Event: Antong Holdings released its 2018 semi-annual report, with operating income of 4.61 billion yuan during the reporting period, an increase of 79.8% over the same period last year; net profit of 340 million yuan, an increase of 48% over the same period last year, equivalent to 0.23 yuan of EPS; net profit of 290 million yuan after deduction, an increase of 31.2% over the same period last year, and EPS of 0.20 yuan after deduction, the performance is basically in line with expectations. Non-recurrent gains and losses mainly come from subsidies provided by some local governments to container shipping and logistics enterprises (about 70 million yuan before tax).

Comments:

We will vigorously promote multimodal transport business and achieve rapid revenue growth. In the first half of 2018, the company continued to expand the logistics network layout of container multimodal transport, vigorously promote the development of sea-rail intermodal transport, hot metal intermodal transport, public-rail intermodal transport, while continuing to develop container shipping business and achieve rapid revenue growth. In the first half of 2018, the company's operating income was 4.61 billion yuan, up 79.8 percent from the same period last year; operating costs were 3.96 billion yuan, up 91.4 percent from the same period last year; and gross profit margin was 14.1 percent, down 5.2 percentage points from the same period last year. The development of multimodal transport business leads to the rapid growth of the company's income, but the layout of the transport network requires a lot of upfront investment, while the railway and road transport in multimodal transport is mainly outsourced, so the gross profit margin has declined.

The railway business has developed vigorously, the transport network has continued to improve, and the share of revenue has increased significantly. Railway is the core link of multimodal transport. in 2018, the company established the Railway Division and continued to develop the railway plate. By June 30, 2018, the company has set up 22 railway networks, including Harbin, Zhengzhou, Xi'an, Guiyang, Urumqi, etc., with more than 848 direct railway lines and more than 600 sea rail lines, involving 672 business railway stations. railway services cover 155 cities in 31 provinces.

Compared with the end of 2017, the company added 4 new railway networks, more than 448 new direct railway lines, more than 470 new sea rail lines, 145 new railway stations related to business, and 90 new railway services covering cities. In the first half of 2018, the company's railway natural cabinet transport volume was about 234600 TEU, and the railway sector revenue was about 830 million yuan, an increase of 731.2% over the same period last year, accounting for 18% of the company's revenue in the first half of 2018, and an increase of 14 percentage points over the same period last year.

Water transport business continues to expand, the scale of transport capacity has increased significantly, and the density of routes has further increased. Water transport is not only the basis of multimodal transport, but also the company's traditional business. With the rapid development of multimodal transport business, the company has greatly expanded the size of the fleet. As of June 30, 2018, the company has operated and managed a total of 111ships with a total capacity of 1.985 million deadweight tons, with a year-on-year increase of 47%. At present, the capacity of the company ranks second in China's domestic trade container logistics enterprises (the first is Pan-Asia Shipping under the central enterprise COSCO Shipping Holdings), and ranks first among private enterprises. As of June 30, 2018, the company has set up 89 shipping outlets across the country, involving 172 business ports, and the number of ports attached to the route network has increased to 172. Compared with the end of 2017, the company has 24 new business ports and 13 new affiliated ports.

Additional issuance and fund-raising, layout of multimodal transport logistics base. The company plans to issue no more than 20% of the total share capital (corresponding to 297 million shares) and raise no more than 3.43 billion yuan to invest in two multimodal logistics base projects and new container ship projects in Jingtang Port area of Tangshan Port and Shihu Port area of Quanzhou Port. The project plans to build a multimodal transport base with bonded warehousing, cold chain logistics, goods collection and distribution, urban distribution, circulation and processing, financial services, market transactions and other functions, which will help to enhance the company's service added value and customer viscosity.

Profit forecast and rating. Multimodal transport helps to reduce logistics costs. In recent years, relevant departments have promulgated a number of policies to vigorously promote the development of multimodal transport. In the newly released freight incremental action plan for 2018-2020, it is mentioned that container multimodal transport has an average annual growth rate of more than 30 per cent from 2018 to 2020. The company is vigorously promoting the development of multimodal transport business, which is in line with the general direction of national policy and industrial development, and has broad growth prospects. The company's EPS from 2018 to 2020 is expected to be 0.5,0.64,0.79 yuan, corresponding to the closing price of August 28, the PE is 19,15,12 times, maintaining the "prudent overweight" rating.

Risk hint. The relationship between supply and demand of domestic trade collection and transportation deteriorates, the development of multimodal transport business is lower than expected, the return on investment of multimodal transport base is lower than expected, and maritime safety accidents.