Tangshan Port is the first to enter the mature stage.
As a dry bulk port, Tangshan Port has entered the mature period earlier than container ships, oil tankers, ro-ro ships and other ports. With the slowdown of urbanization and industrialization, China's demand for bulk raw materials has reached a plateau.
From 2016 to 2021, the cargo throughput of Tangshan Port was flat, with ore falling by 18 per cent, coal by 29 per cent, steel by 19 per cent and other bulk goods by 33 per cent. The operating income of Tangshan Port in 2021 was 6.075 billion yuan, down 22.49%, which was mainly due to the decrease of Beijing ITC trade business and the non-consolidation since the end of August; the return net profit was 2.089 billion yuan, an increase of 13.36%, mainly due to the increase in asset disposal income; deduction of non-return net profit of 1.663 billion yuan, a decrease of 6.59%, mainly due to the reduction of ore demand due to production restrictions in steel mills. Iron ore imports can be tracked at high frequency and the performance in 2021 is in line with expectations.
Focus on the main business and shrink diversified investment
In the mature period, focusing on the main industry and shrinking diversified investment, Tangshan Port has become the forerunner of the port industry. As a public infrastructure company, Tangshan Port has stable throughput and handling rates, which brings stable profits and abundant cash flow. While the dry bulk terminal business has entered a mature period, capital expenditure has decreased, so reinvestment affects the value of the company. The container terminal and shipping business invested by Tangshan Port in previous years have lost money year after year, and the profit of commodity sales business is meagre. Since 2020, Tangshan Port has greatly reduced the scale of commodity sales business, withdrew from shipping business, spun off container terminal business, and focused on the main bulk cargo loading and unloading business. The adjustment of investment direction is expected to promote the profitability of the company.
High proportion of dividends, increase the value of investment
The dividend ratio and dividend ratio of Tangshan Port are far ahead, becoming the benchmark of the port industry. Due to the reduced demand for reinvestment, Tangshan Port has significantly increased its dividend ratio to 64% from 2020 to 99% in 2021. The dividend yield of Tangshan Port in 2021 is 11.4%, which is far ahead in the transportation industry. It is the only A-share port company with high investment value when paying dividends. Tangshan Port shrinks diversified investment, while the main business reinvestment demand is low, we expect the company will continue to high dividend. Taking into account the acquisition pressure of major shareholders after the acquisition of Tangshan Container Terminal and Commodity sales Company, we expect Tangshan Port to maintain a very high percentage of dividends in 2021-23.
Maintain profit forecasts and target prices
Considering the decrease of income from asset disposal, the increase of loading and unloading rate and the divestiture of loss business, the forecast EPS in 2022-23 is maintained, and the forecast EPS in 2024 is 0.35 yuan.
Risk hints: environmental production restrictions become stricter, energy consumption double restrictions become stricter, real estate and infrastructure investment decline, port fee reduction policy is introduced, and the dividend ratio is reduced.