Stolt-Nielsen is again opening up the reporting season next week with its 2Q (March-May) results scheduled on Thursday. We find ourselves in the cautiously optimistic phase expecting the strong results to continue, however, a slightly weaker quarter compared to the superb 1Q. With the company acknowledging that the fundamentals are finally strengthening in the chemical tanker market and following the highly increased USD/NOK rate we reiterate Buy recommendation with a slightly upped NOK 220/sh (NOK 210/sh previously) Target Price.
The coin is turning its better side for chemical tankers
We anticipate the strong market to have continued during the second quarter of 2022 and are encouraged by the management’s comment that the chemical tanker market is finally turning in the company’s favour. The orderbook for new stainless steel chemical tankers was communicated to be at 5% and the yards are full, practically building everything but chemical tankers, meaning even if someone wanted to order ships today, they would arrive in 2026 at the earliest. On the demand side, because of the war in Ukraine, the swing tonnage is moving out of chemicals. Nations are sourcing their refined products away from Russia causing more tonne-mile demand for the product tankers.
Not forgetting the headwinds
Unfortunately, it is still hard to speculate on the full impact of the war in Ukraine, as the war seems to be far from over and is touching upon all the Ukrainian ports whatsoever. The geopolitical tension, inflation, increased bunker prices and let us not forget the Covid-19: all these should be seen as the risk towards the case. Nevertheless, we find the company well on track to gradually milk the chemical cow, but even if this scenario might be lagging, Stolt-Nielsen always has an extra help from Terminals, Containers or the Sea Farm. Thus, we reiterate Buy recommendation under the higher NOK 220/sh Target Price.
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Source: Norne Research