Highlights of the report describe CNOOC shipping's 2015 annual report, achieving revenue of 31,861 billion yuan, a year-on-year decrease of 12.07%, gross margin falling 6.58 percentage points to -2.84% year on year, net profit attributable to the parent company falling 377.88% year on year to -2,949 million yuan, EPS being -0.25 yuan, and 0.09 yuan in 2014. Incident review The drop in oil prices is difficult to withstand the dive in industry freight rates. Looking at the whole year, the 12.07% decline in the company's revenue was greater than total traffic volume (down 3.51% year on year), mainly due to severe overcapacity in the global shipping market in 2015, and freight rates continued to fall (the typical shipping index SCFI fell 32.4% year on year), which led to the company's single-box freight rate falling 8.87%. Despite benefiting from the 41.4% year-on-year decline in the average CST380 marine fuel price, the company's fuel expenditure and total operating costs fell 35.62% and 6.06%, respectively, and gross margin fell 6.58 percentage points to -2.84% year over year. In the end, the company achieved net profit of 2,949 million yuan, which was 1,061 billion yuan last year. The main factors behind the loss of profit: 1) the company's gross profit decreased by 2.26 billion yuan compared to the previous period due to a sharp decline in operating income; 2) the company accrued more depreciation losses on ship and container assets in the current period, as well as investment income from disposal subsidiaries in the previous period, and there was no such income in the current period. Looking at the fourth quarter alone, the company achieved a year-on-year decrease of 15.6% in operating income, a year-on-year decrease of 18.4 percentage points to -9.35%, a year-on-year decrease of 581.6% in net profit, and EPS of -0.16 yuan. The corresponding EPS for the 1st and 3rd quarter of 2015 was 0.02 yuan, -0.02 yuan, and -0.09 yuan, respectively. Revenue from major routes declined across the board. The company achieved a year-on-year decline of 3.51% in box traffic throughout the year, and revenue from all major routes declined across the board, which dragged down total transportation revenue by 12.1%. By route, although the volume of European routes continued to rise slightly, unit freight rates declined significantly (22.7% year-on-year decrease) due to low shipping demand and poor capacity control measures by shipowners. Over the same period, the freight rate (SCFI) for exports from Shanghai to Europe and the Mediterranean fell 47.1% and 47.4% year on year. In the end, revenue from European routes fell 19.7% year on year, leading the decline for other major routes; domestic trade routes were affected by weak domestic economic growth, showing a sharp decline in volume and price, with revenue falling 18.5% year on year. Maintain an “Overweight” rating. After the restructuring of the state-owned shipping enterprise, the company will sell shipping and port assets and transform into financial leasing business, including container, ship leasing and non-shipping finance business. Among them, the company's container leasing business ranks 3rd in the world, and its profitability and stability have improved compared to container shipping, and the non-shipping finance business is also a highlight. We expect the company's EPS to be 0.10 yuan in 2016, maintaining the “Overweight” rating. Risk warning: macroeconomic downturn continues, industry supply and demand deteriorate