Key Takeaways:
Jefferies substantially raised its price target on COSCO Shipping Energy Transportation Co. Ltd. (01138.HK) to HKD24.60, a 146% increase from its previous HKD10 target, citing a structurally tight market for very large crude carriers (VLCCs).
"Management believes the VLCC market will enter 2026 in a state of structural tightness rather than facing cyclical peak risks," Jefferies said in a research report, reiterating its "Buy" rating on the stock.
The bank noted that continued crude oil imports by China, rising exports from the Middle East and the Atlantic Basin, and India’s shift toward non-Russian crude are supporting tonne-mile demand. Simultaneously, sanctions, an aging global fleet, and increased use of vessels for floating storage have reduced effective supply. New vessel orders represent only 22% of the existing fleet, with most deliveries not expected until 2029, which will largely just offset the 376 VLCCs set to be over 20 years old by then.
The bullish outlook prompted Jefferies to increase its 2026 earnings forecast for COSCO Shipping Energy by 11% and its 2027 forecast by a significant 78%. The bank expects VLCC freight rates to remain volatile but at structurally elevated levels through 2026, compounded by security risks in the Middle East that have recently stranded over 70 VLCCs.
The significant price target revision signals strong analyst conviction in a sustained upcycle for the tanker market. Investors will be watching daily VLCC freight rates and geopolitical developments in the Strait of Hormuz as key indicators for the thesis.
This article is for informational purposes only and does not constitute investment advice.
