Company Coverage
China Aviation Oil (CAO SP): 1H26: Misses Expectations Due To Weakness in Business Volume; Recovery Expected in 2H26
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
S$1.63
S$1.88
15.3%
S$2.63
Analyst
Analyst
Highlights
- 1H26 revenue and net profit declined 8.8%/17.3% yoy respectively, making up 45%/34% of our full-year forecasts, mainly due to weaker business volumes.
- Stronger contributions from associates, particularly SPIA, helped cushion the weaker core business, with associate earnings rising 67.3% yoy.
- Maintain BUY with a 28% lower target price of S$1.88, rolling over our valuation based to 2027F, and pegged to an unchanged 14.5x 2027F PE.
Analysis
- 1H26 results miss expectations. Revenue declined 8.8% yoy to US$7.81b, below expectations and representing 45% of our full-year forecast. This was largely due to lower business volume amid the sudden intensification of the Middle East conflict, partially offset by the increase in revenue caused by higher oil prices. Net profit fell 17.3% yoy to US$41.4m, also below our expectations at 34% of our full-year forecast. The weaker performance stemmed from lower business volumes, alongside higher jet fuel procurement costs and oil price related impairment losses in Asia and the US West Coast, effectively offset bythe increase in share of results from associates. Gross profit fell sharply, down 83.8% yoy to US$4.91m, while total expenses rose 9.3% yoy to US$10.8m.
• Positives from associates. Share of results from associates surged 67.3% yoy to US$45.9m, led by Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA), whose contribution jumped 76.0% yoy to US$44.9m on higher refuelling volumes and oil prices. China Aviation Oil (CAO) owns 33% of SPIA. As flight volumes increase amid stronger travel demand across Asia Pacific, alongside ongoing expanding airport capacity, these associates are expected to deliver stronger recurring income, especially for SPIA.
Highlights
- 1H26 revenue and net profit declined 8.8%/17.3% yoy respectively, making up 45%/34% of our full-year forecasts, mainly due to weaker business volumes.
- Stronger contributions from associates, particularly SPIA, helped cushion the weaker core business, with associate earnings rising 67.3% yoy.
- Maintain BUY with a 28% lower target price of S$1.88, rolling over our valuation based to 2027F, and pegged to an unchanged 14.5x 2027F PE.
Analysis
- 1H26 results miss expectations. Revenue declined 8.8% yoy to US$7.81b, below expectations and representing 45% of our full-year forecast. This was largely due to lower business volume amid the sudden intensification of the Middle East conflict, partially offset by the increase in revenue caused by higher oil prices. Net profit fell 17.3% yoy to US$41.4m, also below our expectations at 34% of our full-year forecast. The weaker performance stemmed from lower business volumes, alongside higher jet fuel procurement costs and oil price related impairment losses in Asia and the US West Coast, effectively offset bythe increase in share of results from associates. Gross profit fell sharply, down 83.8% yoy to US$4.91m, while total expenses rose 9.3% yoy to US$10.8m.
• Positives from associates. Share of results from associates surged 67.3% yoy to US$45.9m, led by Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA), whose contribution jumped 76.0% yoy to US$44.9m on higher refuelling volumes and oil prices. China Aviation Oil (CAO) owns 33% of SPIA. As flight volumes increase amid stronger travel demand across Asia Pacific, alongside ongoing expanding airport capacity, these associates are expected to deliver stronger recurring income, especially for SPIA.
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
S$1.63
S$1.88
15.3%
S$2.63
Analyst
Analyst
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