1H22 performance is in line with our expectations
The company announced 1H22 results: first-half revenue of HK $6.51 billion, an increase of 14.9% over the same period last year, an increase of 5.2% over the previous year, and a net profit of HK $4.83 billion, corresponding to HK $1.27 per share, an increase of 2.4%, a month-on-month increase of 40.5% and a recurrent profit of HK $4.97 billion, an increase of 9.8% and 65.4% respectively. The company announced an interim dividend of HK $0.22 per share, corresponding to a dividend yield of 17.3%, an increase in 0.13ppt compared with 1H21, and the company's results and dividends in the first half of the year were in line with our expectations.
In the first half of the year, the company's port business revenue and profits grew rapidly, and the 1H22 port business revenue ring increased by 7.2% and 16.2% over the same period last year, which is faster than the company's overall revenue growth rate. From a regional point of view, port revenue in the Pearl River Delta and Yangtze River Delta regions grew faster in the first half of the year, with a year-on-year increase of 23.4% and 47.0% respectively, mainly due to the increase in the rate and throughput of Shenzhen West Port and Ningbo Daxie Port (1H22 Shenzhen West Port / Ningbo Daxie Port throughput growth rate was 3.4% and 1.8%). The net profit of 1H22 port business increased by 47.1% compared with the same period last year, mainly due to the increase of the company's stake in Shanghai Port Group in the first half of the year and the growth of Shanghai Port Group's own net profit.
Trend of development
The construction of intelligent ports to improve operational efficiency, operational capacity is expected to replicate in the future. The company actively explores the construction of smart terminals and uses digital means to empower traditional terminals to improve operational efficiency. In 2021, the company built Guangdong-Hong Kong-Macau Greater Bay Area's first 5G automatic wharf, Mawan Wisdom Port. At present, Mawan Wisdom Port is in good condition. As of June this year, the container throughput reached 1 million TEU, with 28 new routes in the first half of the year. Mawan Wisdom Port can effectively reduce the port labor cost and depreciation cost, and improve the efficiency of integrated services and customs clearance. We believe that the company's successful intelligent port construction experience and operational capacity are expected to be replicated to other ports in the future, so as to improve the overall operational efficiency.
The company will continue to carry out global network layout to achieve a high-quality asset portfolio. Global network layout helps to disperse regional business risks. 1Q22 and 2Q22 occurred respectively in Shenzhen and Shanghai, but the overall operation of the company was not greatly affected. We believe that risk diversification is mainly due to the balanced distribution of the company in the Yangtze River Delta and Pearl River Delta. In the first half of the year, the company completed the increase of 14.6% of the shares in Asia Air Transport Terminal (AAT) and 1.4% of the shares of Shanghai Port Group. We believe that the company is expected to further distribute high-quality port assets at home and abroad, achieve high-quality port coverage in key areas such as the Pearl River Delta, Yangtze River Delta and Bohai Rim, as well as the layout of overseas emerging markets and disperse regional operational risks. Share the growth dividend of emerging market economies.
Profit forecast and valuation
We keep our profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 5.4 times 2023 / 5.2 times earnings. To maintain an outperform industry rating, taking into account the declining market risk appetite, we lowered our target price by 14.4% to HK $15.70 corresponding to 7.2 times 2022 price-to-earnings ratio and 6.9 times 2023 price-to-earnings ratio, which is 33.1% higher than the current share price.
Risk.
The global macro-economy is declining, and the epidemic situation is repeated.