2025-10-19 15:58Summary of COSCO Shipping Energy Transport Management Update Call Company Overview - Company: COSCO Shipping Energy Transport (CSET) - Date of Call: 16 October 2025 - Stock Codes: 1138.HK / 600026.SH Key Industry Insights - Tanker Cycle Outlook: Management expressed a positive outlook on the tanker cycle, driven by: 1. Demand Recovery: Supported by OPEC's steady output recovery and China's Strategic Petroleum Reserve restocking [2][32] 2. Supply Constraints: Effective supply tightening due to India's shift towards compliant Middle-East and Latin-American crude, extreme weather, gray-fleet retirements, and shipyard congestion [2][32] 3. Policy Drivers: Introduction of port fees on US-linked vessels in China, escalating US-China trade tensions, and participation in Brazil through a joint venture with CNOOC [2][32] 4. Shareholder Returns: Plans to resume dividends and buybacks post-restrictions [2][32] Financial Performance and Forecasts - 3Q25 Revenue Forecast: Expected to be Rmb4.95 billion, a decrease of 5% YoY and 16% QoQ [4] - 3Q25 NPAT Forecast: Expected to be Rmb976 million, an increase of 26% YoY but a decrease of 16% QoQ [4] - 4Q Earnings Rebound: Anticipated due to strong spot rates, with average TD3C rates around US$72k/day since September [4] Supply and Demand Dynamics - OPEC+ Production Increase: OPEC+ has increased production by approximately 2.47 million barrels per day since April, providing substantial cargo volumes for long-haul shipments [8] - VLCC Market Trends: The VLCC market has shown volatility, with rates fluctuating significantly due to geopolitical events and market sentiment [8][12] - Impact of Sanctions: US sanctions and China's reciprocal port fees have created a bullish environment for compliant tonnage, with high TCEs expected to persist [8][12] Strategic Initiatives - Decarbonization Efforts: CSET is testing methanol-dual-fuel VLCCs and exploring new energy solutions, aligning with long-term carbon reduction goals [18] - Expansion in Brazil: CSET is increasing its presence in Brazil through a joint venture with CNOOC, capitalizing on growing Brazilian crude output [18] Valuation and Investment Thesis - Price Target: CSET-H target price set at HK$12, reflecting a potential upside of 25% [34][39] - Investment Thesis: CSET is rated Overweight based on: 1. Industry recovery signals post-2025 2. Scrapping of older vessels and tightening supply discipline 3. Diversified fleet mix and strong market positioning 4. Limited exposure to geopolitical risks [33][43] Risks and Considerations - Downside Risks: Include slower-than-expected recovery in tanker demand, regulatory cost pressures, and geopolitical uncertainties [45] Conclusion - CSET is positioned favorably within the tanker market, with strong fundamentals and a clear strategy for navigating current challenges, making it an attractive investment opportunity as the market tightens into 2026 [32][38]