The recovery of Port Throughput drives the growth of 1H21 performance compared with the same period last year

Tianjin Port announced interim results: 1) operating income increased by 26.8% year-on-year to 7.11 billion yuan; 2) return net profit increased by 28.2% to 483 million yuan; 3) non-return net profit increased by 27.2% to 475 million yuan. The year-on-year growth was mainly due to the increase in handling business revenue driven by throughput growth, while sales and other business income increased compared with the same period last year due to the recovery of the market. Looking forward to the second half of the year, we believe that with the gradual normalization of global economic production activities, port throughput is expected to maintain a positive trend. We raise our 2021 PE profit forecast for 2022 by 2.4% to 830 million yuan, leaving the 2023 forecast unchanged; we adjust the target price to 4.56 yuan (based on 16.4x 2021E PE, the company's three-year PE average 19.7x minus 1 standard deviation, 2021E EPS 0.28 yuan), and maintain the "overweight" rating.

Throughput rebounded year-on-year, port handling and logistics business improved

In the first half of 2021, the company completed bulk cargo throughput of 220 million tons, an increase of 10.5% over the same period last year, and container throughput of 10.3 million TEUs, an increase of 20.1% over the same period last year. The company's handling business achieved operating income of 3.25 billion yuan, an increase of 12.2% over the same period last year, gross profit of 1.08 billion yuan, an increase of 14.2% over the same period last year, and gross profit margin increased by 0.6 percentage points to 33.2% over the same period last year. The operating income of the port logistics business reached 760 million yuan, an increase of 19.8% over the same period last year; the gross profit was 290 million yuan, an increase of 122.7% over the same period last year; and the gross profit margin increased by 17.6% to 38.1%. The company's port handling and logistics business has achieved a high gross profit margin, mainly because the company, as the main operator of the loading and unloading logistics industry in Tianjin Port area, actively expands the logistics value-added services related to the port industry chain to provide customers with integrated and integrated port services.

The gross profit of the sales business increased sharply compared with the same period last year, and the gross profit of the port service and other businesses decreased in the first half of this year. The company's sales business realized operating income of 3.03 billion yuan, an increase of 51.2% over the same period last year; gross profit was 18 million yuan (1 million yuan in the same period last year, mainly due to the impact of the epidemic); gross profit margin rose 0.5% to 0.6%. The operating income of port services and other businesses reached 230 million yuan, down 2.0% from the same period last year; the gross profit was 150 million yuan, down 14.2% from the same period last year; and the gross profit margin fell 8.1% from the same period last year to 57.3%. The year-on-year decline in gross profit of port services and other businesses is mainly due to the company adjusting its business structure and reducing the operation of related services.

Superior geographical location, good medium-and long-term development

Tianjin Port is located at the intersection of the city of Beijing and Tianjin and the economic circle around the Bohai Sea. it is an open door and an important foreign trade port in northern China, a world-class artificial deep port, and a link between Northeast Asia and Central and Western Asia. The construction of "Belt and Road Initiative", the construction of Xiongan New area, the implementation of the major strategy of strengthening economic cooperation around the Bohai Sea and Beijing-Tianjin-Hebei region, and the strategic deployment of the construction of Tianjin Free Trade Zone have brought a broader space for development for the company. In the first half of this year, due to the change in the share capital of the company, our target price for the previous share capital is 4.37 yuan, based on 17.1x 2021E PE.

Risk tips: 1) port throughput growth is lower than expected; 2) port logistics and other business growth is lower than expected; 3) natural disasters; 4) policy risk.