1H25 results slightly miss our expectation

Nanjing Tanker Corporation announced its 1H25 results: Revenue fell 21.43% YoY to Rmb2,772mn; attributable net profit dropped 53.28% YoY to Rmb570mn, implying EPS of Rmb0.12; recurring attributable net profit fell 44.92% YoY to Rmb566mn. In 2Q25, the firm’s revenue fell 17.22% YoY and rose 1.78% QoQ to Rmb1,398mn, and attributable net profit dropped 48.00% YoY and grew 0.33% QoQ to Rmb286mn. The firm’s 1H25 results slightly miss our expectation due to weaker-than-expected performance of freight rates.

The firm’s revenue and earnings declined YoY in 2Q25 mainly due to weak performance of freight rates. From mid-March to mid-June 2025 (freight rates corresponding to the firm’s earnings in 2Q25), the average freight rate for the TC7 route was US$19,746/day (-47.3% YoY and +38.9% QoQ), and the freight rate of MR tankers for the Pacific route was US$21,392/day (-46.6% YoY and +25.1% QoQ). The YoY declines in freight rates could be attributed to a high base caused by the Red Sea shipping disruptions, falling gross profit of domestic refineries, and weakening demand for refined oil exports and inter-regional transportation for arbitrage.

Trends to watch

Freight rates for refined oil products have improved markedly QoQ; freight rates and earnings to resume positive YoY growth in 2H25; look forward to performance of freight rates during peak season in 4Q25. The supply of MR tankers remains relatively tight and we think the industry will remain on an upward trend. The freight rates for refined oil have improved QoQ since mid-June. Since mid-June, the freight rates for the TC7 route and the Pacific route have risen 7.9% and 18.6% QoQ compared with 2Q25 and fallen 11.4% YoY and risen 1.0% YoY compared with the freight rates corresponding to the firm’s earnings in 3Q24, with YoY decline narrowing notably. We expect freight rates for refined oil to resume positive YoY growth in 2H25 as the peak season arrives in 4Q25. Over the long term, we think the supply of MR tankers may remain relatively tight, with backlog orders accounting for 16.3% of total existing shipping capacity and above-20-year-old vessels accounting for a 15.3% share. In addition, we believe that tightening sanctions on shadow fleets by Europe and the US, stricter environmental requirements, and efficiency losses caused by older vessels will limit the effective shipping capacity of　　MR tankers, and the industry will continue to trend upward.

Pay attention to shareholder return plan: Announcing a new round of share buybacks; loss reduction in financial statements accelerated; potential dividend payout to improve valuation. Based on its corporate filings, the firm plans to buy back its shares at a price of no more than Rmb4.32/sh in the next 12 months and shares to be bought back by the firm are likely to account for 1.21-1.93% of its current total shares. Meanwhile, the firm’s undistributed profit in its non-consolidated financial statements (containing statistics of the listed company alone) continued to turn around and reported a loss of Rmb1.27bn as of end-June 2025, falling by Rmb305mn QoQ. Based on the firm’s previous announcements, if the firm is eligible to use 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, which could boost shareholder returns and facilitate improvement in the firm’s valuation. We suggest keeping an eye on the firm’s future shareholder return plans.

Financials and valuation

We maintain our earnings forecasts, target price of Rmb3.7 and OUTPERFORM rating. The stock is trading at 10.8x 2025e P/E and 9.5x 2026e P/E, and our target price implies 13.4x 2025e and 11.7x 2026e P/E, offering 23.7% upside.

Risks

Risks related to geoeconomic changes; sharp increases in orders for new tankers.