Executive Summary / Key Takeaways

• Dorian LPG operates a modern, technologically advanced VLGC fleet, strategically positioned to capitalize on global LPG demand growth and the emerging ammonia transportation market through investments in dual-fuel and ammonia-capable vessels.
• Despite significant market volatility leading to a decline in revenues and net income in fiscal year 2025 compared to the exceptionally strong prior year, the company maintains strong profitability margins and robust cash flow generation.
• A solid balance sheet, characterized by substantial cash reserves, manageable debt levels, and a well-structured debt profile, provides significant financial flexibility to navigate market cycles and fund strategic initiatives.
• The company is committed to returning capital to shareholders through irregular dividends and share repurchases, balancing these distributions with prudent investments in fleet modernization, efficiency upgrades, and debt reduction.
• While facing inherent risks from market cyclicality, geopolitical events, and competition, Dorian LPG's focus on operational excellence, technological differentiation, and strategic capital allocation underpins its investment thesis for long-term value creation.

Setting the Scene: A VLGC Operator in a Cyclical World

Dorian LPG Ltd., incorporated in 2013 and headquartered in the United States, has established itself as a focused owner and operator of Very Large Gas Carriers (VLGCs) within the global liquefied petroleum gas (LPG) shipping industry. From its inception, the company's strategy centered on building and managing a high-quality fleet to transport LPG, a cleaner-burning energy source vital for petrochemical, residential, and agricultural uses worldwide.

The LPG shipping market is inherently cyclical and subject to significant volatility, driven by the interplay of global energy supply and demand, geopolitical events, and fleet capacity dynamics. Recognizing this, Dorian LPG has pursued an overarching strategy focused on maintaining a modern, efficient fleet, leveraging in-house operational and commercial expertise, participating in strategic partnerships like the Helios Pool, and employing a disciplined capital allocation approach to manage through market fluctuations and capitalize on opportunities. This foundational approach, shaped by the company's history of fleet expansion and strategic refinancings, positions Dorian LPG not merely as a transporter but as an active participant seeking to optimize performance within a challenging yet opportunity-rich environment.

Fleet and Operational Excellence: The Backbone of Performance

Dorian LPG's operational strength is rooted in its fleet and management capabilities. As of May 23, 2025, the company's fleet comprises twenty-five VLGCs, including one dual-fuel ECO VLGC, nineteen fuel-efficient ECO VLGCs, one modern VLGC, and four time chartered-in vessels (three dual-fuel Panamax, one ECO Panamax). This fleet boasts an average age of 8.9 years, notably younger than the global VLGC fleet average of 11.4 years, positioning Dorian LPG favorably against competitors with older tonnage.

The company emphasizes operational safety and efficiency, managed through its in-house commercial and technical teams. This integrated structure is seen as a key differentiator, enabling superior customer service and reliability. Safety is paramount, with established KPIs and a program of continual maintenance and improvement for all vessels, which hold necessary ISM Code certifications and are classed by leading societies. This focus on operational excellence is critical for maximizing vessel availability and minimizing off-hire time, directly impacting revenue generation.

Technological Differentiation and Sustainability: Building the Moat

A core component of Dorian LPG's strategy and competitive positioning is its investment in technologically advanced and environmentally friendly vessels and systems. The majority of its owned fleet consists of ECO-design VLGCs, featuring very low RPM engines, larger propellers, advanced hull design, and low friction paint. These design elements contribute to enhanced fuel efficiency and reduced greenhouse gas emissions on a ton-mile basis.

