Introduction to this report:
The company announced the 2024 semi-annual results forecast. The performance was in line with expectations, and the profit center continued to rise. The Red Sea situation does not change the oil transportation super bull market options. The future rise in the economy will continue to exceed market expectations, and there is room for performance valuation.
Key points of investment:
Maintain an increase in holdings rating. The oil transportation industry's capacity utilization rate has reached a threshold. Supply and demand will continue to improve in the next few years, and the rise and continuation of the boom will exceed expectations. The company's oil transportation business has sufficient profit flexibility, and the oil transportation super bull market will provide double room for performance valuation. It is recommended to reduce short-term fluctuations and focus on central trends. Reverse investment will enhance the investment experience. Maintain the 2024-26 net profit forecast of $7.2/8.6/9.4 billion. Maintain the target price of 23.54 yuan and maintain the increase in holdings.
The results for the first half of 2024 were in line with expectations, and the profit center continued to rise. The company announced that net profit for the first half of 2024 was about 2.55 billion yuan, a year-on-year decrease of 9%, and a year-on-year increase of more than 5% after deducting non-net profit. Among them, the estimated net profit of 2024Q2 was 1.31 billion yuan. The performance was in full line with our expectations. The year-on-year decline of 1.54 billion yuan after 23Q2 was due to the high base effect (higher 23Q2 tariffs due to the post-epidemic trade pace), and the steady increase of 1.24 billion yuan compared to 24Q1 is in line with the freight rate trend. According to the Polish Stock Exchange rate, the VLCC revenue confirmation was delayed by about a month. The average VLCC Middle East-China TCE corresponding to the six-quarter single-quarter results of 2023-24 was 3.4/5.2/3.1/0.029/0.042/0.044 million US dollars, respectively. Of these, 24Q2 fell 14% from 23Q2 and increased nearly 5% from 24Q1.
The impact of the Red Sea is relatively limited, and peak season performance can be expected to be optimistic. The low season for the oil transportation market in the first half of 2024 was not easy, and the market believes that it mainly benefited from the influence of the Red Sea. We believe that the impact of oil transportation on the Red Sea is relatively limited, and future changes in the Red Sea situation will not change the oil transportation super bull market options. In the past, only 10% of global oil shipments passed through the Suez Canal. Currently, it is estimated that more than half of the tankers orbiting the Cape of Good Hope consume an additional 1-2% of the effective capacity of the entire industry. The recent drop in VLCC freight rates has raised concerns about oil transportation demand in the market. We believe that off-season refinery maintenance and oil prices will still have an impact on the pace of trade. According to our statistics, the average distance of global crude oil transportation continued to increase by 3% in the first half of 2024. Considering the resilience of traditional energy, the weakening impact of storage, and the low base in the second half of the year, oil transportation demand is expected to rise steadily throughout the year. It suggests that the effective capacity supply for tankers during the 2024 peak season may be more rigid, and the peak season performance can be expected to be optimistic.
The company's profit flexibility is sufficient, and there is double room for performance evaluation. Global oil transport trade has been restructured and continued to deepen since 2022, and the rigidity of tanker supply has gradually become prominent. The utilization rate of oil transportation capacity is already close to the threshold, which means that future marginal improvements in supply and demand will bring a rise in the oil transportation industry that exceeds expectations, and should be given strategic attention. We believe that oil supply and demand will continue to improve in the next few years, and the boom will continue to rise and exceed expectations. COSCO Marine has the largest tanker fleet in the world, and the fleet structure is similar to that of the industry. It will fully benefit from the upward trend and sufficient profit flexibility. It is estimated that every litre of VLCC TCE is 0.01 million/day, and the company's net profit will increase by 1 billion yuan. It is suggested that the oil transportation super bull market will provide double room for performance valuation. It is recommended to focus on the timing of the reverse layout.
Risk warning. Economic fluctuations, geographical situation, implementation of new environmental protection policies falling short of expectations, safety incidents.