Description of the event

In the first half of 2024, the company achieved operating income of 13.23 billion, an increase of 1.9% over the previous year, and realized a net profit of 2.5 billion yuan to mother, a decrease of 9.9% over the previous year. It is proposed to distribute an interim cash dividend of 0.1 yuan per share.

Incident comments

Oil transportation has maintained its central position, and the bulk transportation business has clearly recovered. The performance of the company's various fleets in Q2 is as follows: the oil transport/bulk/shipping/roll-roload business contributed 24.1, 2.06, 1.68 and 0.51 billion, respectively, -10.6%, +13.8%, -3.7%, and +2.0%, respectively; the oil transport/bulk transportation/loading/roll-over business contributed 8.0, 0.44, 0.14 and 0.09 billion, respectively, to net profit, -23.4%, +70.2%, -45.7%, and +0.1%, respectively. Oil transportation is in the early stages of the upward cycle, and the oil transportation business continues to maintain a central position; significant recovery in the bulk transportation industry during the year led to steady profit growth, and the profit contribution of the LNG business also remained stable.

Oil transportation business: continuous verification of operating capacity. (1) At the industry level, the upward trend in the oil transportation cycle was blocked due to OPEC production cuts and demand suppression due to falling domestic crude oil imports, etc., and the average Q2 Clarkson VLCC-TCE was 0.042 million/day (previous 1 month), -4.9% month-on-month, mainly due to market shocks during the quarter; (2) At the company level, due to multiple ships installing desulfurization towers, operating days decreased 2% year-on-year in the first half of the year, but the company's VLCC fleet achieved a freight rate of 0.048 millions/day in the first half of the year (Q1) 0.05 million/day), continuing to outperform the market. However, due to the impact of the high freight rate base in the same period last year, Q2's oil transportation fleet revenue fell 10.6% year on year, and net profit fell 23.4% year on year. However, the Q2 oil fleet's net interest rate was 33.4%, a small decrease from the 34.1% decline in Q1, and the oil transportation fleet still maintained strong profitability.

Bulk transportation business: continuous recovery and operational refinement. (1) At the industry level, the first half of the year was driven by China's commodity import demand, especially the increase in imports of iron ore, coal, etc., and dry bulk freight prices continued to rise. Among them, the BDI index recorded an average of 1,848 points in Q2, +41% year-on-month, +1.3% month-on-month, and the market remained volatile during the quarter; (2) At the company level, all major ship types outperformed the market: for example, the Capesize fleet outperformed the market by 6% in the first half of the year, the Panamax fleet outperformed the market by 6%, the Panamax fleet outperforming index by 4.3%, and the Ultramax fleet outperforming index by 23.3% 5%, expected to benefit from As a result of the company's rolling lease operation method, the average daily TCE of the fleet increased month-on-month, and the company expanded its fleet size. As a result, the Q2 revenue of the company's bulk carrier fleet increased 8.8% month-on-month to 2.06 billion, and net profit increased 24.1% to 0.44 billion month-on-month. The business continued to recover and improve operations.

Other shipping businesses provide strong profit support, and financial expenses and income tax expenses have risen. (1) Although the shipping market boomed under the influence of the Red Sea incident in the first half of the year, the company's regional market changed little, so the company's shipping fleet was still under pressure. Q2 net profit increased 30.8% month-on-month, but fell 45.7% to 0.14 billion year on year; (2) the adjustment of domestic and foreign trade capacity in the role-loading business achieved results. Foreign trade volume increased 30% year-on-year in the first half of the year, and Q2 net profit contributed 0.09 billion; (3) The LNG business contributed 0.16 billion to net profit in Q2, which was the same as Q1, mainly due to CLNG investment income; (4) The increase in financial expenses was mainly due to base issues caused by exchange earnings last year. Q2 financial expenses increased 0.12 billion over the same period last year. (5) Due to dividend requirements, the company plans to remit 1.2 billion in profit from overseas, accruing income tax expenses of 0.296 billion according to the income tax rate difference, and reduce profits.

Investment advice: Leading operations combined with fleet expansion are expected to fully benefit the oil and distribution market. The company is the world's leading multi-ship shipping platform. The oil and bulk shipping fleets are at the forefront of the world in terms of scale and operating capacity. Currently, the global demand side is about to enter a cycle of interest rate cuts. The supply side of oil transportation and distribution is also limited by factors such as insufficient long-term capital expenditure, limited shipbuilding capacity, and pressure from new environmental regulations. The company is expected to resonate with the oil and distribution market. The company's 2024-2026 performance is expected to be 6, 7.96, and 8.95 billion, respectively, and the corresponding PE is 9, 7, and 6 times, respectively. We are optimistic about the company's economic prospects and maintain the buying rating.

Risk warning

1. The global macroeconomy experienced a sharp decline; 2. New industry orders increased sharply.