Scissor differences in the growth rate of refined oil shipping supply and demand are compounded by resonance in crude oil shipping opportunities. Due to platform bottlenecks and low desire to order impacting the fleet delivery side, and the aging of ships and new environmental regulations constrain existing fleet supply, the global refined oil shipping supply growth rate is expected to decrease year by year; in the context of the eastward shift of global refineries and the restructuring of refined oil trade brought about by the Russian-Ukrainian conflict, there is a high probability that the growth rate of refined oil shipping demand will increase; judging from historical performance, the current supply and demand for crude oil shipping is also tight; against the backdrop of our own scarce gap in supply and demand growth, we are also in a tight state of supply and demand. Judging that freight prices for refined oil products are expected to resonate with crude oil shipping prices, leading to an increase.

China Merchants CNPC - a global small and medium-sized liquid cargo transportation service provider, with an outstanding share of the refined oil product fleet. China Merchants CNPC is a shipping enterprise positioned as a global liquid cargo transportation service provider for small and medium-sized ships. It focuses on the fields of refined oil products, crude oil, chemicals, gas transportation, etc.; oil transportation is the company's core business, which mainly consists of crude oil transportation and refined oil transportation. According to information disclosed on the company's official website, China Merchants CNPC, as the largest MR domestic trade tanker owner in the Far East, currently operates 28 MR vessels, totaling 133.27 million DWT, accounting for 54.5% of the company's total fleet, accounting for a large share.

The refined oil transportation sector is expected to contribute to greater performance elasticity. We calculated the 28 ships disclosed on the company's official website: for every 10,000 US dollars/day change in MR ships' daily revenue TCE, the net profit elasticity of the corresponding MR fleet is 575 million yuan; if MR ships' daily revenue TCE fluctuates 20,000 US dollars/day, the net profit elasticity of the corresponding MR fleet is 1,149 million yuan.

First coverage, giving a “buy” rating. We forecast that the company's earnings per share for 2023-2025 will be 0.36, 0.43, and 0.49 yuan respectively, with performance growth rates of 20.9%, 20.1%, and 12.1%, respectively; as of March 6, 2024, it is 9.69 times the average PE value of the company in 2024. Considering that the continued widening growth gap between the shipping supply and demand of refined oil products is expected to increase freight rates, and CMB's own fleet size is relatively high, and the performance is more flexible. We comprehensively consider industry prosperity and comparable company valuations, and give the company a PE valuation of 9.0 times in 2024, with a target price of 3.90 yuan. First coverage, giving a “buy” rating.

Risk warning: Shipping demand for refined oil products falls short of expectations, dismantling of old ships falls short of expectations, risk of oil price fluctuations, risk of exchange rate fluctuations.