“After several years of a weakened aviation industry, CAO now stands as a beneficiary of rising international air traffic and jet fuel demand in China,” say analysts Chan En Jie and Nicholas Yon, who note that domestic flights within the country have recovered to their pre-Covid-19 levels since mid-2023. Outbound flights, however, have seen a slower pace of recovery so far, reaching 65% of its pre-Covid-19 levels as at December 2023.
Lim & Tan Securities have initiated “buy” on China Aviation Oil with a target price of $1.20. The target price is pegged to 11.5 times CAO’s FY2024 P/E representing a 10% discount to its five-year average P/E of 12.7 times. The target price also presents a potential upside of 29.7% to CAO’s share price of 92.5 cents as at the brokerage’s Feb 22 report.
CAO is the largest physical jet fuel buyer in Asia Pacific (APAC). It is also the main supplier of imported jet fuel to China’s civil aviation industry.
