"Big Banks" Huayan upgraded PACIFIC BASIN's rating to "Hold" and raised the target price to 2.4 yuan

HSBC Global Research pointed out that Pacific Basin Shipping (02343.HK) saw a 5% quarter-on-quarter increase in the average net daily income of its small handy-sized bulk carriers based on time charter contracts, with spot rates rising by 23%; the rates for super handy-sized bulk carriers increased by 10% quarter-on-quarter, with spot rates rising by 49%.

The bank noted that the company typically lags behind when spot rates rise, due to the lag effect of charter contracts and voyage execution. The bank had previously held a cautious stance on potential overcapacity, but spot rates rebounded due to the resilience of small bulk trade, which increased by 4% year-on-year in the first three quarters of this year. Supply disruptions and slower vessel speeds further offset the impact of fleet growth. The company's higher contract coverage in the fourth quarter indicates that profits in the second half will be stronger than in the first half. The bank expects the company's underlying profit in the second half to be $53 million, compared to $22 million in the first half.

The bank raised its profit forecast for the company this year by 16%, and increased profit forecasts for next year and the year after by 42% to 62%. The bank upgraded its investment rating for the stock from "Reduce" to "Hold," and raised the target price from HKD 1.90 to HKD 2.40