Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Bank of America (BofA) reiterated its “Buy” rating for ADNOC Logistics and Services (ADNOC L&S) and raised its price objective for the stock from Dh7.60 to Dh8.60. ADNOC L&S closed at Dh6.80 on Thursday, implying an upside of about 26% to BofA’s revised target.
“We are raising our estimates and PO once again following the exceptionally strong 2Q26 performance and continued strength in shipping markets,” BofA said in its latest equity research note.
The investment bank expects ADNOC L&S to deliver another exceptionally strong third quarter, forecasting shipping EBITDA of $713 million. For the full year, BofA expects EBITDA to grow 102%, well above management’s guidance for growth in the mid-60% range.
BofA now expects ADNOC L&S to report 54% revenue growth, 102% EBITDA growth and 185% net income growth in 2026. This forecast exceeds management guidance for revenue growth in the mid-20% range, EBITDA growth in the mid-60% range and net income growth in the high-110% range.
In absolute terms, the bank forecasts ADNOC L&S will generate revenue of $7.72 billion, EBITDA of $3.03 billion and net income of $2.36 billion in 2026.
The sharp increase in BofA’s forecasts was primarily driven by the company’s stronger-than-expected second-quarter results and the persistence of unusually high tanker freight rates during the third quarter.
ADNOC L&S generated shipping EBITDA of $944 million in the second quarter, equivalent to 152% of the shipping division’s EBITDA for the whole of 2025. The performance reflected high freight rates and the company’s ability to deploy both its own vessels and chartered vessels to transport ADNOC’s crude oil, refined products and LNG.
BofA forecasts shipping EBITDA of $713 million in the third quarter. While lower than the second-quarter record, it would remain substantially above historical levels.
The company has also acquired six very large crude carriers and five liquefied petroleum gas carriers for about $1.3 billion. The vessels are expected to support ADNOC’s export operations under short-term arrangements linked closely to prevailing market rates, allowing ADNOC L&S to benefit from the current strength in shipping markets.
However, BofA said the longer-term investment case was not dependent solely on high spot-market shipping rates.
Spot shipping involves deploying vessels at prevailing market rates rather than under long-term contracts. It can produce exceptionally high earnings when demand for vessels is strong, as at present, but earnings can fall rapidly when freight rates decline.
Integrated logistics, by contrast, covers services required to support ADNOC’s offshore and onshore operations, including marine logistics, offshore support, warehousing and the transportation of equipment and project cargo. Demand is linked more closely to the level of ADNOC’s production and project activity, making the business more stable and less exposed to daily movements in shipping rates.
“Beyond the current tanker market windfall, ADNOC L&S is increasingly evolving into a higher-quality growth company with greater earnings visibility and lower cyclicality,” BofA said.
BofA said ADNOC L&S’s broader fleet commitments cover 50 vessels with a total investment of about $6.6 billion. From current levels, it expects the company to add 15 vessels by 2029, comprising four LNG carriers, six VLCCs and five gas carriers.
Much of the expansion will be concentrated in LNG, gas and liquids transportation, with most vessels either already covered by long-term contracts or expected to secure long-term employment before delivery.
BofA estimates that spot-exposed tanker operations will account for only around 20% of ADNOC L&S’s EBITDA by 2030, compared with an estimated 63% in 2026.
“The shift towards contracted LNG and liquids shipping should enhance cash flow visibility, support sustained earnings growth, and improve the quality of the earnings mix over the medium term,” the bank said.
BofA also expects integrated logistics to become a more significant growth driver, forecasting high single-digit annual growth for the business over the next five years.
ADNOC’s planned production growth and investments in upstream, gas and LNG projects are expected to generate additional demand for marine transport, offshore support, warehousing and project logistics. ADNOC L&S is positioned to benefit as ADNOC’s preferred logistics partner, the bank said.
The demand would arise throughout the life of the projects, from transporting equipment during construction to providing marine and logistics support once the facilities begin operating. BofA said this should provide ADNOC L&S with a more stable and recurring stream of revenue to complement its more cyclical shipping earnings.
“ADNOC’s planned production growth and post-OPEC+ capacity expansion should drive incremental demand for both shipping and integrated logistics services, positioning ADNOC L&S as a key beneficiary,” the note said.
BofA forecasts ADNOC L&S’s EBITDA will grow at an annual average rate of 11% between 2025 and 2029, compared with management guidance for mid-to-high single-digit growth. It expects net income to grow by an annual average of 14% over the period, also exceeding the company’s guidance.
“Given the stronger-than-expected earnings trajectory, recent fleet additions and a robust project pipeline, we believe management’s current medium-term guidance is increasingly conservative and likely to be revised upwards over time, providing a potential catalyst for the stock,” BofA said.
