Preview of US stocks | Can China Shipping (CGL.US), which has high performance growth and opportunities in the first-tier FBA demand surge, seize high valuation?

With the geographical advantage of being adjacent to the Pearl River Delta and the free port policy, Hong Kong has developed into a global important international trade hub. As an international shipping center, Hong Kong has gathered more than 27,300 transportation, warehousing, and express service enterprises, with freight forwarding agents as an important component, including over 1,000 companies, such as Huayang Shipping, which has initiated its journey towards a listing on the US stock market. It was learned that Huayang Shipping, which secretly submitted its filing to the SEC in 2022, officially took a key step towards the capital market by submitting its public IPO application (F-1 document) to the SEC on October 23 this year. According to the prospectus, Huayang Shipping has applied to list on NASDAQ under the code "CGL". It plans to issue 3.75 million shares of common stock at a price of 4 dollars per share, aiming to raise up to 15 million dollars. Based on this issuance size, the shares offered in this IPO account for 20% of the total shares of the company, meaning that Huayang Shipping's IPO valuation will reach 75 million dollars. In terms of performance, Huayang Shipping has achieved continuous rapid growth. In the fiscal year 2024 (12 months ending September 30), Huayang Shipping's revenue was 31.809 million dollars, a year-on-year increase of 52.4%, and the net profit turned from a loss to a profit, recording 2.096 million dollars, compared to a loss of 755,000 dollars in the fiscal year 2023. In the first half of the 2025 fiscal year (6 months ending March 31), Huayang Shipping's revenue increased by 53.6% to 17.7 million dollars, and net profit surged by 118.7% to 1.017 million dollars, continuing its high growth momentum. With its characteristics as a small-cap stock and impressive performance, will Huayang Shipping be favored by investors? By examining the company's prospectus, one can find out. Seizing the surge in demand for FBA first-leg service to drive continuous high performance Founded in Hong Kong in 1996, Huayang Shipping has been focusing on the international freight forwarding service industry for nearly 30 years. Through its subsidiaries, Huayang Shipping provides reliable, economical, and customized logistic solutions for customers worldwide, effectively transporting various types and sizes of goods globally and providing agent logistics services according to customer requirements. Huayang Shipping has built a comprehensive freight service system covering the entire logistics chain, forming differentiated competitive advantages. The company's core business covers three major sectors: sea freight, air freight, and railway freight agency, which also provides integrated services such as picking up goods, warehousing, customs clearance declaration, especially in the field of Amazon FBA first-leg service sector, they have developed specialized capabilities to meet the explosive growth demand of cross-border e-commerce. In terms of network layout, to better provide international freight forwarding services for customers in different regions, Huayang Shipping, with Hong Kong as the hub, has established 6 branch offices in core cities in Mainland China such as Shanghai, Beijing, and Shenzhen, forming an operation layout of "domestic base points + Hong Kong hub + global radiation", which, in synergy with Huayang Maritime Center in locations like Singapore and Myanmar, provides basic support for multimodal transportation. According to the prospectus, Huayang Shipping has established a good customer base by working with freight forwarding agent clients from around the world, direct customers from industries such as publishing, watches, clothing and clothing accessories, Shenzhen Agricultural Power Group, and electronic products, etc. In the fiscal years 2023 and 2024, Huayang Shipping had 6,547 and 6,855 customers respectively. As of now, Huayang Shipping mainly operates in two major business segments, which include freight forwarding services including sea, air, and railway transport, and agency service revenue. The agency service revenue refers to services such as booking services requested by customers and freight services requested by other freight forwarding companies, warehousing services, and customs clearance/declaration services. In terms of revenue structure, the company's revenue mainly comes from sea freight business. In the fiscal year 2024, the revenue from sea freight, air freight, railway transport, and agent logistics solutions accounted for 83.25%, 8.37%, 0.07%, and 8.32% of the company's total revenue respectively, with sea freight being the largest source of revenue for the company. From a regional perspective, in the fiscal year 2024, revenue from the Hong Kong market accounted for 72.31% of Huayang Shipping's total revenue, while revenue from mainland China accounted for 27.69%. Clearly, after establishing multiple offices in mainland China, Huayang Shipping's revenue from mainland China has