Morgan Stanley: The tanker shipping market continues to heat up; raises COSCO SHIPPING Energy Transportation (01138) target price to HK$28.4

Morgan Stanley released a research report stating that the tanker shipping market continues to heat up. It has raised its earnings per share forecasts for COSCO SHIPPING Energy Transportation (01138) for 2026 to 2028 by 57%, 74%, and 55%, respectively, and raised its target price from HK$26 to HK$28.4; for China Merchants Energy Shipping (601872.SH), it raised its forecasts by 72%, 95%, and 53%, and raised its target price from RMB25.1 to RMB27.7. Both are given an "Overweight" rating. The bank noted that very large crude carrier (VLCC) spot equivalent time charter earnings (TCE) have reached US$800,000 to US$1 million per day, 20 times the 10-year average, mainly due to geopolitical uncertainty reducing effective capacity, global crude oil inventories being at low levels before winter, making holders willing to pay a premium to secure oil supply, and the accumulation of ship damage during conflicts. The bank expects that, assuming a sustainable Middle East peace agreement, if crude oil and refined product prices fall, freight rates will first undergo a period of normalization. However, based on strong restocking demand, some permanent damage to vessels related to the conflict, and potential "compliant" transportation demand for Iranian oil exports, the freight rate upcycle may continue after a short-term sentiment reset. The bank believes that current freight rates may be difficult to sustain, but rising earnings upside risks should continue to support investor sentiment.