and rated as "overweight".

Risk tips: the risk of large-scale expansion of transport capacity; the risk of world economic recession; the risk of a sharp rise in oil prices; the risk of exchange rate fluctuations; the risk of natural disasters; and the uncertainty of industry prosperity.