Introduction
Deutsche Bank has upgraded Euronav to Buy from Hold with a price target of $20.00, citing a generally positive medium-term outlook. While there are some short-term macroeconomic and demand headwinds, the constrained net fleet growth in the coming years will provide support for the industry. In this article, we will delve deeper into Euronav and the reasons behind Deutsche Bank’s upgrade.
What is Euronav?
Euronav is a Belgian tanker shipping company that specializes in transporting crude oil and petroleum products. With a fleet of 74 vessels, Euronav is one of the largest independent crude oil tanker companies in the world. The company operates in the international shipping markets, primarily in Europe, Asia, and the Americas.
Deutsche Bank’s Upgrade
Deutsche Bank’s upgrade of Euronav to Buy from Hold is based on the company’s positive medium-term outlook. While there are some short-term macroeconomic and demand headwinds that still overhang the segment, the medium-term outlook remains generally positive due to constrained net fleet growth in the coming years.
Euronav’s fleet is expected to grow by only 1.4% in 2023, significantly lower than the long-term average growth rate of 4%. This low fleet growth is due to a lack of new vessel orders and increased scrapping of older vessels, which is expected to continue in the coming years. This trend is expected to support freight rates and earnings for Euronav and other tanker companies.
Euronav’s Financial Performance
Euronav has shown strong financial performance in recent years. The company’s revenue has increased steadily since 2017, reaching $1.05 billion in 2021, while its net income has also shown strong growth, reaching $253 million in 2021. Euronav’s strong financial performance is partly due to its focus on crude oil transportation, which has seen strong demand growth in recent years.
In the first quarter of 2022, Euronav reported a net loss of $15.9 million, primarily due to the drop in tanker rates and increased bunker prices. However, the company’s management noted that the market remained healthy and that the tanker industry was well-positioned for the coming years.
Euronav’s Positive Medium-Term Outlook
Deutsche Bank has upgraded Euronav to Buy from Hold with a price target of $20.00, citing a generally positive medium-term outlook. While there are some short-term macroeconomic and demand headwinds, the constrained net fleet growth in the coming years will provide support for the industry.
Euronav’s fleet growth is expected to be only 1.4% in 2023, significantly lower than the long-term average growth rate of 4%. This is due to a lack of new vessel orders and increased scrapping of older vessels, which is expected to continue in the coming years.
Conclusion
Deutsche Bank’s upgrade of Euronav to Buy from Hold is based on the company’s positive medium-term outlook, which is supported by constrained net fleet growth in the coming years. Euronav’s strong financial performance in recent years and its focus on crude oil transportation also provide support for the company’s outlook.
Investors who are looking to invest in the tanker shipping industry may consider Euronav as a potential investment opportunity. However, as with any investment, investors should carefully consider the risks and potential rewards before investing.
