Changhang Phoenix announced the 2010 medium report:

The company achieved operating income of 1.185 billion in the first half of the year, an increase of 35.71% over the same period last year; gross profit of 13.73%, up 10.66% over the same period last year; net profit of-9.33 million, EPS of-0.01yuan, and-0.15yuan of the same period last year. However, the results in the second quarter turned from losses to profits, with a profit of 38.58 million in a single quarter. The trend of performance inflection point has become clear.

In terms of business, the Yangtze River and the coast are still the main contributors to income, accounting for 90% of the income, but with the launch of ocean transport capacity, Cosco has become the main contributor to income increment.

The company's operating costs increased by only 20.78% in the first half of the year, much lower than revenue growth, driving gross profit margin up 10.66 percentage points. The main reasons are: 1) the salary of employees decreased by 6.02% compared with the same period last year; 2) the depreciation fee decreased by 8.65% as a result of the change in accounting policy.

Coastal and ocean performance capacity delivery provides a stable driving force for performance growth, while the loss reduction of the Yangtze River business is the icing on the cake. It is expected that the EPS of the company from 2010 to 2012 is 0.05,0.30 and 0.40 yuan respectively, corresponding to 101,18 and 13 times of PE respectively. The fast-growing performance rapidly reduces the current high valuation. And the catalyst for possible future events:

(1) the integration of group bulk cargo business

(2) the supporting policy of inland waterway shipping has been issued. For the time being, we maintain a "cautious recommendation" rating and can participate in the opportunities offered by its event catalyst when existing performance provides a margin of safety.

For other analysis of the company, please refer to our July 27 report entitled "Internal and external environment has improved and performance inflection point has emerged".