Further technological differentiation includes:

• Scrubbers: Sixteen vessels (including one chartered-in) are fitted with scrubbers, allowing the use of cheaper high-sulfur fuel oil while complying with IMO 2020 sulfur emission limits. This provides a tangible cost advantage when the fuel price differential is favorable, enhancing TCE rates. The company has a commitment to install a scrubber on its newbuilding VLGCAC.
• Dual-Fuel Capability: One owned and three chartered-in vessels are dual-fuel, capable of burning LPG as fuel. This offers economic benefits over traditional fuels and contributes to lower carbon emissions, aligning with increasing environmental standards. One chartered-in vessel also features a shaft generator for additional electricity generation and reduced fuel consumption.
• Energy-Saving Devices & Optimization Software: Investments in quick-payback energy-saving devices and silicon paints are yielding fuel savings exceeding 10% with payback periods under a year. The company leverages internal and third-party data collection and analysis software, advanced vessel routing software, and AI engine monitoring systems for performance optimization, aiming to reduce fuel consumption and emissions.
• Ammonia Carrying Capability: Recognizing the potential of ammonia as a future energy source and cargo, Dorian LPG is proactively positioning its fleet. It has completed upgrades on two VLGCs to carry ammonia and plans a third retrofit in Q4 2025. Combined with the newbuilding VLGCAC (93,000 cbm, LPG/Ammonia, expected Q2 2026 delivery), the company will have four ammonia-capable VLGCs plus the newbuild, enhancing commercial optionality for this emerging market.
• Regulatory Compliance & ESG: These technological investments directly support compliance with increasingly stringent environmental regulations like IMO's EEXI and CII (where the fleet exceeds targets with a 'B' rating in 2024 AER) and the EU's FuelEU Maritime. The company's commitment to sustainability is further evidenced by a sustainability-linked pricing mechanism in its 2023 AR Debt Facility and participation in initiatives like the Getting to Zero Coalition, Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, and the All Aboard Alliance. Discussions around future technologies like carbon capture modules and wind-assisted propulsion systems highlight a forward-looking approach to decarbonization.

The "so what" for investors is clear: these technological and sustainability initiatives are not just about compliance; they are strategic investments that reduce operating costs, improve fuel efficiency, enhance vessel performance, increase commercial attractiveness, and position the company favorably in a competitive landscape facing increasing environmental scrutiny and regulatory change.

The Helios Pool and Commercial Strategy: Navigating the Market

Dorian LPG's commercial strategy is significantly influenced by its 50/50 joint venture with MOL Energia, the Helios LPG Pool. Since April 1, 2015, the pool has served as a commercial management platform for a substantial portion of the company's fleet, aiming to achieve better market coverage and freight efficiencies. In fiscal year 2025, a significant 97% of Dorian LPG's total revenues were generated through the Helios Pool as net pool revenues-related party, highlighting the pool's central role in the company's commercial operations.

Within the pool, vessels operate primarily in the spot market, pursuant to Contracts of Affreightment (COAs), or on time charters of less than two years. This structure exposes Dorian LPG to the volatility of the spot market, which can lead to significant swings in revenue and profitability. However, it also allows the company to capture upside during periods of strong freight rates. The company's broader chartering strategy aims for a balanced mix of multi-year time charters (some with profit-sharing), shorter-term time charters, spot voyages, and COAs to manage risk and optimize earnings across market cycles. As of May 23, 2025, all twenty-five of Dorian's VLGCs were deployed in the Helios Pool, with three on Pool-TCO (time charter out within the pool), indicating substantial exposure to the pool's performance and the underlying spot market dynamics.

Financial Performance: Riding the Cycles

Dorian LPG's financial performance reflects the cyclical nature of the VLGC market. For the fiscal year ended March 31, 2025, the company reported total revenues of $353.34 million, a significant decrease from the exceptionally strong $560.72 million in the prior fiscal year. Net income followed a similar trend, falling to $90.17 million in FY2025 from $307.45 million in FY2024. This decline was primarily driven by a substantial reduction in average TCE rates, which fell from $62,129 per available day in FY2024 to $39,778 in FY2025, mainly due to lower spot market rates. Available days also saw a slight decline due to an increase in drydocking activity.

