Analysts up target prices sharply after this company reports record US$111 million net profit

China Aviation Oil (CAO) surprised with a US$111 million net profit for FY2025, prompting a spate of analyst target price upgrades.

CAO's cashpile also rose sharply from US$508 million at end-1H2025 to US$687 million (S$882 million), or 50% of its market cap of S$1.76 billion (stock price $2.04)

Research house	Call	Target price for CAO
UOB KH	Buy	$2.63 (previously $2.09)
CGS Int’l	Add	$2.63 (unchanged)
OCBC Inv Research	Buy	$2.48 (previously $1.60)
Phillip Securities	Buy	$2.53 (previously $1.50)

An intriguing takeaway from the UOB KH report is how CAO stands to benefit from the current volatility in global oil markets.

Analysts Tang Kai Jie and John Cheong figure elevated prices and market shifts can improve CAO's short-term profitability.

However, CAO is not gambling on these price swings.

CAO says explicitly it avoids short-term speculative trading and will instead adhere to its established, disciplined trading approach.

To navigate the turbulence safely, management has proactively conducted scenario analyses to evaluate the impact of the current geopolitical conflicts, allowing them to adjust trading strategies as needed to manage risk alongside the volatility.

CAO delivered a strong performance in 2025, reporting a record net profit of US$111 million, alongside expanding trading margins from higher volumes and future potential from the growing Sustainable Aviation Fuel (SAF) segment.

CAO graphic3.26

Other Merits Powering the Stock
UOB KH analysts highlighted several other merits that make CAO an attractive investment:

Strong Associate Contributions: A significant chunk of CAO's earnings growth comes from its associates, particularly the Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA), in which CAO holds a 33% stake.

Associate profit contributions rose 31% year-over-year to US$60.2 million in 2025, providing reliable, recurring income that reinforces the company's equity earnings and long-term cash flow stability.
Air Travel Recovery: The company is a direct beneficiary of the ongoing rebound in the aviation sector.

China's international outbound flights have recovered to over 90% of 2019 levels as of FY25, and the Civil Aviation Administration of China (CAAC) expects passenger volumes to climb 5.1% to 810 million in 2026, fueling consistent jet fuel demand.

CAO profit trck3.26 CAO's profit in 2025 not only marks a third consecutive year of growth but also an all-time high for the company.

Mountain of Cash and Rising Dividends

CAO boasts a remarkably robust balance sheet with a net cash position of US$687 million and zero borrowings.

This cash hoard represents 50% to 55% of its market capitalization.

Tang Kai Jie KGI Tang Kai Jie, analystThanks to this financial strength, CAO increased its 2025 dividend by 33% to 4.96 Singapore cents per share, marking its third consecutive year of dividend growth.

Analysts note this massive cash pile provides ample flexibility for future growth initiatives and even higher dividend payouts.

Despite its strong fundamentals, CAO is trading at a cheap valuation.

UOB KH's new target price is pegged to a 15x 2026 forward PE ratio, which remains significantly lower than the peer average of 23.8x.

OCBC Investment Research analyst Ada Lim raised her fair value estimate from SGD1.60 to SGD2.48.

This is pegged to a higher FY26 target price-to-earnings (P/E) ratio of 15.7x, which is roughly one standard deviation above CAO’s five-year historical average.

She considers a deployment of cash through accretive acquisitions or share buybacks to be one possible catalyst for the stock.

lamp9.25 → See also: Two China Stocks With Attractive Fundamentals Lead UOB KH's Alpha Picks Line-up

Analysts up target prices sharply after this company reports record US$111 million net profit

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