Main points of the report
Event description
Lianyungang achieved operating income of 591 million in the first half of 2016, down 5.74% from the same period last year, gross profit rose 2.13% year-on-year to 25.95%, net profit belonging to the parent company fell 81.1% to 6.15 million yuan, and EPS was 0.006 yuan.
Event comment
Volume increases and prices fall, gross profit margin improves, and financial expenses lead to a sharp decline in net profit. In the first half of 2016, the company's operating income decreased by 5.74% compared with the same period last year. According to the results of volume and price analysis, although the company's throughput increased by 25.89% in the first half of the year compared with the same period last year, the proportion of coal and steel throughput with low port rates increased significantly, resulting in a 25.12% drop in unit port rates compared with the same period last year, dragging down revenue. At the same time, under the company's efforts to strengthen cost control and reduce costs and increase efficiency, operating costs fell by 8.38% compared with the same period last year, resulting in a 2.13% increase in gross profit margin to 25.95%. In the end, the company achieved a net profit of 6.15 million yuan, down 81.11% from the same period last year. The main reasons for the sharp decline in profits are: 1) the wharf of the wholly-owned subsidiary Lianyungang Xinlian bulk cargo Terminal Co., Ltd. has been consolidated, and the loan interest has been expended, resulting in an increase of nearly 19.94 million in financial expenses; 2) the return of port charges for foreign trade goods received by the company in the current period has decreased by 6.74 million yuan, and non-operating income has declined accordingly.
Results weakened again in the second quarter. In the second quarter alone, the company's operating income was 286 million yuan, which was basically the same as the same period last year. Also affected by the consolidation of Xinlian bulk cargo terminal and narrowed gross profit, the attributable net profit fell by 100.8% compared with the same period last year. In the first and second quarter, the corresponding EPS of the company was 0.01yuan and-0.0002 yuan respectively.
Benefiting from the increase in imports of iron ore and coal, the throughput has improved significantly. In 2016H, the company completed cargo throughput of 29.08 million tons, an increase of 25.89% over the same period last year. Among them, the throughput of iron ore was affected by the recovery of the national iron and steel market in the first half of the year (the import of iron ore increased by 9.1% in the first half of the year) and the company's efforts in market development, rising 236.77% year-on-year, contributing the main increment, accounting for about half of the throughput. Coal throughput also significantly improved, up 28.96% from the same period last year. However, the throughput of other goods, such as nickel laterite and coke, has declined to varying degrees under the influence of the domestic economic downturn.
Maintain the "overweight" rating. The bright spots of the future company come from: 1) the local port integration will be completed during the establishment of Lianyungang Port holding Group Co., Ltd.; 2) the negotiations on the China-Japan-South Korea free trade zone will be gradually advanced, and if finally finalized in the later stage, it will be good for port cargo handling. We estimate that the company's EPS from 2016 to 2018 will be 0.03 yuan, 0.02 yuan and 0.02 yuan respectively, maintaining the company's "overweight" rating.
Risk tips: continuous deterioration of throughput and port emergencies
