Ge Long Hui·2025-10-20 21:00Core Viewpoint - China Merchants Energy is the largest tanker owner globally, with a diverse fleet structure that allows the company to capitalize on market cycles effectively [1] Group 1: Company Overview - China Merchants Energy owns 44 VLCCs, contributing nearly 1 billion yuan in net profit elasticity, while the overall fleet's net profit elasticity is close to 2 billion yuan [1] - The company has additional profit elasticity of 400 million yuan from its current orders upon delivery [1] Group 2: Demand and Supply Dynamics - OPEC+ is increasing crude oil production, which is expected to boost transportation demand, with a potential increase of 2.14 to 4.11 million barrels per day [1] - The current low oil prices have released pent-up inventory demand, with global crude oil inventories still having a capacity of 460 million barrels compared to the five-year high [1] - The supply constraints are strong, with VLCC fleet capacity not seeing concentrated scrapping for nearly 20 years, leading to an expected actual fleet growth rate of 3.3% and 5.1% for 2026-2027 [2] Group 3: Profit Forecast - The forecast for VLCC freight rates is set at an average of $50,000/day, $60,000/day, and $58,000/day for the years 2025 to 2027 [3] - Projected revenues for the company are 24.485 billion yuan, 26.725 billion yuan, and 27.233 billion yuan for 2025 to 2027, reflecting year-on-year growth of 5.8%, 9.1%, and 1.9% respectively [3] - The company's net profit attributable to shareholders is expected to be 4.462 billion yuan, 5.803 billion yuan, and 5.757 billion yuan for the same period, with growth rates of +10.5%, +30.1%, and -0.8% respectively [3] Group 4: Valuation and Investment Potential - The company's replacement cost is estimated at 55.43 billion yuan, with the current market value being 0.73 times the replacement cost, lower than its peers [3] - If benchmarked against a P/NAV of 1.16 times, the company has an upside potential of 58% [4] - Under various scenarios, including a 10% increase in ship prices, the estimated replacement cost could rise to 60.5 billion yuan, indicating potential price increases of 65%, 72%, and 200% under different assumptions [4]