Results Review

2025 results miss our expectations COSCO SHIPPING Energy Transportation (CSET) announced its 2025 results: Revenue rose 2.3% YoY to Rmb23.7bn. Net profit attributable to shareholders fell 0.2% YoY to Rmb4.04bn. Recurring attributable net profit fell 15.99% YoY to Rmb3.34bn.

In 4Q25, revenue rose 11.22% YoY and 24.12% QoQ to Rmb6.78bn, net profit attributable to shareholders grew 111.51% YoY and 54.02% QoQ to Rmb1.31bn, and recurring attributable net profit was Rmb859mn.

In 2025, non-recurring gains rose 1100.26% YoY to Rmb695mn, mainly driven by gains from disposal of assets.

Trends to watch

Short-term disruptions to cross-strait traffic have pushed up freight rates, while long-term supply constraints, rising market concentration, restocking demand, and changes in sanctions may sustain the sector’s cyclical upturn.

In the near term, we note that current geoeconomic risks have pushed up freight rates on non-Persian Gulf routes, while rates on Red Sea routes remain elevated (per Lloyd’s List, crude loading at Yanbu accounts for 11% of the global total vs 2% in 2025). Increased cargo volumes on long-haul routes from West Africa and the Americas also support freight rates in the Atlantic region.

In the medium-to-long term, we believe supply constraints for VLCCs persist, and higher industry concentration may drive up average freight rates. On the demand side, we think global crude oil inventories may decline sharply. Given energy security, we expect global restocking demand to remain robust. In addition, we believe potential changes in US sanctions against Iran and Russia may also boost transportation demand in compliant markets.

Financials and valuation

Given rising industry concentration, we expect the average freight rate to rise systematically, we raise our 2026 attributable net profit forecast 100% to Rmb12.26bn and introduce our 2027 earnings forecast of Rmb13.6bn. A-shares are trading at 10.6x 2026e and 9.5x 2027e P/E, and H-shares are trading at 7.5x 2026e and 6.7x 2027e P/E.

We maintain OUTPERFORM and raise our A-share TP 97% to Rmb26.6, implying 12x 2026e P/E and 10.7x 2027e P/E with 12.4% upside. Given the lower valuation of H-shares, we raise our H-share TP 170% to HK$22.2, implying 8.8x 2026e and 7.8x 2027e P/E with 17.0% upside.

Risks

Falling global consumption demand for crude oil and oil products; excessive shipping capacity due to a large increase in new vessel orders; geopolitical changes affecting energy transportation landscape and route safety.