COSCO Shipping Energy's 1H26 performance increased significantly year-on-year, and the 2Q quarter-on-quarter improvement slightly exceeded expectations (Morgan Stanley)
The preliminary 1H26 results announced by COSCO Shipping Energy showed a significant year-on-year increase in net profit, and the month-on-month improvement in 2Q26 earnings slightly exceeded Morgan Stanley's expectations.
The preliminary 1H26 results announced by COSCO Shipping Energy showed a significant year-on-year increase in net profit, and the month-on-month improvement in 2Q26 earnings slightly exceeded Morgan Stanley's expectations. However, the month-on-month improvement was limited due to the dilution of rates due to geographical factors. Looking forward to 3Q26, as navigation resumes, ship utilization is expected to increase, and there are upward risks to full-year profits. The agency believes that solid tanker shipping rates (VLCC) are the core driver and maintains a positive rating based on factors such as tightening supply. The market has expectations for the oil transportation cycle, but the extension of transportation distances brought about by changes in sanctions and the resumption of navigation may become a key variable that exceeds expectations. The current stock price may not fully price in this possibility. One-sentence conclusion: COSCO Shipping Energy's first-half performance has set a positive tone for the whole year. The tight supply of VLCC has provided support for freight rates. The subsequent geopolitical and navigation recovery will become the key to determining profitability flexibility. Positive/negative: Positive for COSCO SHIPPING Energy. The current stock price has partially reflected the prosperity of oil transportation, but the upward risks brought by changes in sanctions and extension of transportation distances may not be adequately priced. Catalysts: 1) 3Q26 utilization data to verify the progress of navigation resumption; 2) changes in sanctions policies (such as the intensity of crackdowns on shadow fleets); 3) shipping distance indicators brought about by changes in global crude oil trade flows.