Event description
In the first quarter of 2016, Lianyungang achieved operating income of 305 million, down 10.9% from the same period last year, gross profit increased by 6.5% year-on-year to 31.48%, net profit attributed to the parent company decreased by 58.8% to 6 million, EPS was 0.006 yuan, Q1 in 2015 was 0.015 yuan. At the same time, the company expects cumulative net profit in the first half of the year to fall sharply compared with the same period last year.
Event comment
Gross profit margin rebounded, financial expenses and investment income eroded profits. In the first quarter of 2016, the company's operating revenue fell 10.9% compared with the same period last year, and we expect the company's throughput growth to be hampered mainly due to the macroeconomic downturn and increased inter-port competition. At the same time, due to the company's effective cost control, operating costs fell 18.7% year-on-year, and gross profit margin increased 6.5 percentage points year-on-year to 31.48%. In the end, the company achieved a net profit of 6 million, down 58.5% from the same period last year. The company's profit in the first quarter dropped sharply compared with the same period last year, the main factors are: 1) the wharf of the wholly-owned subsidiary Lianyungang Xinlian bulk Terminal Co., Ltd. has been consolidated, and the loan interest has been expended, resulting in an increase of nearly 10 million in financial expenses; 2) the overall performance of joint ventures and associated companies has declined compared with the previous year, resulting in a drop of about 6 million in investment income compared with the same period last year.
The company expects a sharp drop in net profit in the first half of the year. Considering that the company's attributable net profit in the first quarter has dropped 59% compared with the same period last year, and due to the continued economic downturn at home and abroad, the national port cargo throughput rose 1.7% in the first quarter compared with the same period last year, the port industry has periodic overcapacity, and the inter-port competition is intensifying day by day. Profits in the first half of the year are still under great pressure.
The business environment of the industry is still tight, maintaining the "overweight" rating. Considering that the operation of port enterprises is obviously affected by the economic environment, the performance risk of the company has been released, but the operating environment of the industry in 2016 is still tight and adjustment is still under way. 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 0.07 yuan, 0.08 yuan and 0.08 yuan respectively, maintaining the company's "overweight" rating.
Risk tips: continuous deterioration of throughput and port emergencies
