1Q25 results in line with our expectations

Nanjing Tanker Corporation announced its 1Q25 results: Revenue fell 25.3% YoY and 6.4% QoQ to Rmb1.37bn. Attributable net profit reached Rmb285mn, implying EPS of Rmb0.06 (-57.6% YoY and +7.3% QoQ), in line with our expectations.

The YoY decline in revenue and earnings in 1Q25 was mainly due to falling freight rates. From mid-December 2024 to mid-March 2025 (corresponding to the firm’s freight rate-based earnings in 1Q25), the average freight rate for the TC7 route was US$16,748/day (-53.4% YoY and +9.3% QoQ), and the combined freight rate of the MR vessel Pacific route averaged US$18,511/day (-54.0% YoY and +14.5% QoQ). The YoY freight rate decline in 1Q25 was due to falling gross profit of domestic refineries, and weakening refined oil exports and demand for inter-regional arbitrage transportation.

Trends to watch Supply to remain tight; upbeat on sector up-cycle. Freight rates of MR vessels have been falling since 2Q25, and demand has been weak; wait for catalysts from peak season in 4Q25. According to

Clarksons, backlog orders for MR vessels account for 16.4% of total shipping capacity, vs. 42.5% for vessels over 15 years of age. In addition, we believe that tightening environmental requirements, and an aging fleet that increases efficiency losses will limit the effective shipping capacity of MR vessels, leading to an upward cycle. Freight rates of MR vessels have remained low recently. On April 25, the average rate of MR vessels was US$18,446/day (-43.4% YoY and -3.1% WoW). We believe the industry is in a slack season, and domestic refineries’ capacity utilization rate and gross profit remain low. We suggest waiting for catalysts in the upcoming peak season.

Controlling shareholder’s share purchase demonstrates confidence; accelerating loss reduction; the possible dividend payout to boost

valuation. According to corporate filings, as of March 31, 2025, the controlling shareholder of Nanjing Tanker had completed the previously announced plan to increase its shareholding, and cumulatively increased its stake in the firm by 1.72% of its share capital. The reported undistributed profit turned around at an accelerated pace. As of 1Q25, the firm reported an undistributed loss of Rmb1.42bn, down Rmb160mn from　　end-2024. According to corporate filings, if the firm meets the conditions for using its capital reserve to cover losses, it will use the capital reserve to pay dividends to investors as soon as possible after making up for losses, boosting shareholder returns and bolstering valuation improvement.

Financials and valuation

We maintain our 2025 and 2026 earnings forecasts at Rmb1.51bn and Rmb1.52bn. The stock is trading at 8.8x 2025e and 8.7x 2026e P/E.

Maintain OUTPERFORM and TP of Rmb3.7, implying 11.8x 2025e and 11.7x 2026e P/E, offering 34.1% upside. The debt-to-asset ratio is low (15.1% at end-2024) and its current P/B is close to 1x, offering a margin of safety.

Risks

Geopolitical changes; sharp increase in new vessel orders.