The results for the third quarter of 2021 are in line with our expectations

COSCO SHIPPING Port announced the company's results for the third quarter of 2021: revenue increased 9.5% year over year to US$296 million, and net profit of the parent company increased 0.2% year over year to US$86.14 million (corresponding to earnings of 2.6 cents per share), in line with our expectations. The company's gross profit increased 9.9% year over year to 77.49 million US dollars, and gross margin expanded to 26.2%, an increase of 0.1 percentage points year over year.

Profitability further recovered in the first three quarters of 2021: revenue increased 19.1% year over year to US$861 million, gross profit increased 33.1% year over year to US$226 million, and net profit of the mother was US$262 million, up 44.8% year over year (excluding one-off items).

Development trends

Terminal profit reached the highest quarterly profit since 2016. In the third quarter of 2021, the company's total throughput increased 0.8% year over year to 33.72 million TEUs; equity throughput increased 0.4% year over year to 10.32 million TEUs; consolidated throughput from subsidiaries fell 0.8% year over year to 5.97 million TEUs. Thanks to a rebound in throughput, the company achieved the highest third-quarter and nine-month terminal profits since 2016:3Q21 terminal profit increased 11.7% year over year to $105 million; 1-3Q21 terminal profit increased 40.2% year over year to $322 million.

Profit forecasting and valuation

We keep the company's 2021 and 2022 earnings forecasts unchanged. Currently, the company's stock price corresponds to 6.8 times the 2021 price-earnings ratio and 6.4 times the 2022 price-earnings ratio, respectively. We maintain our outperforming industry rating and target price of HK$7.86 (corresponding to 8.8 times 2021 price-earnings ratio and 8.4 times 2022 price-earnings ratio, respectively), with room for an increase of 30.1% compared to the company's current stock price.

risks

Repeated outbreaks or weak demand caused throughput growth to fall short of expectations.