Odfjell posts 3Q results next Tuesday and we anticipate the figures to go along with the guidance – to be somewhat weaker QoQ, yet, still solid. General stability was seen during the 3Q in the chemical tanker rates, which were softer than in 2Q, though. After our estimates were adjusted downwards, the Target Price was reduced to NOK 190/sh, but the sharp share drop seems way too excessive and we reiterate Buy recommendation for the stock.

3Q guided weaker after the record 2Q

Following two record quarters in a row, Odfjell guided for a somewhat weaker 3Q, yet, still solid. As we also follow the overall chemical tanker rates, we saw a gradual reduction in both the Transatlantic and Transpacific routes during the 2Q and a stabilization during 3Q. However, this means that the average rates of 3Q should be weaker QoQ, in line with the company's guidance. Both we and consensus anticipate EBITDA to land below the USD 140m and EBIT below USD 100m thresholds.

Number of newbuildings approaching

Global seaborne chemical volumes are stable, and swing tonnage is at low levels despite a slight recent increase. Although the chemical tanker orderbook is not at the historically low levels anymore, Odfjell has played a strong role there with 16 newbuildings to be delivered from 2H24 until 2028. Regarding the competitors, in September, Maersk announced the formation of a new pool of J19 stainless steel tankers. SC Shipping has expanded their orderbook by an additional 10 vessels now totalling 22 stainless steel vessels to be delivered between 2026 and 2028 from two Chinese shipyards.

Drop is excessive, in our view

The stock keeps dropping and we view this as an excessive reaction, thus, even with the lower NOK 190/sh Target Price (NOK 210/sh previously) we stick to Buy recommendation.
Source: Odfjell