reached a considerable scale. Behind the continued strong performance of Huayang Shipping is the recovery of the economy and the increase in consumer demand driving an increase in trade volume. At the same time, Huayang Shipping has seized the industry opportunities brought about by the explosive growth in demand for FBA first-leg service due to the cross-border e-commerce boom. Platforms such as Temu, SHEIN, TikTok Shop, Amazon sellers (with over 6 million active sellers globally in 2024), have expanded globally from 2023 to 2025, leading to a surge in demand for "from China to overseas warehouse" FBA first-leg service. Huayang Shipping's FBA first-leg service segment, as the fastest-growing sub-segment, has directly embraced this wave of opportunities. In 2024, due to the rapid growth in sea freight, air freight, and agency service revenue, Huayang Shipping's total revenue increased by 52.4% to 31.809 million dollars. Building on this, Huayang Shipping has reduced expenses to improve operational efficiency, with general and administrative expenses decreasing by 26%, further accelerating profit. As a result, Huayang Shipping turned a profit of 2.096 million dollars during the reporting period, a significant turnaround from a loss. In the first half of the 2025 fiscal year, Huayang Shipping's sea freight business continued to maintain its strength, with revenue increasing by 43.5% to 14.085 million dollars, and the agency service revenue also experienced a major surge, soaring by 454.5% to 2.656 million dollars, driving total revenue to increase by 53.6% to 17.7 million dollars. Thanks to the improved operational efficiency, Huayang Shipping's net profit surged by 118.7% to 1.017 million dollars, witnessing a rapid release of profits. Building cyclical competitive barriers will become the key to future valuation While Huayang Shipping has seized the opportunities in the cross-border e-commerce boom to drive continuous high performance, in the long run, the company faces various operational challenges. From an industry perspective, the freight forwarding industry in Hong Kong is highly fragmented and fiercely competitive. As of December 2024, Hong Kong had about 3,700 freight forwarding service providers, leading to frequent price wars in the industry. The issue of "locking in low-end" services is particularly prominent, with many small enterprises relying on price competition as their main method, leading to a high degree of service homogeneity. Huayang Shipping needs to deal with competition from traditional freight forwarders and emerging cross-border e-commerce logistics companies. If it cannot enhance its value and differentiation competitive advantages through differentiated services (such as supply chain finance, data analysis), it may struggle to maintain market share. Additionally, adjustments in cross-border e-commerce policies may impact Huayang Shipping. From May 2, 2025, the United States canceled the "small value exemption" policy for low-value imports (below 800 dollars) from mainland China and Hong Kong, requiring these parcels to pay 120% tariff or a fixed fee of 100 dollars per item (unchanged after the US-China agreement on May 14, 2025). After the US fully canceled the "small value exemption" policy on August 29, 2025, Chinese goods still need to pay a tariff of 100 dollars per item (sent via USPS). The volume of cross-border e-commerce shipments on the China-US route accounts for approximately 30%-40% (mainly from FBA first-leg and express services), policy adjustments leading to a decrease in demand for e-commerce parcels, Huayang Shipping's related business may face the risk of order loss. Furthermore, shipping is a notably cyclical industry, with market demand closely related to the macroeconomic environment, resulting in significant fluctuations in the performance of companies within the industry. OECD predicts that global economic growth is expected to slow to 2.9% in 2026, while risks such as trade frictions, geopolitical conflicts, and industrial restructuring may continue to exist, creating an unfavorable industry environment. In this context, shipping companies need to build cyclical competitive barriers, which is one of the reasons for Huayang Shipping's listing in the US. Huayang Shipping stated in its prospectus that the funds raised from this US listing will mainly be used for three purposes: firstly, to enhance the development of intelligent logistics systems, improve the visibility management capability of goods; secondly, to expand into emerging markets such as Southeast Asia and the Middle East, seizing the industry opportunities brought about by the shift of manufacturing industry to ASEAN; thirdly, to upgrade green logistics solutions in response to the implementation of the EU CBAM mechanism, layout electric tractors, low-carbon transportation, and other cutting-edge areas. Whether this listing can serve as a strategic pivot to build long-term competitive barriers that can drive steady growth for the company will be the key litmus test for Huayang Shipping's strategic execution capability, and it is the core factor determining its future valuation anchor.