Summary of COSCO Shipping Energy's Conference Call Company Overview - **Company**: COSCO Shipping Energy - **Period**: First half of 2025 Key Financial Metrics - **Net Profit**: CNY 1.869 billion, down 29% year-on-year, but up 64% quarter-on-quarter in Q2 [2][4] - **Foreign Trade Oil Transportation Gross Profit**: CNY 1.289 billion, down 49.1% year-on-year, but up 40.3% quarter-on-quarter in Q2 [5] - **LNG Transportation Contribution**: Net profit of CNY 424 million, up 5.7% year-on-year [5] Fleet Development and Strategy - **Fleet Size**: 157 operational vessels, with 18 awaiting delivery [4] - **New Orders**: Ordered methanol dual-fuel and chemical tankers, expected delivery in 2027-2028 [2][6] - **Old Vessel Disposal**: Disposed of a 31-year-old LR1 and a 20-year-old VLCC, generating net proceeds of CNY 1.18 million and CNY 72.98 million respectively [6] Capital Raising and Financial Strategy - **A-Share Private Placement**: Approved by the CSRC, aiming to raise up to CNY 8 billion for new VLCC, Aframax, and LNG vessels [2][7] - **Debt Structure Optimization**: COSCO Shipping Group committed to subscribe for 50% of the offering [7] Market Outlook - **VLCC Rates**: Currently at approximately USD 50,000 per day, expected to improve in Q4 due to OPEC+ production increases and seasonal demand [2][10] - **Supply Constraints**: Aging fleet with high proportion of old vessels, limited new deliveries expected [9] - **Geopolitical Factors**: U.S. sanctions on Iranian oil may tighten market supply, supporting industry fundamentals [9][11] Future Projections - **LNG Vessel Profit Contribution**: Expected to increase net profit by approximately 30% with new deliveries from 2025 to 2028 [3][22] - **TCE Expectations**: Anticipated to be better in H2 2025, with one-year charter rates projected between USD 45,000 and USD 50,000 [3][27] Industry Dynamics - **Trade Shifts**: Increased compliance oil demand from India due to U.S. tariffs, benefiting VLCC and Aframax transportation [11] - **Long-Distance Transport Demand**: Expected to rise due to increased market share from Atlantic oil-producing countries [12] Regulatory and Compliance Readiness - **Environmental Regulations**: All vessels compliant with EXI and CII standards, no additional costs expected [26] Investment Considerations - **Stock Performance**: Recent declines attributed to private placement and broader market trends, with a strong correlation to freight rates [35] - **Long-Term Contracts**: Majority of LNG vessels under long-term contracts, providing revenue stability [34] Conclusion - **Overall Outlook**: COSCO Shipping Energy is positioned for gradual recovery with strategic fleet updates, capital raising efforts, and favorable market conditions anticipated in the latter half of 2025. The company encourages investor engagement in upcoming financing activities [39]

Investment Rating - The investment rating for the company is "Buy" [7] Core Views - The company's revenue for 1H25 was 11.64 billion RMB, a year-on-year decrease of 2.6%, with a net profit attributable to shareholders of 1.87 billion RMB, down 29.2% year-on-year. The decline in performance is primarily due to pressure on international oil transportation demand and a decrease in freight rates. However, there is an expectation for a seasonal demand boost in the second half of the year, which may lead to a recovery in freight rates [1][2] - The report suggests closely monitoring the US interest rate cut cycle and the recovery of domestic demand in China, which could benefit global oil transportation demand and support market freight rates [1] Summary by Sections Oil Transportation Business - The foreign trade oil transportation business generated revenue of 7.31 billion RMB in 1H25, down 5.7% year-on-year, with a gross profit of 1.29 billion RMB, a significant decline of 49.1%. The gross margin was 17.6%, down 15.1 percentage points year-on-year. The decline in freight rates was attributed to increased geopolitical uncertainties affecting production consumption and crude oil replenishment demand. The Baltic Dirty Tanker Index (BDTI) averaged a year-on-year decrease of 21.4% [2] - The domestic oil transportation segment reported revenue of 2.76 billion RMB, down 5.5% year-on-year, with a gross profit of 660 million RMB, down 6.8%. The gross margin was 24.0%, a slight decrease of 0.3 percentage points. The LNG transportation business contributed a net profit of 420 million RMB, up 5.7% year-on-year, supported by the expansion of the LNG fleet and long-term contracts [3] Business Structure - The company has established a diversified business structure, operating in oil transportation, LNG, LPG, and chemical logistics. This diversification allows for resource sharing and strategic synergy among different business segments. As of June, the company ranked first globally in oil tanker fleet size and fourth in LNG fleet size [4] Profit Forecast and Target Price - The profit forecasts for 2025, 2026, and 2027 have been revised downwards by 18%, 9%, and 9% to 4.43 billion RMB, 5.54 billion RMB, and 5.89 billion RMB, respectively. The target prices for A and H shares have been adjusted downwards by 18% and 3% to 13.20 RMB and 8.90 HKD, respectively, maintaining the "Buy" rating [5]

