China Aviation Oil (SGX:G92)'s revenue for 1H24 increased by 20% y-o-y to US$7.5bn, slightly below expectations and accounting for 44% of our FY24e forecast. The revenue growth is primarily attributed to a rise in oil prices and an increase in supply and trading volume (+7.5% y-o-y).
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Earnings will be supported by a recovery in international air traffic in China, which we expect to reach ~90% of pre-pandemic levels (currently around 25% below pre-COVID levels). We maintain our BUY recommendation on China Aviation Oil.
The Positives
Increasing margin & trading volume.
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Furthermore, mispricing due to geopolitical tensions in the Middle East, particularly the Red Sea conflict, has redirected demand to Asia for jet fuel purchases.
China Aviation Oil also saw an increasing contribution from end-to-end sales (from refinery to airline delivery), which now accounts for ~10% of the total volume. We expect trading volume to remain robust in 2H24, as 3Q is seasonally stronger for airlines to onload jet fuel for winter.
Improving contribution from associates.
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Above is an excerpt from a report by Phillip Securities Research. Clients of Phillip Capital may be the first to access the full PDF report @ https://www.stocksbnb.com/.
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