GTHT has released a research report maintaining an "overweight" rating on the aviation and oil shipping sectors. Falling oil prices support the long-term thesis of a super-cycle in aviation. With ticket price liberalization and low supply growth, boosting consumption will help improve supply and demand dynamics, presenting a buying opportunity during pullbacks. For oil shipping, a reopening of the Strait would push supply and demand back to pre-crisis highs, while the lifting of sanctions on Iran could create an ultra-high and sustainable prosperity cycle. Geopolitical conflicts do not alter the medium-to-long-term logic, and investors should look for contrarian entry points.
Key Views from GTHT:
Aviation: Summer Passenger Traffic Accelerates, Fares Steady; Awaiting Improvement in Airline Strategies
Last week, summer passenger traffic year-on-year growth expanded to nearly 8%, with load factors rising over 1 percentage point to a high 86%. However, estimated domestic all-in fares fell nearly 10% year-on-year, reflecting weak demand and airlines trading volume for price. In July, domestic jet fuel prices dropped over 20% from Q2, but considering oil price volatility, domestic fuel costs are expected to rise over 40% year-on-year this summer. Weak demand and year-on-year fuel cost pressure will impact airline profitability in July. Major airlines are gradually withdrawing from the mutual viewing agreement on the China TravelSky (ICS) system, the core flight management system. GTHT believes this will shift airline revenue management focus from "peer competition" to "passenger demand," helping to reduce irrational competition and improve revenue management. The brokerage recommends monitoring subsequent airline strategy changes and fare trends. For the "15th Five-Year Plan" period, aviation supply enters a low-growth era, and demand growth will drive continued improvement in supply and demand, along with higher earnings. Recommendations include: Air China / China Eastern Airlines / Juneyao Airlines / Spring Airlines / China Southern Airlines.
Oil Shipping: Geopolitical Conflicts Again Reduce Demand; Short-Term Rate Adjustments Offer Contrarian Opportunities
1) Short-term: Since July 22, Houthi actions against Saudi maritime transport have reduced transit through the Bab el-Mandeb Strait by over 20% week-on-week, with crude exports from Yanbu port falling more than half. Meanwhile, Strait of Hormuz transit remains low, at less than 10% of February levels. Reduced oil shipping demand has pushed down rates, with VLCC TCE on US Gulf and Africa routes falling below $100,000 last week. Industry sources believe that if geopolitical conflicts persist, rates face further short-term downside risk, but this does not change the long-term supply rigidity and high prosperity cycle for oil shipping. 2) Medium-term: Repeated geopolitical conflicts may aim to negotiate future strait control. Industry sources believe the strait is unlikely to fully reopen in the second half of the year, but a reopening by early 2027 remains possible. If the strait reopens, oil shipping capacity utilization will return to pre-crisis highs, with long-range charter control and inventory replenishment adding further upside. 3) Long-term: If Iran sanctions are lifted, the compliant oil shipping market could achieve ultra-high prosperity lasting several years. Short-term rate adjustments may offer contrarian entry points, with dividend yields supporting valuation floors. Recommendations include: COSCO Shipping Energy Transportation / China Merchants Energy Shipping / Nanjing Tanker Corporation / CSSC Shipping.
Transportation Dividend Stocks: Expressways and Ports Offer Stable Earnings, Reliable Dividends as Top Picks
GTHT recommends sub-sectors with stable cash flows, steady earnings growth, and stable dividend policies, with a preference for expressways and high-quality ports. 1) Expressways: Traffic demand is resilient. The brokerage expects high oil prices to have limited impact on demand in Q2, likely continuing Q1 trends. Regionally, East China/Southwest China show relatively stronger demand resilience, while North China is affected by coal mine freight, and South China by adverse weather. By 2026, although LPR stabilization will reduce the scope for financial cost reduction, maintenance and repair costs may have room to decline from the high base of the national inspection year. Preferred picks with strong geographic locations and limited expansion risks include: Anhui Expressway / Shenzhen Expressway / Jiangsu Expressway. 2) Ports: Q2 port cargo volumes are expected to grow year-on-year. Container shipping on US and European routes saw early shipments due to concerns about post-summer tariff hikes and further price increases. Dry bulk cargo volumes saw significant growth, driven by active Australian ore shipments and strong coal demand. Relevant stocks include: Tangshan Port / Qingdao Port.
Risks: Economic fluctuations, geopolitical oil price volatility, tariffs, exchange rate fluctuations, and safety incidents.
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