The results for the first three quarters exceeded expectations, and Ningbo Port announced the first three quarter results: operating income of 13 billion yuan, up 3.7% year on year; net profit attributable to parent company was 2,316 billion yuan, up 22.8% year on year, corresponding to profit of RMB 0.18 per share, which exceeded expectations. The high profit growth rate that exceeded expectations was mainly due to revenue of 416 million yuan from mergers of enterprises not under the same control, and net profit increased by 5.8% after deduction. Gross margin declined in the third quarter: in the third quarter, the company's revenue increased 28% year over year, and operating costs increased 37% year over year, so gross profit increased by only 2%, and gross margin was 23%, down from 29% in the same period last year. We think the likely reason is that the gross margin of the iron ore handling business was 33% in the first half of this year, down from 38% in the same period last year) due to a block of growth in low margin trade sales revenue, an increase in share, and an increase in depreciation at ore terminals. One-off investment income led to a 44% increase in net profit in the third quarter, and net profit after deduction fell by about 6%. Container throughput continues to grow at a high rate. Express data shows that in the first three quarters, the company completed container throughput of 1.94 million TEUs, a year-on-year increase of 13.7%. Although slightly lower than the 14.1% growth rate in the first half of the year, it continued to grow rapidly. Among them, the year-on-year increase in September was 19.3%, showing an accelerated trend compared to 8.7% in August; cargo throughput increased 9.7% year on year, lower than the 12.3% growth rate in the first half of the year, while other types of goods slowed down. Development trend Container hub ports are benefiting from trade recovery, and the growth rate is faster than average. The company's container throughput increased 13.7% in the first three quarters, far better than 3.9% in the same period last year and faster than the coastal port average of 8.2%. According to the CICC Macro Group, China's export value is expected to increase by 7.7%, 6.3%, and 6.5% from 2017 to 2019, which will continue to benefit container transportation demand. After the integration of Ningbo Zhoushan Port, as a hub port ranked first in global cargo throughput and fourth in container throughput, it has the handling capacity of 400,000-ton ore and crude oil ships and 20,000 TEU container ships, and will continue to benefit from the trend of ship expansion and alliances. Profit Forecast We raised our earnings per share forecast for 2017 by 7% from RMB 0.2 to RMB 0.21, and lowered our earnings per share forecast for 2018 by 3% from RMB 0.21 to RMB 0.2 to reflect the combined impact of this year's decline in one-time earnings and gross margin. Excluding one-time income, the recurring profit growth rates in 2017/18 were 7.4% and 9.3%, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 30.7 times the price-earnings ratio in 2018, and the valuation is still not very attractive. We maintain a neutral rating and target price of RMB 5.47. Risk throughput growth is lower than expected.