Goldman Sachs sees 114% upside for COSCO SHIP ENGY on Hormuz reopening

Goldman Sachs said a Hormuz reopening would create a $250,000 VLCC market, lifting COSCO SHIP ENGY earnings 114% and airline H-shares 70%.

"If the Strait of Hormuz reopens and sanctions on Iranian oil are potentially lifted, this would have a significant impact on China's transportation sector," Goldman Sachs said in a research report dated June 16. The bank's analysis covers tanker operators, airlines and shipbuilders under its coverage.

Under Goldman's base case — assuming normalization by end-July rather than end-August — VLCC time charter equivalent rates would reach $250,000 per day in the first year after reopening, well above its $150,000 base-case forecast. That would drive 57% earnings growth for COSCO SHIP ENGY, the bank said. In a "blue-sky scenario" where Iranian oil sanctions are fully lifted, VLCC rates could surge to $350,000 per day, lifting the company's earnings growth to 114%.

The reopening would reverse a 9% to 11% oversupply in crude and refined oil tanker capacity caused by the strait's closure, Goldman said. If Gulf exports normalize by end-July, potential global crude inventory restocking demand of about 5% would be sufficient to offset inventory drawdowns from the closure.

For airlines, Goldman estimates a $10-per-barrel decline in oil prices under its base case. That would lift earnings for the three major Chinese carriers by 16% to 26%, Spring Airlines by 4% and China Eastern Air Logistics by 4%. The bank sees 60% to 70% upside for the H-shares of the three major airlines if Gulf exports normalize by end-July 2026.

Goldman also favors shipbuilders, particularly Songfa Co., whose key asset is Hengli Heavy Industry. While near-term earnings impact is limited, persistently high freight rates and improved trade visibility would encourage new vessel orders, the bank said.

The bank remains cautious on container shipping. It maintained a Sell rating on COSCO SHIP HOLD (01919.HK) with a 12-month price target of HKD10.9. If the Red Sea also reopens, major liners resuming Suez Canal transits would release about 10% of effective global capacity, posing downside risk to container freight rates. COSCO SHIP HOLD's net profit could face 48% downside versus the base-case forecast, Goldman said.

The reopening scenario hinges on a framework agreement between the US and Iran to end hostilities, which media reports indicate has been reached. Investors will watch for formal confirmation and the timeline for sanctions relief, which would determine whether the bullish transport thesis materializes.

This article is for informational purposes only and does not constitute investment advice.