HSBC reiterates Buy on COSCO SHIP HOLD as EBIT margins double to 10%

HSBC Global Investment Research reiterated its Buy rating on COSCO SHIP HOLD (01919.HK) with a HKD17.2 price target, implying 31% upside from current levels.

"The global container shipping upcycle is stronger than expected, supported by structural demand from AI and data center construction rather than merely front-loaded shipments ahead of tariffs," HSBC analysts said in a report citing insights from industry expert network Linerlytica.

The broker expects industry EBIT margins to expand to about 10% in the second quarter from roughly 5% in the first quarter, with further gains possible in the third quarter if freight rates remain firm. Freight rate indicators continued climbing in late June, and carriers are pushing for additional rate increases in July.

COSCO SHIP HOLD's 50% payout ratio for fiscal 2026 through 2028 provides a clear shareholder return framework supporting a valuation re-rating, HSBC said. The broker maintained Hold ratings on OOIL (00316.HK) and SITC (01308.HK) with targets of HKD130 and HKD31, respectively.

HSBC's analysis distinguishes the current cycle from typical tariff-driven demand surges. Traditional Chinese export goods such as apparel, footwear and toys were relatively weak from January through May, indicating the growth is not consumption-led. Instead, demand is tied to artificial intelligence and data center construction, clean technology including batteries, electric vehicles and solar energy, and power infrastructure for data centers.

Key downside risks include easing tensions in the Red Sea and the release of additional vessel capacity, though ongoing port congestion is currently supporting tight capacity conditions. Industry leaders such as Maersk and Hapag-Lloyd may raise their full-year 2026 earnings guidance if the rate environment persists, HSBC said.

The reiterated Buy rating and 50% payout framework position COSCO SHIP HOLD as a beneficiary of structural shipping demand that extends beyond the typical pre-tariff pull-forward cycle. Investors will watch July rate announcements and second-quarter earnings reports from global peers for confirmation of the margin trajectory.

This article is for informational purposes only and does not constitute investment advice.