Key points of investment
The company announced its 2024 mid-year report: 24H1 operating income of 11.65 billion yuan, achieving net profit of 2.607 billion yuan, net profit of 2.607 billion yuan, net profit of non-return to mother of 2.617 billion yuan, +8.2% year-on-year; of these, 24Q2, operating income of 5.813 billion yuan, or -2.2% year-on-year, realized net profit of 1.371 billion yuan, net profit of non-return to mother of 1.381 billion yuan Yuan, -10.1% year over year, was higher than the company's performance forecast (the company forecast 24Q2 net profit to mother and net profit without deduction was 1.314 billion yuan).
Foreign trade oil transportation: High performance base in 23Q2, the 24H1 foreign trade oil transportation business revenue of the company with better performance of finished tankers was 7.75 billion yuan, +2% year over year, gross profit 2.53 billion yuan, -9% year on year, gross profit margin 32.7%, down 3.8 pct year on year.
The 23Q2 high base is due to the cancellation of temporary surcharges on Brazilian crude oil exports, which led to a significant increase in Brazilian pallets, and an increase in the number of docked ships, which led to an increase in the off-season. The detour caused by the 24H1 Red Sea incident greatly increased the demand for tank-mile transportation of refined oil tankers, resulting in better freight rate performance for refined tankers than crude oil tankers.
According to industry rules, Q2 performance generally corresponds to the average freight rate between March and March, VLC TD3C-TCE 44,392 US dollars/day, -14%, while for finished tankers, LR2 TC1-TCE averaged $56079 per day, +34% year over year, LR1 TC5-TCE averaged 42,348 US dollars/day, +21% year over year, MR TC7-TCE averaged US $37,305 per day, and +28% year over year.
Domestic Trade+LNG Contributes to Performance Safety Pad
In the first half of 2024, these two businesses accounted for about 33.3% of revenue, and gross profit contributed 1.21 billion yuan, +4.6% year over year, mainly due to the year-on-year increase in LNG transportation business capacity. As of 24H1, the company had 45 LNG carriers in operation, an increase of 3 over the previous year.
The mid-term dividend of the plan is 30-50%, highlighting the investment value
The total amount of the company's mid-term cash dividends is 30% to 50% of 24H1's net profit. Specific distribution plans such as whether to implement the mid-term profit distribution and the specific distribution amount will be reviewed by the board of directors before the end of October.
The Q4 peak season for oil transportation can be expected, and the boom is expected to continue to exceed expectations
There is no change in supply-side rigidity. It is expected that only 2 new VLCC ships will be delivered throughout this year, and the Red Sea crisis has brought about a new round of shipping boom, and other shipowners will follow up or increase orders, thereby increasing the tension on the fleet. Short-term deliveries of new tankers are still limited, which is expected to drive the current oil transportation boom cycle to last longer than expected. Furthermore, OPEC+ plans to gradually eliminate additional production cuts of 2.2 million b/d starting in October 2024, which is expected to bring additional surprises on the demand side.
Investment advice
Currently, ship asset value and term leasing levels continue to be high, and we continue to be optimistic that the oil transportation boom will improve. We expect to achieve net profit of 5.6, 6.6, and 7.1 billion yuan in 2024-2026, maintaining the “increase in holdings” rating.
Risk warning
The global economy is in recession, oil-producing countries have drastically cut production, shipowners have placed large-scale orders to build ships, etc.