The results for the first half of 2018 are basically in line with expectations. Ningbo Port announced the results for the first half of 2018: operating income of 10.86 billion yuan, an increase of 35.7% over the previous year, mainly due to a sharp increase in trade and sales revenue and an increase in the scope of consolidation; net profit attributable to the parent company was 1.56 billion yuan, an increase of 13.5% over the previous year, corresponding to a profit of 0.12 yuan per share. After deducting non-net profit of 1.49 billion yuan, a year-on-year increase of 12.2%. Profit growth in the second quarter (17%) was faster than 10% in the first quarter. Gross margin declined: The company's gross profit margin in the first half of the year was 26%, down 4 percentage points from 2017; after deducting the impact of the increase in the share of low-margin sales business, the main reason was that the merger of Suzhou Hyundai Cargo Terminal and Gangji Terminal made the cost growth rate (61%) far higher than the revenue growth rate (48%), and the gross margin of the container business sector fell 4 percentage points to 47%. Throughput maintained steady growth: In the first half of the year, the company's cargo throughput increased 6.9% year on year to 392 million tons, and iron ore volume growth rate was 3.1%, mainly due to the maturity of the Moulanghu ore terminal area, which normalized berthing of 400,000-ton mines, and coal throughput increased by 3.7%. Container throughput increased 7.4% year over year to 14.02 million TEUs. The growth rate was higher than the coastal average, but it was slower than the 14.1% growth rate achieved in the same period last year. Development trend throughput is expected to continue to grow faster than the industry: after the restructuring in 2015, the company promoted two wings, integrated the advantages of Zhejiang's five ports (Ningbo, Zhoushan, Jiaxing, Wenzhou and Yiwu), and has maintained higher throughput growth than the industry (also faster than Ningbo's local port), and this trend is expected to continue in the future. Foreign trade container rates may face some pressure, but the impact on the company's performance is limited. Since 2018, Ningbo Zhoushan Port has reduced the foreign trade import and export container heavy container handling rate standard from 621 yuan/box to 490 yuan/box, a reduction of 21%. However, the actual impact was relatively limited because: 1) only foreign trade import and export container volumes were affected; 2) Due to the port's preferential treatment for shipping companies, the actual revenue per box was lower than the standard rate. Judging from the performance situation in the first half of the year, the actual impact was limited. Profit forecast We maintain our 2018/19e profit forecast of 2.55/ 2.896 billion yuan unchanged. Valuation and recommendations The company's current stock price corresponds to 20.9/18.5 times P/E in 18/19. The neutral rating was maintained, but considering the increase in uncertainties such as trade frictions and economic growth, the market risk appetite decreased, and the target price was lowered by 12% to 4.84 yuan, corresponding to 25/20 times P/E in 18/19, with 19% room compared to the current stock price. Risk throughput growth was lower than expected, foreign trade container handling rates declined, and costs continued to rise.