Introduction to this report:

The utilization rate of refined oil transportation capacity may have exceeded the threshold, and multi-line freight rates have hit new highs one year after another. It is expected that supply and demand will continue to improve in the next few years, and the rise and continuation of the boom will exceed expectations. The marginal impact or gradual decline of the situation in the Red Sea will welcome a good layout opportunity.

Key points of investment:

An increase in holdings is recommended. The utilization rate of refined oil transportation capacity may have exceeded the threshold. Profits continued during the off-peak season, and the company's profit center increased significantly. Supply and demand are expected to continue to improve in the next few years, and the rise and continuation of the boom will exceed expectations. The marginal impact or gradual decline of the situation in the Red Sea will welcome a good layout opportunity. Maintain the 2023-25 net profit forecast of $16/24/25 billion. There is double room for performance evaluation, and the target price is maintained at 7.37 yuan.

The utilization rate of refined oil transportation capacity may have exceeded the threshold, and multi-line freight rates have hit new highs one year after another. In 2023, the relay war of global refineries moved eastward in fear of rushing and storing oil to ensure an increase in demand for refined oil transportation, and drove a significant increase in the capacity utilization rate of the refined oil transportation market compared to 2019. MR TCE surged beyond expectations for the Atlantic route in November 2023 and hit a new high during the year; the Singapore-Australia route continued to rise to nearly US$45,000 per day in January 2024, hitting another one-year high. Once again, we suggest that the capacity utilization rate of the refined oil transportation market may have exceeded the threshold, the freight rate center has risen, and the freight rate sensitivity is sufficient.

It is expected that supply and demand will continue to improve in the next few years, and the rise and continuation of the boom will exceed expectations. 1) Requirements:

Europe, America, Australia, etc. will continue to permanently shut down some refineries, while the world's new refinery capacity is concentrated in the Middle East/India/China, etc. At the same time, European and American oil trade sanctions against Russia are becoming more and more strict. The eastward relocation of refineries and trade restructuring are expected to continue to boost cross-regional trade and lengthen flight distances. 2) Supply: MR's on-hand order pressure is limited, and shipowners' willingness to place orders has declined. An aging fleet and stricter environmental regulations will limit supply flexibility, and tighter shadow fleet sanctions will also speed up the dismantling of old ships.

The marginal impact or gradual decline of the situation in the Red Sea will welcome a good layout opportunity. The company has 30 MR ships, and it is estimated that TCE will increase net profit by nearly 600 million yuan per liter of 10,000 US dollars. Since the situation in the Red Sea gradually escalated in December 2023, high boat freight rates may help off-season performance, and more importantly, once again verify that the capacity utilization rate has exceeded the threshold. Considering the persistence of disturbances, it is difficult to determine, and it has not affected our central freight rate expectations for 2024. The marginal impact or gradual decline of the situation in the Red Sea will welcome a good layout opportunity.

Risk warning. Economic fluctuations, geographical conditions, sanctions and environmental protection measures falling short of expectations.