Shipping container industry – Low domestic sea container freight rates will drag back the profits of companies
- Sea container freight rates in 2023 will return to a low level as (1) domestic freight demand weakens due to production will be less active (2) total domestic carrying supply has increased since the end of 2022.
- GPM of companies in the industry such as HAH, VOS, VFC will narrow due to the low domestic sea container freight rates, and the growth rate of revenue/NPAT is forecasted to be negative in 2023.
- For HAH stock, it is trading at a P/B valuation of 1.0x, although this valuation is still 40% higher than the average P/B for the period 2028 - 2019 (the period of sea freight and charter rates remained low), however, HAH currently has more than three ships for time charter and the charter rate is more than 2 times higher than in the previous period. This valuation has also been deeply discounted compared to the average P/B of 2Y 2021 - 2022 (the period of sea freight and charter rates increased rapidly), so we see not much downside risk price for HAH.
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