For Hong Kong-listed companies, being able to enter the Hong Kong stock connect means that they can attract more mainland investors, improve liquidity, and market attention, which is more critical in the current context of overall lack of liquidity in the Hong Kong stock market.

Recently, the Hang Seng Composite Index released the semi-annual index review, which provides an important basis for the subsequent adjustment of the Hong Kong stock connect. At the same time, China International Capital Corporation's report listed 33 companies that meet the requirements for inclusion in the Hong Kong stock connect, and China CSSC Shipping is among them.

To a certain extent, this also reflects the market's recognition of China CSSC Shipping. In recent years, against the backdrop of lackluster performance in the overall Hong Kong stock market, the stock price of China CSSC Shipping has continued to fluctuate upward, with a cumulative increase of over 118% since 2021. This is actually supported by the company's outstanding performance.

Recently, China CSSC Shipping released its 2024 semi-annual report. Overall, this report continues its outstanding performance since its listing in 2019.

In the first half of the year, China CSSC Shipping achieved a revenue of 1.966 billion Hong Kong dollars, a year-on-year increase of 13.5%; net income was 1.34 billion Hong Kong dollars, a year-on-year increase of 22.9%. At the same time, the company's ROE (return on equity) and ROA (return on assets) for the period increased by 4.5 and 1.5 percentage points to 20.2% and 6% respectively.

It can be seen that this interim report demonstrates all-round, high-quality growth, highlighting China CSSC Shipping's long-term steady operation. Fundamentally, it benefits from the improved industry environment and the company's unique advantages.

I. The improvement in industry environment has brought about remarkable effects in cross-cycle adjustments.

With the global economic recovery, the shipping industry's prosperity in 2024 has also improved.

Especially in the second quarter of this year, phenomena such as high shipping prices and container shortages have frequently occurred, showing a "non-peak season" characteristic overall.

According to a report released by the Shanghai International Shipping Research Center, the China Shipping Prosperity Index for the second quarter of 2024 was 122.05 points, an increase of 18.17 points from the previous quarter, jumping from the micro-prosperity range to the relatively prosperous range. At the same time, the China Shipping Confidence Index for the second quarter was 141.88 points, an increase of 27.11 points from the previous quarter, rising from the relatively prosperous range to the more prosperous range.

(Source: Shanghai International Shipping Research Center)

The prosperity of the shipping industry continues to rise, providing a favorable development environment for the entire industry chain.

In fact, regardless of the changes in the industry's prosperity, CSSC Shipping has been able to deliver good results, and this time is no exception. Ultimately, it is the company's cross-cycle adjustment strategy that is at work.

Simply put, it is to build a large number of ships when ship prices are low, forming a cost advantage, and then put a large number of ships into operation when the prosperity level rises. The key to achieving this is to have a deep understanding of the changes in industry prosperity. Backed by China Shipbuilding Group, CSSC Shipping has a keen perception in this regard, enough to support its unique approach of "building ships against the cycle and operating with the cycle."

From an operational perspective, in order to mitigate the enormous fluctuations in performance caused by cyclical changes, CSSC Shipping has formed a model of "fixed income + flexible income."

Among them, fixed income represents financing leasing and loan borrowing services, and the income from this part has relatively weak correlation with industry cycle changes. In the first half of this year, the total financial services revenue of this part was 0.896 billion Hong Kong dollars, a year-on-year increase of 6.7%.

Flexible income represents the company's investment through independent or joint investment to place orders for shipbuilding when the market is at a low point, and then continue to invest in the short-term and spot market operations, which is closely related to the current market environment. In the first half of this year, the total revenue from operating leasing and ship brokerage services was 1.069 billion Hong Kong dollars, a year-on-year increase of 19.9%.

In fact, this is similar to the "downside protection and upside flexibility" model favored by the capital market, and thanks to this, the growth certainty of CSSC Shipping is also stronger.

Second, the green energy strategy continues to advance, creating a model for the industry's green transformation.

Looking ahead, the shipping industry is in a major transformatio node, namely the green and low-carbon transformation.

According to the decarbonization strategy formulated by the International Maritime Organization, by 2050, the carbon emission intensity of the global shipping industry will be reduced by 70% and the total carbon emissions will be reduced by 50%. Promoting green transformation is not only a practice that maximizes social value, but also an important guarantee for China to occupy the high-end position in the global shipping industry value chain.

It can be predicted that as the proportion of clean energy gradually increases, owning green ships will become a necessary condition for entering the shipping industry, and transportation ships mainly powered by liquefied gas media such as LNG, liquid carbon dioxide (LCO2), and liquid hydrogen (LH2) will become the mainstream in the industry.

As a company with great foresight of industry trends, CSSC Shipping is one of the earliest companies in the industry to undergo green and low-carbon transformation. It has taken the green energy industry as its main direction and has started to layout LNG, offshore LNG/LPG equipment ships, and other green energy-related industries since its listing.

In the first half of the year, CSSC Shipping accomplished the commissioning of two 0.175 million cubic meters LNG transportation vessels, expanding the number of joint venture large-scale LNG transportation vessels under construction to seven.

As of June this year, in terms of initial investment amounts, clean energy equipment for offshore, container ships, bulk carriers, general cargo ships, and special vessels accounted for about 36%, 24%, 10%, 15%, and 14% respectively. The overall structure of the operating fleet is shifting towards higher value and younger vessels.

III. Conclusion

Thanks to its strong and sustainable performance, CSSC Shipping has always been generous in terms of dividends. The total amount of dividends has been increasing over the past five years, and the dividend ratio has exceeded 36% each year. Although the mid-year dividend this year is HKD 0.03 per share, which may seem small, it is just following the usual practice and leaves room for year-end dividends. Based on the current excellent performance, investors can look forward to the year-end dividend.

In the current overall weak market conditions, companies like CSSC Shipping that have a track record of consistent excellent performance and are willing to share the fruits of their operations with shareholders are more likely to attract the attention of institutions and long-term funds.