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Stolt-Nielsen: Weak NOK signals it might be still too early to take profit

Monday, 27 March 2023 | 12:00

Stolt-Nielsen posts its 1Q (December–February) results next Thursday. We follow the company’s outlook in 4Q and the recently published annual report and expect solid figures from all the segments to continue, except for the Containers, which had an extraordinary year. We made limited changes to our estimates, while weaker NOK is one of the reasons we increased the Target Price to NOK 370/sh from NOK 350/sh and reiterate Buy ahead of results.

Sustainable growth in Tankers, weaker Containers

Improvement in chemical tanker rates is expected to continue further and with renewed contracts at significantly higher rates, Stolt-Nielsen is anticipated to gradually improve the main Tanker segment. During 2023 the company said to be focusing on the digital supply chain and ship-to-customer platform. Terminals are projected to remain relatively stable throughout the year with unpredictable deviation to follow the development of war in Ukraine and economical situation in China. Tank Containers, as we previously communicated, should be a different story whatsoever. 2022 was an exceptional year to the container shipping market and the company expects the segment to return to pre-2022 historical earnings, signalling for a significant drop YoY. However, this might be offset by the land-based Sea Farm, which might encounter a very solid year of growth and strengthening in 2023.

Downsides and uncertainty exist in parallel

The war in Ukraine is far from over and this impacts energy supplies and prices. We have an inflationary environment and high interest rates, particularly in Europe. European plants are scaling down production and manufacturing activity has been impacted. Furthermore, China’s prolonged Covid-19 measures should negatively impact at least 1Q23 figures. Everything is manageable, but surely brings uncertainty to the table.

Buy reiterated ahead of results

We made limited changes to our estimates, but stronger USD vs. NOK is one of the reasons why we increased the Target Price for the stock to NOK 370/sh (NOK 350/sh previously) and the upside is still significant enough for Buy recommendation to be reiterated.
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