Results Review

1Q26 results in line with our expectations

Nanjing Tanker Corporation announced its 1Q26 results: Revenue rose 14.19% YoY and 1.12% QoQ to Rmb1,568mn. Attributable net profit rose 51.73% YoY and 18.5% QoQ to Rmb432mn. Recurring net profit increased 24.68% YoY to Rmb352mn.

The firm's revenue and earnings rose YoY in 1Q26, mainly due to YoY growth in freight rates for refined oil shipping. From mid- December 2025 to mid-March 2026 (corresponding to the firm's earnings-based freight rates in 1Q26), the combined freight rate of medium-range (MR) tankers on the Pacific route averaged US$30,971/day, up 64.7% YoY. In addition, the firm disposed of four old MR tankers and generated asset disposal income of about Rmb80mn.

Trends to watch

Upbeat on rising average freight rates and improving earnings in 2026. Freight rates of refined oil tankers have been rising since March due to the obstruction of passage through the Strait of Hormuz. Freight rates of BCTI refined oil products in the Pacific and Atlantic regions averaged US$34,000 and US$86,000/day in March, up US$13,000/day and US$63,000/day from the same period last year.

Freight rates in the Atlantic region were higher due to strong cargo demand. Although the Pacific region market performed relatively weakly due to reduced refined oil shipping volume, the high price spread between the Atlantic and the Pacific East- West markets drove the emptying of refined oil tankers from the Pacific region to the Atlantic, resulting in tight refined oil tanker capacity in the Pacific region.

Since April, freight rates of refined oil tankers in the Pacific region have increased. As of April 24, the combined freight rate of MR tankers on the Pacific route reached $44,000/day. In the long term, we expect supply-side pressure to gradually ease. Orders on hand now account for 14% of total shipping capacity and 17% for older vessels exceeding 20 years of age. We expect demand for refined oil to increase as crude oil inventories recover. We are upbeat on rising average freight rates and improving earnings in 2026.

Financials and valuation

We leave our 2026 and 2027 net profit forecasts unchanged at Rmb1.97bn and Rmb2.14bn. The stock is trading at 10.3x 2026e and 9.5x 2027e P/E. We maintain an OUTPERFORM rating, and raise our TP 8.86% to Rmb5.04 to reflect improved risk appetite across the sector. Our TP implies 12x 2026e and 11x 2027e P/E, offering 16.4% upside. The firm previously announced that cash dividends and share buybacks would account for 40% of its net profit in the next three years. The dividend yield will reach 3.9% in 2026 if the dividend payout ratio reaches 40%.

Risks

Geopolitical issues; a decline in refined oil shipping volume.