...December 12, 2023 Chronic industry overcapacity to stress Wan Hai Line Ltd.'s profitability in 2023-2024. Seaborne freight rates have fallen rapidly in 2023 from record highs in early 2022, as capacity rapidly overtook demand. We forecast Taiwan-based Wan Hai's EBITDA margin will plummet to 10%- 13% in 2023 from 53.8% in 2022, and lead to an operating loss of new Taiwan dollar (NT$) 6.0 billion-NT$6.5 billion. Wan Hai's profitability will remain under pressure and the EBITDA margin could only recover slightly to 15%-17% in 2024. Containership supply will significantly exceed demand growth. High inflation and interest rates will cap cargo demand on main-lane service lines but there could be some recovery in 2024. Meanwhile, capacity growth of megaships that are usually deployed on long-haul routes will likely peak at 10%-20% in 2024. Wan Hai's weaker cost structure and pricing power for transpacific services could constrain its margin, despite action to adjust its services to lower the impact....
