Events:
Cosco Haineng released its semi-annual report for 2022: 1H2022, the company achieved operating income of 7.513 billion yuan, an increase of 22.85% over the same period last year; the net profit of shareholders belonging to listed companies was 159 million yuan, down 70.78% from the same period last year; and the non-net profit deducted from the mother was 152 million yuan, a decrease of 72.68% over the same period last year.
Main points of investment:
The boom of small and medium-sized oil tankers contributed to an improvement in the performance of the second quarter compared with the previous quarter. 2Q2022 realized a net profit of 134 million yuan, an increase of 109 million yuan, or 43.6%, over the previous month. Performance improved month-on-month thanks to the crude oil boat, oil products market took the lead in the recovery. a. Crude oil vessels: after the conflict between Russia and Ukraine, while Europe was looking for alternatives to imported oil from other regions, Russian crude oil supply turned to Asia, and small ships were the first to benefit as the main ship type in the region. b. Refined oil market:
The recovery of refined oil demand in Europe and the United States has encountered the elimination of its own refinery capacity and the embargo on Rosneft. The higher refining profit margins in Europe and the United States have led to the trade of refined oil products and pushed up the freight price of refined oil products. The company has a large fleet of small and medium-sized oil tankers, and actively adjusts and grasps the market situation, turning three ships' internal trade into foreign trade, and adjusting one finished oil tanker to black oil transportation, so as to improve the overall income.
VLCC is already on its way to recovery and is expected to start contributing profits in the third quarter. TCE, the TD3C route, has continued to recover since the end of June, with an average of $24500 per day in August. The continuous release of crude oil from the United States Bay and the Middle East has led to a sustained recovery in the VLCC market, which is expected to continue, considering that it is about to enter the peak season of the fourth quarter. The VLCC fleet is expected to begin to contribute profits in the second half of the year.
2022 is the first year of the oil transportation cycle, and we are optimistic about the further strengthening of the market. Considering the many restrictions on the supply side, the current cycle of oil transportation is not a flash in the pan, but gradually strengthened, with a high probability that it will occur at some point in the year after next year, and this year is just entering the early stages of recovery. The degree of insufficient effective supply will be gradually reflected in the next two years: a. With the serious aging of ships, the number of ships to be dismantled is gradually increasing; the environmental protection policy of b.IMO becomes stricter, and the supply of the fleet loses flexibility; c. Shipyard capacity is tight and there is no room for new orders for VLCC. Demand continues to recover driven by the increase in crude oil production and route restructuring, and the replenishment of warehouses and the lifting of the ban by Iran at any time in the future provide potential flexibility for demand growth. This supply and demand structure continues to deduce, and the market is expected to further strengthen.
Profit forecast and investment rating Cosco Haineng is the global leader in oil and gas transportation and has the largest oil tanker fleet in the world. Benefiting from the economic recovery of refined oil and crude oil transportation, we estimate that the operating income of COSCO Haineng in 2022-2024 is 142.38 yuan, 167.35 yuan and 19.214 billion yuan respectively, and the return net profit is 13.85,37.64 and 5.745 billion yuan respectively, and the corresponding PE is 43.12,16.88,11.24 respectively. Maintain the "overweight" rating.
Risks suggest repeated outbreaks; IMO regulation falls short of expectations; oil-producing countries increase production less than expected; policy risks; a sharp global economic downturn; and worse-than-expected bad weather.