JP Morgan lowered the target price for PACIFIC BASIN to HKD 2.7, maintaining a "buy" recommendation as the fundamentals remain unchanged

JP Morgan believes that the recent selling pressure on PACIFIC BASIN (02343.HK) seems to be an overreaction compared to its fundamentals; it reiterates an "Overweight" rating, with the target price lowered from HKD 3.2 to HKD 2.7, which reflects the flat TCE (Time Charter Equivalent) and the ongoing growth prospects of the fleet.

The bank believes that the recent weakness in the stock price is based on several factors, including the company's completion of its buyback program, market expectations that industry supply will continue to exceed demand leading to a weak outlook for next year, Caravel slowing down its share acquisition pace and lacking visible short-term catalysts, as well as year-end profit-taking. However, these factors do not reflect a deterioration in the company's competitive position or balance sheet.

The bank stated that while demand for handy-sized bulk carriers is slowing, it is expected to maintain a positive year-on-year growth of 2% next year, which will support capacity utilization. Additionally, the aging fleet issue is increasingly becoming a constraint, with currently 14% of handy-sized vessels and 12% of supramax vessels being over 20 years old. Once the market further weakens, the response from the supply side will be more asymmetric. The bank believes that after adjusting the valuation and target price, the risk-reward ratio has become more favorable