COSCO SHIPPING PORTS (the “Company”) performed slightly worse than our and market expectations for the first quarter of 2022. Benefiting from the merger of the Tianjin container terminal, the company's revenue for the first quarter of 2022 increased 24.2% year-on-year to US$329.7 million. Excluding the impact of this consolidation, the company's revenue rose 7.4% year over year to $285 million. Gross margin increased 1.1 percentage points year over year to 24.5%. Profits from joint ventures rose steadily 1.9% year over year to $82.5 million. Due to the loss of fair value of convertible bonds, the company's shareholders' net profit rose slightly by 2.6% year-on-year to 74.9 million US dollars, slightly lower than our and market expectations.

We expect the company's return on net assets to improve with continued synergies and more mature operations. In the first quarter of 2022, mainly affected by the COVID-19 pandemic and port congestion, the company's throughput increased only slightly by 0.3% year on year, while its terminal profit rose steadily by 5.2% year on year. Looking back, in the context of improving the shipping industry, as contract price expectations for terminal services gradually rise, single-box operating cost expectations fall after the pandemic, and overseas terminal operations become more mature, we expect the company's profitability to develop steadily. Supported by the parent company's continued throughput, we are optimistic about the increase in the company's return on net assets.

Maintain the “buy” investment rating and slightly lower the target price to HK$8.10. Given the high dividend rate and stable operating cash flow, we think the company's current valuation is attractive. Our target price corresponds to 8.8 times, 8.1 times and 7.7 times the 2022-2024 price-earnings ratio, and 0.6 times, 0.5 times, and 0.5 times the 2022-2024 net price-earnings ratio.