Zhi Tong Cai Jing·2025-09-23 06:18Core Viewpoint - Morgan Stanley initiates coverage on China Merchants Energy Shipping Company (01138) with an "Overweight" rating and a target price of HKD 12, while giving a "Neutral" rating for its A-share (600026.SH) with a target price of RMB 13 [1] Group 1: Company Overview - China Merchants Energy is the largest oil tanker operator in China and a leading global player in crude oil, refined oil, and LNG transportation [1] - The company operates a diversified fleet under China Merchants Group's energy transportation division, providing it with a competitive edge in a volatile freight market [1] Group 2: Financial Projections - The company is expected to achieve a compound annual growth rate (CAGR) of 16% in net profit from 2025 to 2027, driven by freight recovery, structural supply-demand catalysts, and cautious fleet expansion [1] - Revenue CAGR is projected at approximately 8% from 2025 to 2027, supporting an improvement in profit margins, with net profit margin increasing from 19% in 2025 to 21% in 2027 [2] Group 3: Fleet and Debt Management - The fleet is anticipated to grow from 246 vessels in 2024 to 290 vessels by 2027, positioning the company to capitalize on the next upward cycle [2] - Net debt ratio is expected to rise from about 52% in 2025 to approximately 67% in 2027, but strong operating cash flow and asset backing will keep leverage manageable [2] - LNG revenue is projected to increase its share to around 13% by 2027, enhancing revenue visibility [2]