UBS has released a research report, raising its profit forecasts for SITC (01308) for 2026-2027 by 1% to 6%, reflecting stronger-than-expected volume and freight rates this year. However, the bank maintains a cautious stance on overall industry feeder fleet expansion beyond 2027. It reiterated a "Neutral" rating while increasing the target price from HK$30 to HK$33.8.

The report indicates that both volume and freight rates are expected to return to year-on-year growth in the second quarter of 2026, with limited impact from geopolitical tensions. The bank recently invited SITC's management to participate in an Asian investment forum. Management expressed confidence in intra-Asia shipping demand and outlined plans for continued fleet capacity expansion.

Regarding Middle East geopolitical tensions, management anticipates limited downside risk and expects SITC to benefit from the rebound in container freight rates observed since March. Management noted that freight rates were under pressure in Q1 2024, declining approximately 5% year-on-year. However, with the escalation of Middle East geopolitical tensions, rates have rebounded strongly, surpassing last year's levels. It is expected that both freight rates and volume will achieve year-on-year growth in the second quarter.

Furthermore, although bunker fuel costs have nearly doubled from the lows seen earlier this year, SITC can currently pass the entire cost increase to customers through fuel surcharges. Management pointed out that fuel costs account for about 20% of total operating costs. The average fuel price in April was approximately $630 per ton, compared to $520 per ton for 2025.

In terms of competitiveness, the company maintains a cost advantage of about $100 per TEU compared to peers, while its average freight rates also command a premium of about $100 per TEU. According to the vessel delivery schedule, SITC is set to receive two 1,800-TEU vessels in 2026, 11 in 2027, 13 in 2028, and 6 in 2029.