The Zhitong Finance App learned that Societe Generale Securities released a research report stating that it maintains COSCO Haineng (01138)'s “increase in holdings” rating, with a target price of HK$12.5. The overall logic of the oil transportation industry has not changed, and the long-term boom is still there. Ongoing orders for tankers account for a low proportion of the fleet (for example, VLCC is 2%). At the same time, the aging of the fleet will accelerate fleet clearance, and tanker supply is tight; demand is expected to rise steadily in the second half of the year. According to the company's announcement data, demand for crude oil tons and nautical miles is expected to increase 6.6% in 2023. At the same time, the company's LNG business layout continues to expand to provide revenue guarantees.

Societe Generale Securities's main views are as follows:

2023H1 VLCC's overall rate boom supports performance

2023H1's revenue was RMB 11.483 billion, up 54% year on year. Among them, domestic oil transport/foreign trade oil transport/foreign trade LNG transportation revenue was RMB 30.53/75.6/870 million yuan, respectively, with year-on-year changes of +3.8%/+92.8%/+42.1%. The company recorded a gross profit margin of 35%, an increase of 26.6 percentage points over the previous year. A net profit of RMB 2,895 million was recorded to the mother, an increase of 1531% over the previous year. In terms of foreign trade oil transportation, the company's VLCC tanker business benefits from the overall favorable 2023H1 market. At the same time, the company emphasizes diversification of route supplies and the development of new customers and new routes; small and medium-sized fleets mainly benefit from strengthening cooperation with large international oil companies and optimizing the capacity of triangular routes.

Demand during the peak season supports the market, and the US increases production to deal with production cuts in the Middle East

Looking ahead to 2023H2, OPEC+ production may decrease on the oil supply side, which is expected to be covered by production growth in other non-OPEC countries (such as the US, etc.). According to IEA forecasts, global oil supply will reach the level of 101.5 million b/d in 2023, an increase of 1.6 million b/d over the previous year. On the demand side, global oil demand will continue to grow, and China is expected to contribute 70% to the increase in demand.

Demand is geographically divided, and China, India and Brazil will support 2023Q4 oil demand

According to the IEA's latest report in October 2023, China, India and Brazil will maintain a relatively rapid oil demand growth rate, supporting a year-on-year increase of about 2.3 mb/d in global oil demand this year, with China accounting for 77% of this year's oil demand. Meanwhile, demand for US oil is low. According to September data, US gasoline consumption fell to its lowest point in 20 years. At the same time, oil demand in emerging markets will also be affected due to factors such as the cancellation of subsidies.

The peak oil transportation season is here, and the company's diversified fleet benefits

The peak oil transportation season has arrived, and the crude oil freight index (BDTI) has recently risen rapidly, increasing 31.9% month-on-month as of October 13, 2023. The company's fleet has great operating flexibility. For example, for every 10,000 US dollars/day increase in TCE, the VLCC fleet will generate an additional revenue of 1,057 billion yuan, which will help the company benefit from the new peak season.

Risk warning: 1) risk of changes in sanctions policies; 2) tanker accidents; 3) OPEC production cuts exceed expectations.