Despite the revenue and net income decrease, the company maintained healthy profitability margins (TTM figures: Gross Profit Margin 52.68%, Operating Profit Margin 43.05%, Net Profit Margin 38.52%, EBITDA Margin 58.04%), indicating solid operational efficiency even in a weaker rate environment compared to the prior peak. Vessel operating expenses per calendar day increased to $11,143 in FY2025 from $10,469 in FY2024, influenced by higher non-capitalizable drydock costs and increases in crew, spares, and communications expenses. General and administrative expenses also rose, partly due to higher stock-based compensation and bonuses.

Cash flow from operations remained robust at $173.01 million for FY2025, although lower than the $388.45 million generated in FY2024, reflecting the reduced profitability and changes in working capital related to the Helios Pool. This cash generation is critical for funding operations, debt obligations, and strategic investments.

Liquidity and Capital Allocation: Balancing Returns and Investment

Dorian LPG maintains a strong balance sheet, providing significant financial flexibility. As of March 31, 2025, the company held $316.88 million in cash and cash equivalents. Total debt outstanding stood at $557.42 million (gross), resulting in a manageable debt-to-total book capitalization ratio of 34.8% and a net debt-to-total capitalization of 15%. The debt structure is well-managed, with a weighted average all-in cost of approximately 5.1% and a significant portion hedged against interest rate fluctuations ($148 million hedged as of March 31, 2025). The next major refinancing event for the BALCAP facility is not until December 2026, and quarterly principal amortization is considered manageable and largely in line with depreciation.

The company's capital allocation strategy prioritizes returning value to shareholders while funding strategic growth and maintaining financial strength. In fiscal year 2025, Dorian LPG paid $156.16 million in irregular cash dividends, bringing the total capital returned to shareholders through dividends, buybacks, and a self-tender offer to over $875 million since its IPO. The recent declaration of a $0.50 per share irregular dividend payable in May 2025 reflects this commitment, balancing current results and the outlook with long-term needs and a heavy drydocking schedule. The company also repurchased $6.27 million of common stock in FY2025 under its existing authority.

Strategic investments include payments for the newbuilding VLGCAC ($86.35 million in commitments as of March 31, 2025) and budgeted drydocking costs ($12 million for 8 vessels in FY2026). The $84.4 million net proceeds from the June 2024 equity offering further enhanced the balance sheet and positioned the company to pursue fleet renewal and expansion opportunities. Management has indicated they are actively evaluating opportunities to deploy this capital judiciously, balancing shareholder distributions, debt reduction, and fleet investment.

Competitive Landscape: Strengths in Profitability and Technology

The VLGC shipping market is highly competitive, with approximately 115 owners globally, the top ten controlling a significant portion of the fleet. Key competitors include BW LPG (BWLLF), NYK Line (NPNYY), and Petredec. Competition is based on charter rates, customer relationships, operational expertise, reputation, and vessel specifications.

Dorian LPG competes effectively by leveraging its modern, younger fleet (average age 10 years for owned vessels vs. global 11.4 years), in-house management, and technological advantages. Direct, comprehensive financial comparisons across all competitors are challenging to ascertain. Dorian LPG's reported TTM profitability margins (Gross 52.68%, Operating 43.05%, Net 38.52%, EBITDA 58.04%) appear robust, potentially indicating a strength in generating profit per unit of revenue compared to some peers like Navigator Holdings (NVGS) (TTM Gross 56%, Operating 25%, Net 15%, EBITDA 33%). This profitability, coupled with its technological edge (ECO design, scrubbers, dual-fuel, efficiency systems), allows Dorian LPG to compete on both cost (through efficiency) and value (through reliable, compliant service).

The company faces competition not only from traditional VLGC operators but also potentially from VLECs (Very Large Ethane Carriers) if the ethane market weakens, as these vessels can also carry LPG. The significant newbuilding orderbook (108 vessels by end 2029, including ammonia carriers) represents a future competitive dynamic, although management believes expected trade growth, including the emerging ammonia market, should help absorb this capacity. Customer concentration, particularly the high reliance on the Helios Pool, and counterparty risk are also competitive factors that require diligent management.

