China Aviation Oil - CGS-CIMB Research 2023-02-17: Attractive Proxy For A Recovery In China’s Aviation Traffic

• China Aviation Oil (SGX:G92) is the largest physical jet fuel trader in Asia, and the sole supplier of imported jet fuel in China, according to management. With China fully reopening its borders in Jan 23, we expect China Aviation Oil to benefit via two key earnings drivers, namely
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  2. rebounding contribution from 33%-owned associate Shanghai Pudong International Airport Aviation Fuel Supply (SPIA).
• With China expecting air passenger traffic to reach 75% of pre-pandemic levels by end-2023F, we see much clearer revenue visibility and expect China Aviation Oil to record significant EPS CAGR of 27% in FY23-25F.

First earnings driver: stronger jet fuel supply volumes

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• We then expect jet fuel supply volumes to rise 25%/10% y-o-y in FY24F/25F as international flight volumes accelerate towards pre-pandemic levels.
• We assume FY23-25F revenue CAGR of 4% for China Aviation Oil, with strong volume growth partially offset by weaker ASPs as crude oil prices should continue to moderate.

Second earnings driver: rebounding SPIA contribution

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Kenneth TAN CGS-CIMB Research | Izabella TAN CGS-CIMB Research | https://www.cgs-cimb.com 2023-02-17 SGinvestors.io

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