Strong freight rate is expected to continually support cosco ShippingHoldings' ("CSH"or the "Company") performance. On the back of strong consumption recovery since July 2020, a sudden surge in shipping volumeespecially related to Asia-North America routes, caused port congestion which resulted in prolonged vessel withholding time and inefficient port logistics. In addition, congestion and trade imbalance are still affecting the efficiency of empty container rearrangement. Given strong export orders out of China, we expect freight rate to remain strong until February 2021.
　　Following competition structure improvement within the industry, CSH's profitability is expected to escalate in the future. As evidenced by solid freight rate in 1H20 as the COVID-19 pandemic first emerged, the industry showed stronger capacity discipline when encountering decline in demand. In addition, considering a lower level of shipping capacity on orderbook, better demand-supply balance could be expected in the future which is expected to support average freight rate in the coming years, which benefits CSH's future profitability prospects. Moreover, we expect CSH' smarket share in Europe to moderately expand when newly ordered ships are deployed in the future.
　　Considering strong freight rate forecasts, we lift our forecast of CSH's shareholder's net profit. We have forecasted CSH's net profit to shareholders to be RMB5,727 mn/RMB5,709 mn/RMB5,836 mn for2020-2022, respectively, representing YoY growth of 322.6%/-0.3%/2.2%Change our investment rating from "Buy"to "Accumulate"and revise up TP to HK$8.20, representing 15.7x/15.7x/15.4x PER and 2.7x/2.4x/2.1x PBR for 2020-2022.