Guotai Haitong: Optimally Timing for Aviation Off-Season Layout, Maintains "Buy" Rating on Aviation Fuel Transportation.

Guotai Haitong released a research report stating that it maintains a positive outlook on aviation fuel transportation. In terms of aviation, it continues to be optimistic about the long-term super cycle logic, with market-based ticket prices and low supply growth helping to boost consumption and support a continued improvement in supply and demand. Opportunities are highlighted for investing in oil transportation strategically, with the value of Chinese fleets expected to exceed expectations. Global inventory restocking will ensure continued high demand, and changes in the gray market are expected to achieve super high demand and sustainability. Key points from Guotai Haitong include: Aviation: Despite high oil prices, aviation demand (quantity * price) continues to grow, and it is recommended to increase holdings during the off-peak season. In the second quarter, the market is in the traditional off-peak season, and high oil prices are only partially transmitted. Airlines find it difficult to stimulate passenger flow at low prices, resulting in a reduction in the scale of price-sensitive passenger flow. Recent trends of reducing flights and increasing prices have continued. The bank estimates that the industry's passenger flow volume last week decreased by nearly 10% year-on-year, while the load factor remained high. Domestic fares for stand-alone tickets continue to grow positively, with prices including fuel estimated to have increased by 20% year-on-year. It is emphasized that despite high oil prices, aviation demand (quantity * price) - that is, residential aviation consumer spending - continues to increase significantly year-on-year, better than market concerns focused solely on weakening demand based on changes in passenger flows. It is noted that the upcoming national college entrance exam will temporarily affect travel demand, and the summer travel season pre-sale has not yet begun. It is expected that after the end of the college entrance exam in mid-June, the start of the summer travel season will improve the transmission of oil prices due to supply and demand pressure. Domestic aviation fuel prices: Lowered in June, improvement in oil price pressure before the peak season Domestic aviation fuel prices are linked to the average price of aviation fuel in Singapore from the previous month, calculated by the National Development and Reform Commission at the beginning of each month according to a formulated formula. As a result, the international oil price transmission to domestic prices has been continuously controlled and reduced since April 2026. *....(truncated) Oil transportation: Strong expectations for the resumption of navigation in the strait, anticipation of global inventory restocking and changes in the gray market Oil transportation is expected to enter a super bull market in two phases from 2022-2025. In the short term: The US and Iran are planning to extend the ceasefire by 60 days, with plans to gradually restore the passage of commercial ships through the strait to pre-conflict levels within a month. The passage of ships through the Hormuz Strait increased by 15% compared to the previous week (from 7% in February), with record highs in exports from the Gulf and South America, and a 1% increase in global crude oil shipping volume compared to the previous week. Short-term freight rates for immediate oil transport have slightly declined, with VLCC one-year leases still exceeding $120,000 per day. It is expected that Chinese ship owners will continue to operate more efficiently than the industry, and the performance in the second quarter is expected to exceed expectations. Medium-term: In the past three months, global crude oil destocking has reached a historic record. If navigation through the strait is restored in the future, utilization of oil transportation capacity will return to high levels, combined with increased production replenishment and long-term control, sustainability of high demand and sustained high profitability can be expected. Long-term: If Iran sanctions are lifted, its exports will turn to compliant demand, and related shadow fleets will find it difficult to return, resulting in a super high demand and sustainability in oil transportation for several years, providing a double space for performance and valuation. Risk factors: Economic fluctuations, geopolitical oil prices, tariffs, exchange rates, safety accidents, etc.