Market Outlook: Fundamentals vs. Volatility

Management maintains a constructive outlook for the VLGC market, underpinned by positive long-term fundamentals. Key drivers include expected increases in U.S. LPG production and exports, supported by terminal capacity expansions scheduled for the second half of 2025 and 2026. Growing demand in Asia, fueled by petrochemical expansion (new PDH plants in China) and residential consumption, is also a significant positive factor. The limited number of newbuilding deliveries expected in 2025 (13 ships, ~3% fleet increase) is anticipated to contribute to a favorable supply-demand balance.

However, the market is expected to remain volatile in the near term. Management describes the current state as near equilibrium, where external factors can cause sharp price swings. Factors such as the efficiency of Panama Canal transits (influenced by traffic from other vessel types), weather events impacting U.S. Gulf terminals, and geopolitical developments (trade tariffs, conflicts in the Middle East and Black Sea affecting routes and ton-miles) are acknowledged sources of unpredictability. While these can impact quarterly earnings, the underlying fundamentals are seen as pointing towards continued trade growth.

Specific guidance includes an expected cash cost per day of approximately $26,000 for the coming year (excluding CapEx). For the quarter ending June 30, 2025, the Helios Pool has fixed 79% of available days at an estimated TCE of roughly $42,000 per day. The drydocking schedule for fiscal year 2026 involves 8 vessels with a budget of approximately $12 million, and progress payments for the newbuilding VLGCAC are scheduled for September and December 2025 (each ~$12 million). The development of the ammonia transportation market is viewed as a significant future opportunity, although its timeline remains uncertain.

Risks and Challenges: Navigating the Headwinds

Investing in Dorian LPG involves exposure to several key risks. The inherent cyclicality and volatility of the LPG shipping market are primary concerns, directly impacting charter rates, vessel values, and profitability. The company's dependence on a limited number of customers, primarily through the Helios Pool, exposes it to counterparty risk and potential losses if obligations are not met. Restrictions and increased tolls at the Panama Canal can disrupt trade patterns, increase costs, and reduce efficiency.

Geopolitical risks, including trade protectionism, sanctions, and conflicts (such as those in the Middle East and Ukraine), can lead to route disruptions, increased voyage costs (e.g., war risk insurance, security), and uncertainty in trade flows. Environmental regulations and increasing ESG scrutiny pose ongoing challenges, potentially requiring significant capital expenditures for compliance and affecting access to capital markets. Operational risks, including accidents, piracy, and IT/cybersecurity failures, could result in losses, reputational damage, and business disruption. The costs associated with maintaining and drydocking an aging fleet, although managed through planned schedules and budgets, will continue to be a significant expense. While the company has a strong balance sheet, its debt obligations contain restrictive covenants that could limit financial and operational flexibility.

Conclusion

Dorian LPG Ltd. stands as a well-capitalized and operationally focused player in the global VLGC market. Its investment thesis is built upon a modern, technologically advanced fleet designed for efficiency and environmental compliance, a disciplined capital allocation strategy that balances shareholder returns with strategic investments, and a proactive approach to emerging market opportunities like ammonia transportation. While the company's financial performance is subject to the significant volatility of the shipping cycle, as evidenced by the year-over-year decline in FY2025 results from a peak, its strong profitability margins, robust cash flow generation, and solid balance sheet provide resilience. The strategic positioning through the Helios Pool and ongoing technological upgrades enhance its competitive standing. Investors considering Dorian LPG must weigh the potential for upside driven by favorable long-term LPG demand fundamentals and the promising ammonia trade against the inherent risks associated with market cyclicality, geopolitical instability, and competitive pressures. The company's commitment to operational excellence and prudent financial management positions it to navigate these dynamics and potentially deliver value over the long term.