Core Insights - The company reported a revenue of approximately RMB 11.573 billion for the first half of 2025, representing a year-on-year decrease of about 2.5% [1] - The profit attributable to equity holders was approximately RMB 1.894 billion, down about 29.0% year-on-year, with earnings per share at 39.71 cents [1] Revenue Breakdown - The foreign trade tanker fleet generated transportation revenue of RMB 7.29 billion, a year-on-year decrease of 5.5%, with a quarter-on-quarter increase of 3.3% in Q2 [1] - The domestic trade tanker fleet achieved transportation revenue of RMB 2.74 billion, also down 5.5% year-on-year [1] - The LNG transportation segment contributed a profit of RMB 424 million, reflecting a year-on-year increase of 5.7% [1] - The LPG fleet completed transportation revenue of RMB 140 million, up 26.5% year-on-year, with a profit of RMB 30 million, an increase of 21.3% [1] Profitability Metrics - The gross profit from the foreign trade tanker fleet was RMB 1.3 billion, down 48.9% year-on-year, but showed a quarter-on-quarter increase of 42.9% in Q2 [1] - The gross profit margin for the foreign trade segment was 17.9%, a decrease of 15.2 percentage points year-on-year, but increased by 5.7 percentage points quarter-on-quarter [1] - The gross profit margin for the domestic trade segment was 24.4%, down 0.4 percentage points year-on-year [1] - The chemical tanker fleet generated transportation revenue of RMB 160 million, a year-on-year decrease of 13.1%, while gross profit was RMB 40 million, an increase of 7.0% [2] - The gross profit margin for the chemical segment was 26.7%, an increase of 5.0 percentage points year-on-year [2]

Core Viewpoint - The company reported a slight increase in revenue but a significant decline in net profit for the first half of 2025, primarily due to challenges in the chemical transportation market and increased operational costs [1][4]. Group 1: Financial Performance - In 1H2025, the company achieved operating revenue of 713 million yuan, a year-on-year increase of 0.7%, but the net profit attributable to shareholders fell to 54 million yuan, down 44.2% [1]. - In Q2 2025, the company recorded operating revenue of 341 million yuan, a year-on-year growth of 3.1%, while net profit dropped 67.3% to 16 million yuan [1]. Group 2: Business Analysis - The growth in revenue is attributed to the acquisition of Shenghang Haoyuan, which expanded the company's refined oil business [2]. - Chemical transportation revenue decreased by 20.5%, with its revenue share declining by 19.7 percentage points to 74.2%, due to a downturn in macroeconomic conditions and freight rates [2]. - The refined oil business saw a remarkable revenue increase of 353.4%, raising its share by 19.6 percentage points to 25.13%, driven by enhanced capacity and customer resources post-acquisition [2]. - Domestic refined oil transportation volume surged by 486.2%, although freight rates faced downward pressure due to increased tanker capacity and slow growth in global chemical trade [2]. Group 3: Cost and Margin Analysis - The gross margin for 1H2025 was 23.5%, a decrease of 7.3 percentage points, primarily due to falling industry freight rates and increased operational costs from a larger fleet [3]. - The expense ratio for 1H2025 was 14.3%, a slight decrease of 0.44 percentage points, with management expenses down by 0.59 percentage points due to reduced downtime losses [3]. - The net profit margin for 1H2025 was 7.6%, down 6.1 percentage points year-on-year [3]. Group 4: Capacity Expansion - The company is expanding its capacity in the chemical and refined oil sectors through new vessel applications, acquisition of existing vessels, and equity purchases [3]. - New vessels, including a 6200 DWT oil-chemical dual-purpose ship and a 13500 DWT stainless steel chemical/refined oil ship, are expected to be operational in the second half of 2025 [3]. - The acquisition of Shenghang Haoyuan includes three vessels currently under construction, enhancing the company's operational capabilities [3]. Group 5: Profit Forecast and Valuation - Due to the challenging hazardous chemical transportation market, the company has revised its net profit forecasts for 2025-2027 to 140 million yuan, 170 million yuan, and 180 million yuan, respectively [4]. - The company maintains a "buy" rating despite the downward revision in profit expectations [4].

Core Viewpoint - The company, China Merchants Nanjing Tanker Corporation, announced a share buyback plan with a total amount between 250 million and 400 million yuan, aiming to stabilize its stock price amid a 4.47% decline in share price this year [1][2]. Group 1: Share Buyback Details - The buyback will be conducted through centralized bidding, with a maximum repurchase price set at 4.32 yuan per share, which is 44.48% higher than the current price of 2.99 yuan [1]. - The funding for the buyback will come from the company's own funds, and the buyback period is set for 12 months [1]. Group 2: Company Financial Performance - For the first half of 2025, the company reported a revenue of 2.772 billion yuan, a year-on-year decrease of 21.43%, and a net profit attributable to shareholders of 570 million yuan, down 53.28% year-on-year [2]. - As of July 31, the number of shareholders decreased by 10.37% to 147,700, while the average circulating shares per person increased by 11.56% to 32,509 shares [2]. Group 3: Shareholder Composition - As of June 30, 2025, Hong Kong Central Clearing Limited was the fourth largest circulating shareholder, holding 64.1352 million shares, a decrease of 70.9247 million shares from the previous period [2]. - The Southern CSI 1000 ETF ranked as the ninth largest circulating shareholder, increasing its holdings by 6.8034 million shares to 35.8807 million shares [2].