Dorian LPG Stock: Fleet Utilization Rates May Improve Soon (NYSE:LPG)

Dorian LPG Ltd. (NYSE: LPG) has seen a 30% drop in its share price since June this year. However, I think there is an interesting opportunity for a long position in this stock right now.

In this article, I will review the company’s recent performance, with a focus on the headwinds and pressures the company is currently experiencing.

In my opinion, the decline in their fleet utilization rate was driven by non-recurring events and I expect this rate to recover in the coming quarters. This, along with a healthy balance sheet and insider buying activity, drove my buy rating.

I will discuss my rationale in the Outlook section below. For now, I’ll start with a brief company overview section for those readers new to this stock.

Company overview

Dorian GPL is a maritime transport company, incorporated in the Marshall Islands and headquartered in the USA, specializing in the transportation of liquefied petroleum gas.

They operate a fleet of 25 very large gas carriers (VLGCs), including owned and chartered vessels, with a total carrying capacity of approximately 2.1 million cubic meters.

I thought I’d mention that most of their ships are deployed in the Helios Pool, a commercial pool where ships are leased to energy companies like ExxonMobil, Chevron and Royal Dutch Shell.

For those unfamiliar with how Helios Pool works, this system allows the company to share revenue and expenses with other ship owners, providing a more stable and predictable income.

Dorian operates exclusively in the VLGC segment, transporting liquefied gases, mainly propane and butane, across international waters. In 2023, management highlighted its plans to expand into ammonia transport by acquiring vessels capable of carrying both LPG and ammonia.

So far, they have ordered a newbuild VLGC/ammonia carrier with a cargo capacity of 93,000 cubic meters to be delivered in Q2 2026 from Hanwha Ocean.

I thought I’d include a table below to better understand the different income streams.

Click to enlarge

Compilation of author from latest 10-K

As mentioned above, their ships are deployed in the Helios Pool, and as shown in the table above, they have reduced their charter time to focus primarily on the Helios Pool.

In terms of company ownership, the most recent 14A shows that the total common stock ownership for all 10 directors and executive officers is 13.4%, with Chairman and CEO John C. Hadjipateras owning only 11.5% .

Recent performance and risks

I like to start dinner with dessert, so I’ll first cover the headwinds, pressures, and risks that I think could break my bull thesis.

Fleet utilization decreased from 98.0% in Q1 2024 to 90.4% in Q1 2025. As a side note, I am referring to FY 2024 and FY 2025.

Reasons behind this decline included congestion and blockages in the Panama Canal and US Gulf terminal delays due to terminal maintenance issues and delayed exports due to Hurricane Beryl.

In May and June, demand for transit slots exceeded availability in the Panama Canal, mainly due to water levels in Lake Gatun at historic lows due to severe droughts. The Panama Canal Authority restricted the number of ships that could transit the canal, leading to disruptions that caused ships to remain idle for longer periods, reducing available charter days.

Another pressure comes from the volatility of freight rates, mainly due to the disruptions mentioned above. For example, in May freight rates rose to $80 per metric ton, but then fell to $74 per metric ton in June 2024 as external pressures eased.

Longer term, I am concerned about another pressure that could affect freight rates; market entry of new VLGCs. The main reason I am concerned about this is that demand may not grow at the same rate as new VLGC supply.

In 2023 alone, 56 new VLGCs were added to the global fleet, increasing the total number of vessels by 16%. In 2024, the global fleet is expected to grow by another 4%, so this adds up to a 20% increase in just 2 years.

Looking at the evolution of freight rates over the past few years (see image below), this raises some concerns about a potential demand lag as a result of increased VLGC supply.

Despite pressures and headwinds, Q1 2025 was largely positive

TCE rates increased 8% year over year to $55,228 per operating day. This led to an increase in revenue despite lower fleet utilization rates. Total revenue increased 2.5% from last year to $114.4 million.

Also, despite increased vessel operating expenses (from $10,383 per day in Q1 2024 to $10,717 per day in Q1 2025), net income remained relatively flat at $51.3 million, which is 0. 7% below Q1 2024.

Additionally, earnings per diluted share were $1.25, beating Q1 2025 EPS estimates by 13%.

Their balance sheet saw an improvement over last quarter, with a 25% increase in cash and cash equivalents totaling $353.3 million.

Finally, I believe the company has good financial flexibility, with a weighted average cost of debt of 4.7%, below current market rates, and a net debt to total book capitalization ratio of just 14.2% .

Outlook

Let’s start with the stock price first. A quick look at the weekly chart below shows a bull run starting in 2022 and price consolidation starting in January 2024 between $35 and $50.

Currently, the stock price appears to be near a support level around the $35 price threshold, after a 33% decline since June this year.

This drop makes sense because freight rates have fallen significantly over this period, as shown in the chart in the previous section.

On the P&L side, there was a clear downward trend from Q3 2023 for total revenue, operating income, net income and EBITDA.

However, when we look at their balance sheet, the last three quarters have seen a decrease in net debt and an increase in total current assets, including cash and cash equivalents.

So they’re not growing, but they’re paying down their debt and building up cash reserves, which my investment style favors.

In terms of cash flow, the company has had positive free cash flow for the past 7 quarters, with $40 million in the most recent quarter.

They have paid a special dividend of $1 for the last 2 years, usually 4 times a year, which acts similar to a quarterly dividend.

I like that this is a special dividend, rather than a recurring quarterly one, because it gives the company flexibility to adjust or even stop paying it without significantly scaring shareholders, which can lead to panic selling.

While recently focusing on this particular dividend, they do have a share buyback program. Even though no repurchases were made in Q1 2025, Dorian has repurchased 75,000 shares to date under the 2022 common share repurchase program.

The main factor that sparked my interest in this stock was an insider buyout transaction by the CEO in January of this year. John Hadjipateras bought $212,900 worth of stock at an average cost of $42.58.

My investing style favors these types of trades, especially after a sale. Looking closer to the beginning of this year, the share price fell 30% during January.

To me, this indicates that the CEO believes in the company and its ability to perform well in the short to medium term. Additionally, support at the $35 price level could indicate a good entry point for a long position.

However, despite my buy rating, I have not started a position in the company at this time. I have to admit that the main reason is due to the low cash reserves in my portfolio, but also because I want to monitor the current carry prices and see an improvement before I decide to open a long position in this stock.

Conclusion

In conclusion, I think Dorian presents an interesting opportunity for a long position despite the company’s current difficulties.

In my opinion, the main factors that have reduced their fleet utilization rate are non-recurring, one-time events. Therefore, with the Panama Canal Authority lowering the limits that caused a global maritime blockade in May of this year, I am confident that utilization rates will increase for the coming quarters.

I highly prefer insider buying activity by the CEO and the stock price getting closer to the $35 support level. Additionally, the company has a healthy balance sheet and positive free cash flow. Therefore, my rating is Buy, but I recommend closely monitoring freight rates and freight demand in the coming quarters.