[Huachuang Transportation * Performance Review] China Merchants South Oil: 25Q4 net profit attributable to parent company of 360 million yuan, up 37% year-on-year, crack spread widening driving the prosperity of refined oil transportation.

(Source: Huachuang Transportation)

Company Announcement 2025 Annual Report:

1. Performance

1. In 2025, operating revenue was RMB 5.82 billion, year over year -10%; net profit attributable to shareholders was RMB 1.31 billion, year over year -32%; after non-recurring items, net profit attributable to shareholders was RMB 1.30 billion, year over year -22%.

2. In 2025Q4, operating revenue was RMB 1.55 billion, year over year +5.7%, quarter over quarter +3.6%; net profit attributable to shareholders was RMB 360 million, year over year +37.4%, quarter over quarter -3.3%; after non-recurring items, net profit attributable to shareholders was RMB 360 million, year over year +29%, quarter over quarter -1.7%.

3. The main difference in growth rates before and after excluding non-recurring items is that in the same period last year, some gains from asset disposals contributed non-operating income of RMB 270 million; this item this year declined significantly to only RMB 20k.

2. By business segment, in 2025 the gross profit from the finished oil transportation business was RMB 830 million, year over year -33%; gross profit from the crude oil, chemical, and ethylene transportation business was RMB 22k, RMB 35k, and RMB 56 million respectively, year over year +3.8%, -42%, and -13%.

3. Market performance: In 2025, the freight rates in the international finished oil transportation market declined year over year, but in the fourth quarter, freight rates rose both quarter over quarter and year over year. The 25-year MR TC7 TCE average was USD 2.0 million/day, year over year -29%; the Q4 MR TC7 TCE average was USD 2.2 million/day, year over year +47%, quarter over quarter +3%. (Taking into account the two-week lag in revenue recognition of freight rates)

4. Dividend and share buybacks:

1. The company plans to distribute a cash dividend of RMB 0.027 per share (including tax), totaling RMB 130 million in cash dividends. In addition, together with the 25-year share buyback of RMB 400 million, the combined amount is about 40% of the full-year net profit attributable to shareholders.

2. The company has formulated a shareholder return plan for 2026-2028. Under the premise of meeting relevant policies and regulations, the total cash dividends distributed within each year should be around 40% of the net profit attributable to shareholders of the listed company realized in that year (including cash used for share buybacks), and, in light of the company’s business development conditions, the company will strive to steadily improve this proportion.

5. Outlook for the finished oil tanker market: The conflict in the Middle East has caused short-term crude oil supply disruptions and, meanwhile, Middle East refineries shut down. At the same time, other overseas refineries reduce operating loads. In Singapore and the Atlantic Basin, the gasoline and diesel cracking spreads are widening significantly. Cross-regional arbitrage demand is driving a substantial rise in finished oil tanker freight rates. In 2026Q1, the MR TCE reaches USD 3.5 million/day, year over year +94%.

Investment recommendation:

Based on current market demand and freight rate levels, we expect the company’s forecast net profit attributable to shareholders for 2026-2028 to be RMB 1.92 billion, RMB 2.04 billion, and RMB 2.16 billion, respectively, corresponding to PE of 12, 12, and 11 times for 2026-2028. Maintain the “Buy/Recommend” rating.

Risk warning: Risks that oil transportation demand may fall short of expectations, oil price fluctuation risk, risks that the process of scrapping older ships may fall short of expectations, geopolitical risk, etc.

For detailed information on investment recommendations and specific content, please refer to the report titled “China Merchants Nanhai: 25Q4 net profit attributable to shareholders was RMB 360 million, +37% year over year; cracking spread widening drives an upswing in finished oil shipping cycle,” released on April 6, 2026 by the Huachuang Securities Research Institute.

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