Bank of America: COSCO Shipping Energy’s third-quarter profit weighed down by costs; BofA bets on fourth-quarter freight-rate rebound

Why did third-quarter profit miss expectations despite a recovery in transport volumes?

In the third quarter of 2026, the company’s net profit was 2.84 billion yuan, below BofA’s previous forecast of 3.6 billion yuan. International transport volume rose 1% year over year, a marked improvement from the 25% year-over-year decline in the second quarter, which BofA attributed to increased crude oil flows through the Strait of Hormuz.
International transport revenue per unit rose 21% quarter over quarter, in line with BofA’s expectations; however, a tighter market drove up chartering costs. Third-quarter chartering costs rose 90% quarter over quarter and fuel costs rose 30%, weighing on profit.

BofA expects net profit of 7 billion yuan in the fourth quarter of 2026, up from 2.84 billion yuan in the third quarter. The forecast assumes international transport revenue per unit rises 66% quarter over quarter, compared with its previous assumption of 40% growth.
The bank believes increased crude oil flows through the Strait of Hormuz, together with efficiency losses from ship-to-ship transfers, have driven tanker rates higher since September 2026. After accounting for voyage timing and vessel positions, its model assumes the company’s very large crude carriers (VLCCs) achieve an average rate of approximately 400 thousand dollars per day.
Costs remain a significant constraint on profit: BofA notes that the company has limited ability to pass on higher fuel costs; freight rates could also come under pressure if global oil production slows.

BofA made only minor adjustments to its earnings forecasts for 2026 through 2028: higher fourth-quarter freight-rate expectations roughly offset rising chartering and fuel costs in the second half. Its adjusted net profit forecast for 2026 is 14.373 billion yuan, down 0.1% from its previous forecast; its forecast for 2027 is 17.131 billion yuan, down 1.3%.
High earnings will not continue to grow in a straight line: the bank expects adjusted net profit of 7.131 billion yuan in 2028, below its forecast for 2027.

BofA believes fourth-quarter earnings growth will demonstrate the company’s dividend-paying capacity. It maintained its Buy rating on the H shares and its target price of 25 Hong Kong dollars; the H-share price listed in the report was 17.63 Hong Kong dollars. The target price is based on a price-to-book multiple of 2 times book value as of December 2026.
The bank’s model forecasts H-share dividend yields of 9.9% and 11.8% for 2026 and 2027, respectively, falling to 4.9% in 2028; dividend yields change with the earnings cycle.