COSCO Shipping Holdings' or "the Company'1） 2020 results beat our expectation. Due to surged freight rate and shipping volume recovery in 2H20, the Company achieved revenue of RMB 171,258 mnt up 13.8% YoY. Of which, revenue from container shipping business increased 14.6% YoY. Leveraged by gross profit margin improvement in 4Q20. CSH's gross profit was significantly improved in 2020. CSH's net profit to shareholders increased 48.4% YoY to RMB9.927 mn, representing EPS of RMB0.81, beating our expectation but in line with market consensus. Excluding one-off gains, adjusted net profit to shareholders surged 632.6% YoY
　　High freight rates are expected to persist in the short run. Given the sudden surge in shipping volume, inland infrastructure bottleneck affected by the pandemic was an important reason for high freight rate, in which we think it should take a longer time to smooth out supply chain congestion. Meanwhile, different expectations on freight rate turnaround point are likely to cause volatility to CSH's share price.
　　Upward industry cycle, higher contracted rate and longer contract period sustained CSH's profitability. Considering shipping capacity growth and global economic growth post the pandemic, a better supply and demand pattern is expected. Besides that CSH's contracted rate should improve, shippers may consider longer contract period as they pay more attention to supply chain safety. Therefore, CSH's profitability is expected to be more stable and sustainable.